Abandon discretionary trust changes, prioritise trust taxation review, lawyer says

In his submission, View Legal director Matthew Burgess said a more coherent policy approach would involve reviewing taxation of trusts as a whole, simplifying complex provisions, introducing greater certainty for taxpayers and advisers, considering interactions with state and territory tax systems and more considered consultation.

“Consultation directed towards long-term structural reform rather than incremental changes to specific aspects of the existing regime, that on the face of material released are targeted solely at generating tax revenue,” he said.

The proposed measures should be abandoned, he said, and priority should be placed on a comprehensive review of Australia’s trust taxation framework.

“If instead these recommendations are simply ignored, which we assume will be the case, we strongly recommend that no final position be adopted until all substantive concerns raised by the leading professional bodies are addressed.”

In the 30 July 2026 submission, Burgess said that the proposed reforms risk adding greater complexity to the Australian tax system.

“Consideration should first be given to simplifying and modernising existing rules before introducing additional layers of complexity.”

“Any reform in this area should therefore be approached with caution and only after a comprehensive review of the broader trust taxation framework.”

Burgess added that the consultation paper proceeds on the assumption discretionary trusts are primarily used as vehicles for income splitting and tax minimisation. Despite this, he stressed that discretionary trusts “perform important commercial, asset protection, succession planning and investment functions”.

“Returns on business and investment assets are inherently uncertain and often involve significant personal and financial risk.”

“Any reform should carefully balance revenue objectives against the broader policy objective of encouraging entrepreneurship, investment and long-term capital formation.”

“Rather than improving the taxation of trusts, the proposal adds material complexity, will significantly increase compliance costs, while diminishing confidence in the fairness and integrity of a system that already imposes near overwhelming (by way of global comparisons) tax burdens on many of the taxpayers most likely to be affected (most of whom already carry a disproportionate amount of contributions to consolidated revenue).”