31/05/2026
The Federal Government has announced proposed changes in the 2026 Budget that may impact how income from discretionary trusts is taxed.
From 1 July 2028, it’s proposed that income distributed from discretionary trusts (including testamentary trusts) will be subject to a minimum 30% tax rate. Currently, this income is taxed at each beneficiary’s marginal tax rate, which can be more flexible.
At this stage, there are still a lot of unknowns, and the detail will depend on the final legislation. For many beneficiaries already earning over $45,000 per year, the practical impact may be limited.
Importantly, discretionary testamentary trusts remain a valuable estate planning tool. They continue to offer strong asset protection and flexibility, and can still provide tax planning advantages in the right circumstances.
If you’d like to understand how these proposed changes may affect your estate planning, please contact MV Law’s Wills & Estates Team for expert advice on (02) 6279 4444 or [email protected].