New industry polling has found that more than 60% of small-to-medium residential and commercial property developers expect the federal budget's proposed discretionary trust tax changes to affect the timing or viability of their projects, with 37% of those expecting an impact saying one or more projects would be cancelled entirely — the single most common response.
The research, conducted by Accent Research and jointly commissioned by the Housing Industry Association (HIA), Master Builders Australia (MBA), the Property Council of Australia (PCA), the Real Estate Institute of Australia (REIA), and the Urban Development Institute of Australia (UDIA), surveyed almost 1,200 small and medium business owners on the proposed changes, which would apply a minimum 30% tax rate to discretionary trust distributions.
Among property businesses using discretionary trusts — commonly used across the sector to hold ownership interests and ring-fence development land from commercial risk — 77% reported reduced confidence as a result of the proposal. More broadly, 54% of business owners said the changes had reduced confidence in their industry's outlook, against just 3% reporting increased confidence.
PCA chief executive Mike Zorbas (pictured left) said the scale of expected project losses should concern policymakers.
"That would be a catastrophe for housing supply," Zorbas said, noting that market confidence and project feasibility were already under strain in key markets ahead of any further rate rise. That rate rise now looks increasingly likely – all four major banks expect the RBA to hike at its September meeting, adding a second source of pressure on top of the proposed trust changes.
MBA chief executive Denita Wawn said the reforms risked undermining the businesses needed to fix the housing shortfall, warning "these changes would hamstring the very businesses that are central to the solution."
REIA president Jacob Caine (pictured center) echoed the concern, saying "projects delayed or cancelled today mean fewer homes reaching buyers and renters tomorrow."
HIA managing director Jocelyn Martin (pictured right) linked the proposal to a broader run of weak new home sales data, arguing "Australia cannot tax its way to 1.2 million homes" — a reference to the government's national housing target.
HIA Chief Economist Tim Reardon echoed the warning, pointing to new home sales data: sales fell 10% in August, the fourth consecutive monthly decline. The market, Reardon said, "cannot absorb further interest rate increases on top of the tax increases."
For brokers working with developer or small business clients structured through discretionary trusts, the proposed changes add a fresh layer of uncertainty to project finance and business lending conversations, with almost half of business owners aware of the changes already considering reduced investment, restructuring, or deferred expansion.
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