When the Federal Budget was handed down in May, the Government announced a proposal to introduce a minimum 30% tax rate on income from discretionary trusts, including discretionary testamentary trusts established from 1 July 2028.

At the time, we shared in our recent Federal Budget Proposal article that the proposal represented a significant potential change to Estate Planning and that, importantly, the legislation had not yet been introduced or passed by Parliament.

Since then, the Government has indicated it intends to revise the proposal. It has been widely reported that discretionary testamentary trusts established for genuine Estate Planning purposes will no longer be subject to the proposed 30% minimum tax. Instead, the proposed minimum tax is expected to only apply where income from those trusts is distributed to a corporate beneficiary.

While this is welcome news for many Australians, it is important to remember that the proposed legislation has not yet been finalised or passed by Parliament. The detail of the final law, including any exclusions and how they will operate in practice, remains uncertain.

What does this mean for your Estate Plan?

Our advice remains largely unchanged.

Testamentary trusts continue to be an important Estate Planning tool. They can provide significant benefits including:

• Asset protection
• Flexibility in administering inheritances
• Protection for vulnerable beneficiaries, and
• Tax planning opportunities where appropriate

The recent developments reinforce the importance of building flexibility into Estate Planning rather than reacting to proposals that may ultimately change before becoming law.

Should you change your Will?

For most people, there is no immediate need to amend an existing Will solely because of these announcements.

However, if you have questions about how the proposed changes may affect your Estate Plan, or you are considering updating your Will for other reasons, now is an appropriate time to seek advice.

As the legislation is still being developed, we are not yet able to provide definitive advice on how the final laws will affect individual Estate Plans. Once the legislation is settled, we will be able to provide more specific recommendations where required.

We're here to help

Our Wills & Estates team is here to discuss the proposed changes and answer any questions you may have about your Estate Planning arrangements. To arrange a confidential discussion, please contact Robert Lamb, Tracy Pratt or our Wills & Estates team on (07) 3220 1144 or send our team an email via email@hillhouse.com.au.