Greens claim Labor’s tax bill contains private school fee loophole

The Greens are demanding the government hike taxes on parents paying for private school fees through trusts, arguing there is a loophole in the budget reforms.

Labor needs the support of the Greens in the Senate to pass the tax on trusts, with the Coalition staunchly opposed to any tax hikes. Treasurer Jim Chalmers has already been forced to walk back a number of measures in the May budget after unforseen consequences copped backlash.

But the Greens are concerned the government has gone too far in the carveouts, and will kick the bill to a Senate inquiry after Chalmers introduced the legislation to parliament on Wednesday.

The minor party wants to interrogate an exemption to the proposed 30 per cent minimum tax on discretionary trusts, which would exclude money paid to charities.

While the bill does not name which entities will be exempt, some private schools hold charitable status, potentially excluding disbursements to them through trusts from the 30 per cent tax.

Greens economic spokesman Nick McKim said the party had serious concerns about the exemption.

“It seems as if it will be possible for people with trusts to pay private school fees or donations to private schools, and not be subject to the 30 per cent minimum tax,” the senator said.

“People with trusts, in general terms, are quite well-off, and we don’t think they should get a benefit that is not available to people who don’t have trusts – because money that goes into trusts is tax-free, but people who don’t have a trust are paying income tax.

“You need to be wealthy enough to afford a fancy accountant, or at least some accounting advice, which is not available to everyone.”

McKim would not say whether the change was a red line for the party, but said it would consider the evidence in the inquiry.

“Once we’ve been through that process, we’re happy to sit down with the government and have a conversation.”

The government is not expected to move on the Greens demands, given the arrangement has always been a feature of trusts.

But it poses a challenge to the government, which needs Greens’ support to pass the reforms.

Chalmers said on Wednesday morning there was good reason for charitable exemptions.

“We’ve tried to make sure that there are reasonable arrangements for charities, for not-for-profits, which reflect some of the current arrangements that are in place,” he told the ABC’s RN Breakfast.

“This is a very specific sliver of what’s being proposed here. Obviously, the Greens will have the opportunity in the House of Representatives and in the Senate to raise these sorts of issues.”

Shadow treasurer Tim Wilson was scathing of the bill and demanded an inquiry, accusing Labor MPs of failing to understand how small businesses that rely on trusts to structure their tax affairs work.

“Do not misunderstand the scale of the train wreck that is about to come. You have a problem at the moment with the legislation in front of you, where if people move structures, once they move structures, it automatically ... triggers a stamp duty obligation.

“The members on the other side of this chamber did not have the courage to send this legislation to an election and that is the point of why we need this inquiry.”

More to come.

Cut through the noise of federal politics with news, views and expert analysis. Subscribers can sign up to our weekly Inside Politics newsletter.