Another tax, fewer homes: HIA warns trust tax will hurt housing supply

The Housing Industry Association (HIA) has lodged a formal submission to Treasury opposing the federal government’s proposed minimum tax on discretionary trusts, warning the measure directly contradicts the Albanese Government’s own housing supply commitments.

HIA Managing Director Jocelyn Martin said the proposal exposed a fundamental inconsistency in the government’s policy agenda at a time when Australia is already falling short of its housing construction targets.

“The proposal highlighted a growing contradiction at the heart of the government’s economic agenda,” Ms Martin said.

“Every week governments tell Australians they want more homes. Every month it seems there is another tax or piece of regulation that makes building them harder.”

What the proposal involves

Treasury’s consultation paper outlines a minimum tax applying to income distributed through discretionary trusts. According to HIA, Treasury’s own consultation paper acknowledged the proposal would increase compliance costs, require businesses to restructure and create additional complexity — a concession the association described as extraordinary.

Discretionary trusts are among the most common structures used by family-owned building businesses across Australia. HIA argues the proposal mischaracterises these arrangements as sophisticated tax vehicles, when in reality they serve straightforward operational purposes for small and medium-sized builders.

“Discretionary trusts aren’t some exotic tax vehicle. They’re one of the most common ways family-owned building businesses are structured,” Ms Martin said.

“A local builder might operate through a trust because it allows a husband and wife to run the business together, brings adult children into the business as they prepare to take it over, or provides the flexibility small businesses need when workloads and income fluctuate from year to year.”

Who bears the burden

HIA’s submission emphasises that the businesses most affected are not large corporations with dedicated tax teams, but small operators who form the backbone of Australia’s residential construction industry.

“These aren’t multinational corporations with teams of tax lawyers. They’re builders employing apprentices, paying local suppliers and building homes in communities across Australia,” Ms Martin said.

The association argues that forcing these businesses to restructure in response to the new tax would redirect resources away from productive activity — hiring workers, purchasing equipment and building homes — toward legal, accounting and administrative costs.

“The Government says this is about fairness, but the practical reality is a builder who wants to employ another apprentice or invest in new equipment could instead be paying accountants, lawyers and stamp duty simply to states and territories to restructure their business. That doesn’t build a single extra home,” Ms Martin said.

What HIA is calling for

HIA’s submission makes two specific demands of Treasury. First, it calls on the government to publish a comprehensive assessment of the full economic cost of the proposal, including legal, accounting, valuation and administrative costs, as well as state taxes such as stamp duty that businesses may be required to pay if forced to restructure.

Second, the submission challenges the government’s projected revenue figures from the measure, arguing Treasury should publicly release the behavioural assumptions underpinning its estimates if it expects businesses to change their structures in response to the tax. Without transparency on those assumptions, HIA contends the revenue projections cannot be properly scrutinised.

Broader pattern of concern

HIA positioned its opposition to the trust tax within a broader pattern it has consistently raised with policymakers. The association has repeatedly warned that a succession of tax measures is discouraging housing investment at precisely the moment Australia needs to accelerate construction.

Australia’s national housing targets — a centrepiece of the Albanese Government’s housing agenda — have already come under pressure, with building approvals and commencements tracking below the pace required to meet the 1.2 million new homes goal by 2029.

“Australia doesn’t have a tax collection problem. It has a housing supply problem,” Ms Martin said.

“Until every tax and regulatory decision in Canberra is judged by one simple test — does it help build more homes? — Australia’s housing targets will remain exactly that: targets.”