Supplementary Submission: Minimum tax on discretionary trusts
Submission Date: 4 August 2026
The Law Council of Australia provided a submission to the Treasury’s consultation on the proposed minimum tax on discretionary trusts.
The Law Council has received additional input from the Law Institute of Victoria (LIV), which forms the substance of this supplementary submission. This supplementary submission is informed by the LIV’s Taxation and Revenue Law Committee.
The LIV supports Treasury’s objective to improve the integrity of the income tax system. However, it considers that the proposed minimum 30 per cent tax must be more precisely targeted to avoid unintended consequences for ordinary family, succession, charitable and commercial trusts.
In particular, the regime should develop a purpose-built ‘discretionary trust’ definition that specifically targets income or capital redirection between beneficiaries to avoid, or reduce, tax liability. A definition that only relies on the absence of fixed trust characteristics would risk capturing arrangements that are not the intended policy target.
The LIV also considers that the regime should preserve existing policy settings for arrangements that have historically been recognised as warranting concessional or exempt treatment. This includes distributions to charities and other tax-exempt entities, testamentary trusts, trusts established for vulnerable beneficiaries and beneficiaries who are ‘excepted persons’ under Division 6AA of the Income Tax Assessment Act 1936 (Cth).
The LIV is also concerned by aspects of the proposal that may give rise to economic double taxation, particularly in relation to corporate beneficiaries and the treatment of excess franking credits. The minimum tax should operate as a tax floor rather than as a mechanism for imposing additional layers of tax on income that has already borne tax elsewhere in the system.
The LIV recommends Treasury consider adopting the following measures to better align the regime with its intended objectives whilst reducing uncertainty, compliance costs and unintended consequences for legitimate trust arrangements:
- adopt a purpose-built definition of discretionary trust supported by clear commercial safe harbours;
- exclude or provide appropriate relief for charities, testamentary trusts, vulnerable beneficiaries and excepted persons;
- incorporate mechanisms to prevent double taxation of corporate beneficiaries and to recognise franking credits representing tax already paid;
- provide broader and more flexible rollover relief, including a longer transition period and coordination with state tax and GST requirements; and
- ensure the regime contains practical safe harbours, workable administration and collection mechanisms and clear ordering and transitional rules, including in relation to any future legislative response to Bendel.1
1 Commissioner of Taxation v Bendel [2026] HCA 18 (Bendel).
Last Updated on 07/08/2026
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