Genuine consultation or rushed reform? The Tax Institute questions compressed timeframe for feedback on crucial changes to the taxation of discretionary trusts.
Sydney, 18 September 2026: The Tax Institute has today made a submission to the Treasury regarding its consultation on the exposure draft package of legislation to implement a minimum tax on discretionary trusts. The Tax Institute has welcomed this opportunity, noting that a number of the recommendations that were included in our submission dated 31 July 2026 on the consultation paper titled ‘Minimum tax on discretionary trusts’ have been reflected in the exposure draft legislation and associated materials.
The Tax Institute supports the Government's efforts to reform the taxation of trusts and improve the fairness of the tax system. Reform is long overdue in this area. However, it would be better to re-write the tax laws relating to trusts as a whole.
“There are many legacy issues that impact the taxation of trusts in addition to the Government’s concerns about inappropriate income splitting. Addressing this one issue in isolation risks further complicating an already excessively complex area. This should be an opportunity to re-write and improve the taxation of trusts overall” says Tax Counsel John Storey.
Regarding this proposal specifically, in the development of the submission, and after closely consulting with our members – who have in-depth knowledge, experience and expertise in trust taxation - we continue to have concerns regarding several aspects of the proposed design.
“Several significant policy, technical and practical issues remain unresolved. Adding to these issues is the compressed timeframe for this consultation, spanning just 16 calendar days” says John Storey.
“Given the significance of the proposed reforms, the extensive range of taxpayers and structures potentially affected, and the highly technical nature of the legislative package, we call on the Government to give the profession more time to reflect on and consider the proposed changes rather than rushing to respond to them” continues John.
Particular areas The Tax Institute is concerned about include:
- the continued denial of the minimum tax offset to corporate beneficiaries, which may result in effective double taxation and tax outcomes that exceed the stated 30 per cent policy objective;
- the absence of a comprehensive mechanism to preserve the benefit of trustee-level minimum tax through trust chains to the ultimate taxpayer;
- uncertainty regarding the interaction of the regime with foreign resident beneficiaries, Australia's tax treaties and distributions from foreign trusts;
- the operation of the testamentary trust exclusion, including restrictions on eligible beneficiaries that may adversely affect legitimate estate planning and asset protection arrangements;
- the lack of clarity regarding the scope of the primary production exclusion in relation to common rural ownership and operating structures;
- the interaction of the proposed regime with other tax measures, including Division 7A, capital gains tax provisions and broader trust taxation reforms;
- the significant compliance, restructuring and implementation costs likely to be incurred by affected taxpayers, including the roll-over's restriction to a single transferee entity;
- significant, unresolved design issues in the electable regime;
- extensive reliance on Ministerial legislative instruments for several threshold eligibility questions, including roll-over continuity for trusts that are not family trusts; and
- the deferral of important administrative, reporting, notification, and collection arrangements to future tranches of legislation, which limits stakeholders' ability to fully assess the regime's practical operation.
Further to the above areas of concern, The Tax Institute also notes that the Government intends to finalise implementation of the minimum tax regime through further tranches of legislation.
“While we recognise that substantial reforms may need to be developed progressively, this approach makes it difficult for taxpayers, advisers and other stakeholders to fully understand and assess the
operation of the proposed regime as a whole. Stakeholders are effectively being asked to comment on only part of the framework, even as important aspects of the regime remain under development” says John Storey.
“In our view, meaningful consultation is best achieved when stakeholders have visibility of the complete legislative framework, enabling a comprehensive assessment of the policy's practical operation, compliance burden and interaction with existing tax laws. We therefore encourage Treasury not to introduce the package into Parliament before providing further opportunities for consultation as the remaining elements of the regime are developed” adds John.
This consultation was followed by another five Treasury consultations released on 11 September that are due on the 28 September 2026, and include:
- Monthly Pay As You Go (PAYG) instalments
- Expanding tax incentives for venture capital schemes
- Innovative Business CGT Concession (exposure draft legislation)
- Sustainable fringe benefits tax treatment of electric cars
- Better targeting the Research and Development Tax Incentive (exposure draft)
“This is a concerning trend that we have seen the Government follow in the months following the May Federal Budget,” says John.
“The tax profession and taxpayers deserve a proper say when it comes to changes to the tax system, especially when fairness is the objective” concludes John.
ENDS
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