iscover ‘Assault on family savings’: shadow treasurer slams death tax Easter egg
TaxThe new minimum tax rate on discretionary trusts and related changes is generating responses ranging from confusion to outrage.
The “death tax”, as coined by shadow treasurer Tim Wilson, refers to the 30 per cent minimum tax rate on discretionary trusts, scheduled to take effect on 1 July 2028, unveiled by Treasurer Jim Chalmers in last week’s budget.
Whereas before trusts could feasibly pay no tax if distributions were made by the end of each financial year, and lower-income beneficiaries were only subject to relevant income tax rates, tax will now be levied at a flat minimum at the trustee level.
Under these new rules, a distribution recipient whose personal tax rate is below 30 per cent will receive a non-refundable tax credit, but will not be able to claim the difference.
Implemented to prevent wealthy individuals from lowering their income tax, the measure has been criticised for fundamentally altering the long-term planning of everyday Australians and for its ambiguities regarding fixed trusts and its impact on testamentary trusts.
And according to the opposition, the tax was not openly discussed but rather buried in the budget papers, prompting many to question how it applies to unexecuted or existing wills.
Whether the term ‘death tax’ is unfair continues to be a subject of debate. While Australia does not have an estate or inheritance tax, and no tax is levied at the time assets are passed on, any discretionary testamentary trust created by a will drafted after budget night will be subject to the flat tax.
In a statement last week (15 May), Wilson said: “This bad faith budget is unravelling because Australians have awoken that the budget narrative of intergenerational fairness is code for kneecapping Australian families.”
“In a red hot rage, Anthony Albanese openly lied 50 times over to the Australian people about not introducing new taxes on homes, rentals, investment and family savings, and now he’s been caught out trying to sneak through a death tax too.”
With the definition of a fixed trust and the impact on testamentary trusts still unclear, Treasurer Chalmers partially addressed certain ambiguities in a recent joint press conference.
He said: “We’ve made it very clear that deceased estates are exempt, existing discretionary testamentary trusts are exempt.”
“We’ve been clear about the exemptions in the budget papers. People can still set up fixed testamentary trusts after 2028. I think in this regard it’s best not to listen to the scare campaigns from people who have a partisan or a commercial interest in this. We’re making sensible, common-sense changes.”
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Amelia is a Professional Services Journalist with Momentum Media, covering Lawyers Weekly, HR Leader, Accountants Daily and Accounting Times. She has a background in technical copy and arts and culture journalism, and enjoys screenwriting in her spare time.