The use of trusts to minimise tax is heavily skewed towards the wealthy, with the research finding people who have incomes above $500,000 a year received 51 per cent of all distributions from trusts while representing just 0.43 per cent of the population. Trusts are an increasingly popular - and legal - way to minimise tax. Credit:Getty Images In contrast, people earning less than $180,000 a year - 96 per cent of the population - received just 13 per cent of the income generated by trusts. The most recently available Tax Office figures, from 2014-15, showed there were 823,448 trusts in Australia with assets of a staggering $3.1 trillion and revenue of $349.2 billion. About 78 per cent, or 642,416, of those trusts were discretionary trusts, which can be used by high income earners to legally reduce the tax they pay through income splitting and distribution to family members.

The use of discretionary trusts has sky-rocketed by 95 per cent since 1996-97, when there were 329,475 operating. Australia Institute executive director Ben Oquist predicted that with the introduction of a new cap on how much money people can transfer into their superannuation, that growth is likely to continue. Ben Oquist, executive director of the Australia Institute. Credit:Karleen Minney "That is why now is a good time for the government to look at reigning in tax avoidance through trusts, which risks undermining their positive reforms to superannuation," Mr Oquist said. Back in 2010, the Henry review of the tax system recommended "the current trust rules should be updated and rewritten to reduce complexity and uncertainty around their application". But neither the Coalition nor Labor has any plans to change the rules relating to the use of trusts.

"Huge amounts of money are being washed through trusts in Australia, yet they remain the domain of a small number of people, most of whom are very wealthy," Mr Oqiust said. "With Australia facing a revenue crisis, and trusts being used to avoid and minimise tax, this is an area ripe for reform." In April, Prime Minister Malcolm Turnbull said trusts were "a very legitimate form of business structure" that were also widely used by small businesses and family businesses, particularly farms. "Now, we expect everyone to pay their fair share of tax. Regularly this criticism of family trusts or trusts come up but it is a very long-established and legitimate form of business structure," he said at the time. Mr Richardson said his research indicated the primary attraction of trusts "seems to be tax avoidance".

"An examination of who is using trusts and who benefits from trusts shows they are heavily biased towards the very rich. Virtually all wealth held in all private trusts is by the 20 per cent wealthiest households who hold an average $123,100 in private trusts," he said in the report. Follow us on Facebook