Australia to Introduce 30% Minimum Tax on Trusts
New legislation set to pass by the end of 2026 aims to curb tax avoidance within Australian testamentary trusts.
Updated on Oct. 19, 2026 in Taxes
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The Australian government has tabled legislation to impose a 30% minimum tax on testamentary trusts, which will climb to 32% when including the Medicare levy. This measure is designed as an anti-avoidance policy, excluding specific beneficiaries like charities and individuals.
Why it matters
The change targets trusts that have become common in estate planning over the past 30 years but may now trigger significant tax liabilities. To qualify for exemptions, many Australians will need to review and potentially redraft their existing wills.
The proposed 30% minimum tax rate reaches an effective 32% when the Medicare levy is included. Experts note that approximately 90% of professionally drafted wills from the past 30 years currently contain testamentary trusts.
The players
Australian Government
This national authority is responsible for the introduction and administration of the proposed tax legislation.
The details
Most testamentary trusts established in the last three decades include company or family trust structures that will no longer meet exemption criteria under the new rules. Will-makers must be of sound mind to update their documents, meaning those with current health-related cognitive limitations may be unable to avoid the higher tax burden.
Timeline
The Labor government tabled the trust tax legislation in parliament this week.
Retirement living and aged care exclusions were revealed last Wednesday.
Trusts drafted over the past 30 years are impacted by the proposed changes.
The legislation is scheduled to be passed by the end of 2026.
Market Dynamics
This legislation aligns with the Australian government's anti-avoidance tax policy framework to address perceived loopholes in estate planning. It represents a shift in how testamentary structures are treated compared to broader long-term economic cycles in national fiscal policy.
Individuals with existing testamentary trusts may face a 32% effective tax rate unless they take proactive steps to redraft their wills. It is essential to consult with estate professionals to ensure structures qualify for exemptions before the 2026 deadline.
The takeaway
Australians should treat this as a signal to review their estate planning documents with legal counsel immediately. Ensuring a will is current and complies with new definitions is the only way to avoid unnecessary tax exposure.
Further reading
For more information on national fiscal policies, visit Australia Taxes.
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Is now a good time to review your estate plans due to potential tax law changes?
