The plan introduces a 30% minimum tax on distributions from discretionary trusts, aimed squarely at tax minimisation and income splitting practices used by wealthy families and small businesses. Treasury estimates the measure delivers more than $4 billion in extra revenue each year once fully operating.
Implementation is scheduled for July 1 2028, giving advisers and donors several years to adjust structures. The policy was unveiled in the May 12 federal budget, with formal submissions to Treasury’s consultation process closing on Friday.
Charities are swept up because many rely on income streaming from family trusts and philanthropic structures that fall inside the discretionary trust net. Under the proposal, those distributions face the same 30% floor, even when the end recipient is a tax‑exempt charity rather than a high‑income household.
That change risks making trust‑based giving significantly less attractive for donors who currently direct large recurring payments to not‑for‑profit organisations. Sector advisers argue that even a modest retreat in these flows could translate into millions of dollars lost each year for frontline services.
Policy specialists point out the tension between cracking down on aggressive tax planning and preserving incentives for structured philanthropy. The government is weighing carve‑outs or design tweaks that protect genuine charitable flows while keeping the $4 billion revenue boost largely intact.
Any exemptions need to be tightly drawn so the charity label does not become a back door for renewed income splitting. That balance looks set to dominate the next phase of Treasury’s work, after formal submissions highlighted how many charities could be unintentionally caught.
