Three of the finance broking sector's peak bodies have cautioned that the federal government's proposed minimum tax on discretionary trusts, due to take effect from 1 July 2028, carries consequences well beyond the tax bill itself.
Around 350,000 Australian small businesses currently operate through discretionary trusts, with budget papers suggesting roughly 210,000 small family businesses could face a higher tax burden once the 30% rate applies, with rollover relief available only from 1 July 2027 to 30 June 2030 for those seeking to restructure beforehand.
The Council of Small Business Organisations Australia (COSBOA), the Commercial & Asset Finance Brokers Association of Australia (CAFBA) and the Mortgage & Finance Association of Australia (MFAA) say the flow-on effect on brokers' existing commercial arrangements has been overlooked.
CAFBA chair of advocacy David Gandolfo (pictured left) said a midsized broking firm could face renegotiating up to 50 separate lender accreditation agreements, with no guarantee the new terms would be accepted, and warned that break costs could apply where loan assignments aren't possible.
Gandolfo pointed to the scale of the sector's role in underscoring the risk.
"Commercial finance brokers arrange around 72% of Australia's commercial equipment finance. Any disruption to that accreditation network ultimately affects the small businesses relying on brokers to access the capital they need to purchase equipment, invest and grow," he said.
According to the three bodies, brokers operating through discretionary trusts who are pushed into new structures may also need to revisit lender accreditations, aggregator agreements, and other contractual obligations. For mortgage brokers specifically, this could extend to changes in Australian Credit Licence or Credit Representative arrangements before they're able to keep operating.
COSBOA CEO Skye Cappuccio (pictured center) said the scope of the reforms had been underappreciated.
"The focus has understandably been on the tax implications, but that's only part of the story," Cappuccio said.
"For some regulated small businesses, restructuring could mean unpicking commercial and regulatory arrangements that have taken years to build... That is not a simple transition. It risks creating cost, delay and disruption for small businesses already operating in a difficult environment."
MFAA CEO Anja Pannek (pictured right) said mortgage broking already sits within a dense regulatory framework, and restructuring a trust-based business is far more than a paperwork exercise.
"Mortgage and finance brokers help Australians secure more than 80% of new residential home loans and support thousands of small businesses to access finance. Any reforms should minimise unnecessary disruption for these businesses while still achieving the Government's policy objectives," Pannek said.
The peak bodies are calling on the government to either exclude or grandfather small business trading trusts from the proposed changes, or at minimum provide practical transition arrangements to limit disruption to licensing, accreditation, and lending access.
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