Australia retains 30% tax on some inherited trusts after death‑tax reversal

Prime Minister Anthony Albanese and Treasurer Jim Chalmers announced that the Australian government will pull back its original "death tax" proposal for discretionary trusts but will keep a 30 percent minimum tax on certain testamentary trusts. The change, presented in Sydney, exempts genuine trusts that benefit individuals and tax‑exempt entities such as charities, aiming to curb the use of "bucket companies" that shift income to corporate rates.

The policy will affect discretionary trusts, which number about 840,000 of Australia’s one million trusts, and a subset that only become active after a trustee’s death. New assets added to these trusts after death are expected to be subject to the tax, while income from existing assets may remain exempt. A consultation paper outlining the definition of "genuine" trusts is due next month.

Opposition figures labeled the measure a "death tax". Shadow treasurer Tim Wilson said, "The prime minister denied multiple times in parliament that his budget had a new death tax in it. His backflip is a complete admission that it was a death tax," and Nationals senator Bridget McKenzie also warned the measure could affect hundreds of thousands of Australians.