Discretionary testamentary trusts in Wills included for genuine testamentary purposes (yet to be defined) will be exempt from the proposed 30% minimum tax on discretionary trusts, provided they are structured to benefit only individuals or income tax exempt entities.
Quoting this morning’s announcement
“In response to targeted consultation following the Budget, the Government will exempt income from all types of discretionary testamentary trusts from the minimum tax provided they are established for genuine testamentary purposes. The exclusion will be limited to income from assets of the deceased estate. For discretionary testamentary trusts established on or after 1 July 2028, the exclusion will only apply to trusts that can only benefit individuals and income tax exempt entities. We have been clear that there is no tax on inheritances or deceased estates but we are taking this step to put this beyond doubt.”
Prime Minister of Australia
Media release — Tax reform implementation, small business & start-ups
In summary, discretionary testamentary trusts:
- are exempt from the proposed 30% minimum tax
- must be included for genuine testamentary purposes
- to be effective from 1 July 2028:
- exemption only applies if beneficiaries of such trusts are individuals and income tax exempt entities
What this means for you
Existing Wills with discretionary testamentary trusts may now need their beneficiary classes amended. We would be glad to help you — or your clients — review them in light of this announcement.
