Businesses need tax relief not a "kick in the guts" to drive economic growth, says Malcolm Turnbull.
Opposition Leader Bill Shorten on Sunday unveiled plans to tax all payments to adults from discretionary trusts at 30 per cent, arguing the tax system is too "leaky".
He says the move will limit the legal but unfair use of trusts by Australia's wealthiest earners to split their income among family members instead of paying top tax rates on it.
The prime minister, who is spending a week in Western Australia talking up his economic plan, told reporters Mr Shorten was more interested in the "politics of envy" than jobs and growth.
"He's obviously got a determination to do everything he can to kick small business in the guts," Mr Turnbull said of his opponent on Monday.
"What does he think is going to drive economic growth, other than entrepreneurship and enterprise and small business?"
Mr Turnbull urged Labor to support the government's business tax relief which "will encourage people to invest and employ and get ahead".
Mr Shorten told reporters in Melbourne Mr Turnbull led a government "for the top end of town".
"This government is so out of touch - they are lost in the wilderness," he said.
He said Labor was not planning to prevent trusts being used legitimately to protect assets or for succession planning.
Trust arrangements used by farmers, charities and deceased estates would be exempt.
But Labor intends targeting the unfair use of more than 300,000 trusts Australia's wealthiest earners and small business use to split income among family members to avoid paying a top tax rate of nearly 50 per cent.
"You can't get away with paying no tax on income that you've earned," Mr Shorten said.
Shadow treasurer Chris Bowen says the Labor plan will not affect 98 per cent of Australian taxpayers.
Accountancy firm BDO Australia has also questioned how the Labor policy would work for lower income earners.
It offered the example of a pair of nurses who earned $70,000 each and paid a combined $31,400 income tax, and a pair of plumbers whose small business used a trust and earned $140,000 (same as the nurses) but who would pay a combined $42,000 tax under Labor's plan.
"Disadvantaging small business people in the pursuit of high-income earners does not seem like a smart move," BDO tax partner Mark Molesworth said.
"It should be a case of targeting the behaviour, not the entity."
Small business ombudsman Kate Carnell said the use of trusts by high net worth individuals needed to be examined.
"The problem here is for a very large number of small businesses a trust is a reasonable and a sensible way for them to manage their business - it allows them to flatten profit over a number of years and look after their personal assets," she told Sky News.
