Industry bodies have warned that the federal government’s proposed changes to discretionary trusts could substantially disrupt broking businesses long before the reforms commence.
Mortgage, finance, and small business groups have warned that the proposed discretionary trust tax changes could force brokers to rebuild the licensing, accreditation, and contractual arrangements underpinning their businesses.
The Council of Small Business Organisations Australia (COSBOA), the Commercial & Asset Finance Brokers Association of Australia (CAFBA), and the Mortgage & Finance Association of Australia (MFAA) said the practical consequences of business restructuring had received less attention than the proposed tax impost itself.
The federal government announced in the 2026–27 budget that it would introduce a 30 per cent minimum tax on discretionary trusts from 1 July 2028.
In a joint statement issued on Monday (10 August), the three associations said broking businesses that operated through discretionary trusts could face a far more complex exercise than changing their legal entity or obtaining tax advice.
The associations noted that depending on the businesses’ structure, a transition could require new or altered lender accreditations, aggregator agreements, insurance arrangements, compliance documents, and other contractual approvals.
They added that mortgage broking businesses may also need to amend their Australian Credit Licence or credit representative arrangements before operating under a new entity.
The groups warned that this could generate higher costs, delays, and uncertainty for broking businesses while potentially interrupting the flow of lending to households and small businesses.
Accreditation network at risk
CAFBA chair of advocacy David Gandolfo said the potential disruption needed to be understood in the context of commercial finance brokers’ role in connecting small businesses with equipment funding.
“Commercial finance brokers arrange around 72 per cent of Australia’s commercial equipment finance. Any disruption to that accreditation network ultimately affects the small businesses relying on brokers to access the capital they need to purchase equipment, invest and grow,” Gandolfo said.
“For a midsized broking firm, this could mean the cost and disruption of renegotiating up to 50 separate lender accreditation agreements without any assurance that the new agreements will be accepted.”
Gandolfo also outlined the potential client consequences where existing facilities could not simply be moved to a new structure.
“Assistance will also be needed for business clients to assign or restructure loans, often resulting in significant break costs if loan assignments are impossible (e.g. with commercial chattel mortgages),” he said.
He said the issue therefore extended beyond broking businesses’ own compliance burden to the availability and competitiveness of business lending.
“Access to competitive and appropriate finance is the enabler of small to medium business, and these severe disruptions will impact that flow of finance, with significant yet avoidable impacts to the broader economy,” Gandolfo said.
More than a tax change, says MFAA
MFAA CEO Anja Pannek said mortgage broking’s heavily regulated operating environment meant a trust restructure could trigger major changes across multiple parts of a business.
“Restructuring a business that operates through a discretionary trust is far more than a legal or accounting exercise,” Pannek said.
“For mortgage brokers, it may require changes to Australian Credit Licence or Credit Representative arrangements, lender accreditations, aggregator agreements, professional indemnity insurance and compliance documentation.
“Depending on the nature of the business, finance brokers may also need to revisit contractual arrangements with lenders, aggregators and insurers.”
COSBOA CEO Skye Cappuccio said the policy debate needed to account for the operational realities confronting regulated small businesses.
“The focus has understandably been on the tax implications, but that’s only part of the story,” Cappuccio said.
“For some regulated small businesses, restructuring could mean unpicking commercial and regulatory arrangements that have taken years to build.
“That is not a simple transition. It risks creating cost, delay and disruption for small businesses already operating in a difficult environment.”
Cappuccio said excessive administrative demands could ultimately reduce the time businesses have to serve their own clients.
“When small businesses are spending their time navigating additional red tape instead of helping other small businesses access finance, it’s a clear sign the practical impacts of these reforms need closer attention,” she said.
The associations have urged the government to exclude or grandfather small business trading trusts or establish workable transition arrangements that avoid unnecessary disruption to licensing, accreditation, and access to finance.
[Related: MFAA calls for changes to new discretionary trust tax]
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