Key Highlights

  • Section 100A, Division 7A and Part IVA are central to the alternatives raised.
  • They argue existing anti-avoidance rules could address integrity concerns with less additional compliance work.
  • The High Court unanimously upheld cancellation of an approximately $56 million Capital loss under Part IVA.
  • Treasury seeks a minimum tax floor rather than relying only on transaction-specific anti-avoidance tests.

One question kept surfacing at the Senate hearings into Labor's 30% minimum tax on discretionary trusts: why build a new tax when Australia already has anti-avoidance rules aimed at trust abuse? With the Senate Economics Legislation Committee due to report on 13 November, and a High Court decision on 4 November showing the general anti-avoidance rule at work, the answer matters for hundreds of thousands of family businesses.

The question put to Treasury

At the hearings, Liberal Senator Jane Hume asked whether strengthening existing anti-avoidance rules, naming section 100A, Division 7A and Part IVA, could do the Job without new red tape.

Matthew Addison, executive director of the Institute of Certified Bookkeepers and until recently COSBOA chair, called the minimum tax a "blunt instrument" and said existing anti-avoidance rules should be used instead.

Tony Greco of the Institute of Public Accountants was more direct: "Tell me what the mischief is."

The minimum tax remains a bill. It passed the House on 29 October and needs Senate support, which in practice means the Greens, because the Coalition opposes it.

What the existing rules already cover

Each of the three rules Hume named targets a particular kind of behaviour.

Section 100A, a long-standing provision, can tax a Trustee at the top rate where a beneficiary is made presently entitled to income under an arrangement that passes the real benefit to someone else. It carves out arrangements entered into in the course of ordinary family or commercial dealing.

Division 7A treats certain payments, loans and Debt forgiveness from private companies to shareholders and their associates as unfranked dividends unless they meet strict conditions. The benchmark Interest Rate for complying loans is 8.77% for 2026–27, up from 8.37%, according to the ATO.

Part IVA, the general anti-avoidance rule, allows the Commissioner to cancel a tax benefit where, viewed objectively, the dominant purpose of a scheme was to obtain that benefit.

Merchant shows Part IVA can bite, and where it stops

The High Court's decision in Commissioner of Taxation v Merchant [2026] HCA 39, handed down on 4 November, is a reminder that these rules can be effective.

The arrangement, in the 2015 income year, involved the Merchant family trust selling Billabong shares at Market Value to a related self-managed super fund, crystallising a capital loss of about $56 million. The trust later sold Plantic Technologies shares to an unrelated buyer, producing a gain of about $85 million, and used the loss against that gain.

The court unanimously upheld the cancellation of the Billabong capital loss under section 177D. The majority described the share sale as a "purely internal transfer of shares" that "made no sense" commercially, likening it to a "wash sale".

The Commissioner did not win everything. By 4:3, the court dismissed the Commissioner's appeal on the larger debt forgiveness under the Dividend Stripping provision, section 177E, and allowed the taxpayer's cross-appeal on the smaller one. The majority said section 177E is not a general anti-avoidance rule.

The timeline is also telling. The arrangement dates from 2015. The case went through the Federal Court in 2024 and the Full Federal Court in 2025 before the High Court ruled in November 2026.

That points to a basic difference between the two approaches. Integrity rules work case by case, turn on purpose and facts, and can take a decade to resolve. A minimum tax applies mechanically to every trust within its scope. It trades the precision of a purpose test for certainty and speed, at the cost of catching arrangements that were never designed to avoid tax.

Why Treasury wants a floor, not a purpose test

Treasury's evidence suggests the minimum tax targets something the integrity rules were not designed to catch. Laura Berger-Thomson said part of the rationale was "to prevent even further growth in these types of structures in our economy", noting that "the top-earning 10 per cent of individuals have 90 per cent of total trust wealth."

Spreading income among family members through a discretionary trust is, in many cases, entirely lawful. The ordinary dealing Carve-Out in section 100A and the purpose test in Part IVA mean much routine income splitting sits outside the anti-avoidance rules.

The ACTU has framed the fairness issue this way: a nurse on an average full-time salary of $90,000 could pay up to $10,000 more tax than a household receiving the same income through a trust.

Hypothetical example: A trust earns $180,000 of net income. If one adult received it all, tax at 2026–27 resident rates would be $47,670, ignoring the Medicare levy and offsets.

If the trust split it equally between two adults, each would pay $17,520 on $90,000, a combined $35,040, or $12,630 less.

Under the bill as described, and assuming no exemption applies, the trustee would pay 30%, or $54,000. Each beneficiary would receive a $27,000 non-refundable offset but could use only $17,520 of it, so total tax would be $54,000, more than one person would pay on the same income.

None of those distributions would necessarily trigger Part IVA or section 100A. That is the gap the minimum tax is designed to close, and the outcome critics say is a policy choice to tax lawful arrangements rather than a response to avoidance.

The other integrity fronts still open

Division 7A is itself in flux. In Bendel [2026] HCA 18, the High Court held that unpaid present entitlements are not loans under section 109D. The ATO has withdrawn TD 2022/11 and says dealings with those funds may engage Subdivision EA or section 100A.

The government is consulting on implementing the 2018–19 Budget measure to bring unpaid present entitlements within Division 7A.

Separately, comments on an ATO decision impact statement on Commissioner v Hicks, covering section 45B and Part IVA, close on 20 November.

What to watch

- 13 November: Senate committee report due, including any response to Hume's question. - 20 November: comments close on the Hicks decision impact statement. - Third week of November: reported target for a Senate vote, not confirmed. - December: MYEFO, which could update Revenue estimates. - 1 July 2028: minimum tax would start, if the bill passes.