When it comes to how wealth and high income is taxed in this country, it is not hard to agree with F Scott Fitzgerald’s line that “the rich are different from you and me”.

The difference between the rich and the rest is abundantly clear when you look at how most people make money. Whereas most of us get money from salary and wages, those who earn $1m or more a year generate most of their income through capital gains, dividends and partnerships and trusts:

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Unsurprisingly, the way millionaires make money makes it much easier to avoid tax – whether through the current 50% capital gains tax (CGT) discount or the complex tax arrangements of trusts.

But the government finally seems ready to address the gross inequality in the tax system. As I wrote two weeks ago, the strong rumour is that the CGT 50% discount will be abolished and replaced with the pre-1999 system of only taxing real gain.

But one other significant move that looks set to occur is curtailing the rampant use of family discretionary trusts to limit tax.

Discretionary family trusts are tax vehicles that are used to split up income among everyone in the trust and thereby reduce the overall tax paid. They are different from non-discretionary trusts where the benefits are defined, such as ones set up, for example, in........

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