Australia: Trusts

Australian taxpayers face a challenging paradox where courtroom victories against the Australian Taxation Office often prove pyrrhic, as favorable judicial decisions are routinely neutralized through swift legislative amendments and persistent administrative enforcement. Recent landmark cases involving trust distributions and capital gains definitions illustrate how the government systematically overrides judicial outcomes to protect revenue interests. Understanding this pattern of legislative intervention

A new proposed minimum tax on discretionary trusts aims to prevent income-splitting but could inadvertently capture commercial trust structures used by property and infrastructure groups. The definitional challenge centers on what constitutes a 'discretionary trust' and whether the existing fixed trust rules are appropriate for determining scope. Without proper limitations, many multi-layered structures with no income-splitting function may face unintended tax consequences and compliance burdens.

On Tuesday, 12 May 2026, the Treasurer, Dr Jim Chalmers, handed down the 2026–27 Federal Budget. The Federal Budget introduces the most significant tax reforms aimed at reshaping how income and wealth are taxed in Australia. The Government is seeking to rebalance the system by reducing tax on income from work and increasing tax on income from assets, and then using that difference to fund personal tax relief and influence housing behaviour.

The 2026 Federal Budget has introduced significant changes to how discretionary trusts, including testamentary discretionary trusts (TDTs), will be taxed. If passed, these changes have far-reaching implications for estate planning strategies that many families use to protect and pass on wealth.

The quote sometimes attributed to Vladimir Lenin that “there are decades where nothing happens; and there are weeks where decades happen” seems particularly appropriate in relation to the 2026 Federal Budget.

In this episode of It Depends, associate Sacha Robinson explains how to choose the right jurisdiction for your trust.

Family Office Comparative Guide for the jurisdiction of Australia, check out our comparative guides section to compare across multiple countries

Major reforms impacting how trusts are managed, who can act as trustee, and what information must be shared with beneficiaries.

Legislative mechanisms in place in regard to beneficiaries who are not ordinarily resident in Australia and considering a change in trusteeship.