The Council of Small Business Organisations Australia (COSBOA) has warned that proposed Federal Government changes to the taxation of discretionary trusts represent a far greater threat to small business than previously recognised, arguing the reforms could cost businesses billions of dollars while piling further pressure on a sector already struggling with rising costs and regulatory complexity.
In a submission to the Federal Government's consultation on the proposed 30 per cent minimum tax on discretionary trusts, COSBOA described the measure as "unfair in its bluntness", warning it would penalise legitimate business structures that have been used lawfully by family-owned businesses for decades. Treasury estimates around 350,000 Australian small businesses operate through discretionary trusts, with about 210,000 expected to face a higher tax burden if the proposal proceeds.
COSBOA estimates that businesses forced to restructure could collectively face costs of between $3 billion and $10 billion, based on individual restructuring expenses ranging from $15,000 to $50,000.
CEO Skye Cappuccio said the proposal unfairly targeted business owners who had adopted discretionary trusts for legitimate commercial reasons, including asset protection, succession planning and business continuity.
She also argued the proposal failed to recognise the realities of many family-run businesses, noting that family members receiving trust distributions often do not earn incomes anywhere near the level assumed under the proposed tax model. Rather than imposing a blanket minimum tax, COSBOA has called on the Government to strengthen existing integrity measures, release the modelling underpinning the proposal and consider lower-cost alternatives, such as an annual distribution-pattern test or grandfathering existing small businesses with turnover below $10 million.
The organisation says the trust proposal is just one example of the increasing regulatory burden confronting Australia's small business sector.
In Victoria, COSBOA has also urged newly appointed Premier Ben Carroll to abandon the State Government's proposed work-from-home legislation, arguing it would create additional compliance obligations and unnecessary costs for employers already operating on tight margins.
The proposed Equal Opportunity Amendment (Work from Home) Bill 2026 would provide eligible employees with a presumptive entitlement to work from home for up to two days each week unless employers could demonstrate the arrangement was unreasonable. COSBOA argues the legislation could also require businesses to fund hardware, software, cybersecurity systems and secure network access for remote workers.
According to Cappuccio, workplace flexibility is already adequately covered under Australia's existing workplace relations framework, making additional Victorian legislation unnecessary and potentially confusing.
COSBOA has called on the Victorian Government to pause or withdraw the Bill, or at the very least exempt businesses employing fewer than 50 full-time equivalent staff.
Taken together, the two issues highlight what COSBOA says is an increasingly challenging operating environment for small businesses, with new taxation measures and additional workplace regulation threatening confidence, investment and long-term business viability.
Download COSBOA's submission on the proposed minimum tax on discretionary trusts here.