A proposed minimum tax on discretionary trusts could require some finance brokers to restructure their businesses, according to Cosboa, and two other bodies.
For brokerage businesses operating through discretionary trusts, restructuring could require businesses to review existing regulatory and commercial arrangements. Mortgage and Finance Association of Australia (MFAA) CEO Anja Pannek said mortgage broking is a regulated small business sector in Australia, with requirements covering licensing, lender accreditation, aggregator agreements and compliance.
Restructuring a business that operates through a discretionary trust is far more than a legal or accounting exercise, Pannek said. This could require changes to Australian Credit Licence or Credit Representative arrangements, lender accreditations, aggregator agreements, professional indemnity insurance and compliance documentation.
The MFAA said mortgage and finance brokers help Australians access more than 80 per cent of new residential home loans and assist thousands of small businesses with finance. Pannek said policy changes should account for these requirements to limit disruption.
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The Commercial Asset Finance Brokers Association (CAFBA)’s chair of advocacy David Gandolfo OAM said commercial finance brokers arrange around 72 per cent of commercial equipment finance in Australia.
A midsized brokerage could need to renegotiate up to 50 separate lender accreditation agreements, without assurance that new agreements would be accepted. Restructuring could also affect existing business loans if clients cannot assign or restructure them.
Clients could incur break costs, including commercial chattel mortgages. Gandolfo said these disruptions will affect the flow of finance, with significant yet avoidable impacts to the broader economy.
Cosboa CEO Skye Cappuccio said restructuring could also require businesses to revisit commercial and regulatory arrangements built over several years, adding to the cost and time involved.
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They called on the Government to consider the regulatory and commercial requirements finance brokers and small businesses may need to meet when restructuring.
They proposed excluding small business trading trusts from the changes or grandfathering existing structures. At minimum, the organisations said the Government should introduce practical transition arrangements to minimise disruption to licensing, lender accreditation and access to finance.
Further reading: ‘Grossly unfair’ trust tax slammed as Cosboa increases pressure.
