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New ownership rules for discretionary trusts as announced in the Federal Budget will mean potentially fewer taxpayers will benefit from the capital gains tax concessions and changes to other small business concessions, said Hall & Wilcox partner Michael Parker.

Mr Parker said the law as currently drafted defines a controller of a company, trust or partnership as being someone with “beneficial ownership” in at least 40% of the interests in a company, trust or partnership.

“In the case of a discretionary trust, owning shares or units, no one has this beneficial ownership, so the control test fails.

“The Treasurer has announced that this will be amended to ensure that discretionary trusts will be treated as controlling companies and trusts they own.

“While the announcement only talks about changes in the context of the small business tax concessions, they will have a corresponding effect on who is a small business entity for accessing the new $5,000 vehicle write-off and the accelerated rates of depreciation available to small business entities.

“As a result of the Federal Budget changes, controllers of a company or trust will no longer be able to run the argument that discretionary trusts are not included in the grouping rules for measuring the $6 million net asset cap for the small business CGT concessions or the $2million turnover cap for the small business entity concessions which include the $5,000 upfront deduction for acquisition of vehicles,” Mr Parker said.