Law Council of Australia

Business Law Section

Amendments to the Family Trust Election Provisions

Submission Date: 5 June 2026

The Business Law Section of the Law Council of Australia (the Committee) urges Treasury to give immediate attention to the unintended and increasingly serious consequences of the Family Trust Elections, Interposed Entity Elections and Family Trust Distributions Tax (FTDT) provisions in Schedule 2F to the Income Tax Assessment Act 1936.

As currently drafted and administered, these rules are creating real insolvency risks for taxpayers who have tried to comply with the law, including private groups that employ hundreds of Australians, and for the professional advisers who assisted them.

The Committee accepts, and does not seek to disturb, Parliament’s legitimate objective of deterring loss trafficking and inappropriate franking credit streaming.

However, the FTDT regime is now operating in a way that goes far beyond that objective. It is imposing extraordinary liabilities, often with substantial accrued interest, in circumstances involving ordinary family and private group arrangements,  historical administrative imperfections and no underlying tax avoidance mischief. Those outcomes are commercially destructive and cannot sensibly be regarded as the intended operation of the regime.

Although there is a strong case for more fundamental redesign, this submission proceeds on the basis that Treasury may prefer to retain the existing architecture of the FTDT regime and implement targeted legislative amendments to restore it to its original function. On that basis, the reforms proposed below are directed to a practical and urgent objective: preventing the regime from inflicting insolvency-level consequences on compliant taxpayers, significant private groups and their professional advisers where no abuse of the law has occurred.

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Last Updated on 11/06/2026

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