Our full submission and supplementary paper to Treasury and Parliament. Supports the integrity objective of the proposed minimum tax, and sets out a case study, the existing anti-avoidance framework, the State stamp duty trap, and three constructive legislative recommendations. Published anonymously at the submitter's request; no identifying details are included. Read together with, and standing in place of, the original submission lodged 22 July 2026.
This publication reproduces, anonymously and at the submitter's request, the supplementary supporting paper and original submission lodged with the Australian Treasury (reference sbm3e1eac4f290c6a91986c1, lodged 22 July 2026), in response to Treasury's Consultation Paper on the Proposed Minimum Tax on Discretionary Trusts. No identifying details are included. Fair Trust Reform was established to publish and advocate around this submission; the text below is the submitter's own.
Re: Supplementary Supporting Paper, Consultation on the Proposed Minimum Tax on Discretionary Trusts Original submission reference: sbm3e1eac4f290c6a91986c1 · Original submission lodged: 22 July 2026
This paper is submitted in support of the original submission lodged with Treasury on 22 July 2026, and should be read together with — rather than in place of — that submission. It continues to support the Government's objective of protecting the integrity of Australia's taxation system and addressing deliberate tax avoidance through the misuse of discretionary trusts, while examining four practical issues that warrant further consideration before the legislation is finalised.
1. Legislative precision. Treasury's own analysis shows private trust wealth is concentrated within a relatively small proportion of discretionary trusts. This paper asks whether that evidence supports a more targeted framework — one that distinguishes higher-risk arrangements from modest, long-established family trusts with a demonstrated compliance history.
2. Existing integrity measures. The paper examines how the proposed reform interacts with section 100A of the Income Tax Assessment Act 1936 (Cth) and the ATO's Practical Compliance Guideline PCG 2022/2, and whether these already provide substantial powers to address deliberate avoidance while distinguishing ordinary family dealings from artificial arrangements.
3. Practical implementation issues, including reduced financial capacity for self-funded retirees, diminished support for adult children in tertiary education, the treatment of non-refundable trustee tax credits, and the practical operation of the proposed transition arrangements — with particular attention to the interaction between the Commonwealth restructuring framework and State transfer duty legislation.
4. The State Stamp Duty Trap. Although Treasury has proposed a temporary Commonwealth CGT rollover to facilitate restructuring, families holding commercial property may still face substantial State transfer duty if restructuring becomes necessary — a gap that may significantly affect the practical accessibility of the transition arrangements, and warrants further Commonwealth–State cooperation.
Recommendations. The attached paper concludes with constructive recommendations: objective, evidence-based qualifying criteria; an appropriate annual trust income threshold; recognition of long-established, compliant family trusts; preservation of ordinary family dealings consistent with existing ATO guidance; and greater Commonwealth–State coordination during the restructuring period.
Declaration of interest. This paper reflects the submitter's experience as trustee of a modest family trust, established more than thirty years ago on professional legal and taxation advice, and is offered as a constructive contribution to Treasury's consultation process.
Yours faithfully, [Name withheld, anonymous submission] Victoria, Australia
Submission to the Australian Department of the Treasury and the Parliament of Australia — Response to Consultation Paper: Minimum Tax on Discretionary Trusts (8 July 2026) Prepared by an anonymous submitter, trustee of a long-established family discretionary trust, Victoria, Australia · July 2026
The Government has announced a 30% minimum trustee tax on discretionary trusts, effective 1 July 2028, to strengthen tax system integrity and align trust taxation with the rates paid by salary and wage earners. This submission does not contest that objective.
Treasury's own distributional analysis confirms private trust wealth and high-income trust distributions are concentrated within a small tier of high-wealth entities. Fewer than 15% of active small businesses use a discretionary trust structure, and over 90% of active small businesses are unaffected by the measure. Yet an upfront, non-refundable 30% trustee tax applied uniformly across all non-fixed discretionary trusts creates disproportionate compliance burdens and structural penalties for modest, long-established family trusts operating for genuine self-funded retirement and intergenerational support.
This submission recommends three refinements: an objective net trust income floor of $100,000–$150,000, preserving flow-through taxation below that level; coordinated Commonwealth–State restructuring relief addressing State transfer duty; and alignment with the policy logic already applied to testamentary trusts.
Taxpayers who exploit discretionary trust structures to avoid paying their lawful share of tax should be subject to decisive regulatory and enforcement action. Protecting the integrity and progressivity of Australia's tax base is essential.
But as Parliament considers Treasury's July 2026 proposals, a crucial question must be asked: have policymakers considered the families who sought professional advice, planned their financial self-sufficiency in good faith, and fully complied with the law? For more than thirty years, the submitter and their spouse followed the model encouraged by successive Australian governments — building a business, meeting all tax liabilities, and investing in commercial property through a discretionary trust to fund their own retirement and reduce reliance on the Age Pension. At seventy years of age, the submitter now faces a proposal that risks taxing a modest, lawfully and transparently operated family trust in the same manner as high-wealth avoidance schemes.
This submission does not oppose tax integrity. It offers constructive, evidence-based recommendations to achieve policy precision without penalising compliant families.
Parliament unquestionably holds the constitutional authority to amend revenue laws. Sound public policy, however, distinguishes between artificial tax avoidance schemes and compliant taxpayers operating within statutory frameworks Parliament itself established.
| Feature | Modest family trust | High-wealth tax scheme |
|---|---|---|
| Portfolio scale | Modest | Substantial |
| Disclosure | Fully disclosed | Concealed or obscured |
| Distribution pattern | Standard family dealings | Aggressive income splitting |
| Structural character | Genuine economic entitlements | Artificial paper entitlements |
| Overall risk profile | Low | High |
Treasury's published distributional analysis confirms two findings: fewer than 15% of active small businesses operate through a discretionary trust, and over 90% will be unaffected by the measure; and private trust wealth and high-income trust distributions are heavily concentrated within high-wealth households. Because Treasury can already isolate where avoidance risk is concentrated, the legislation should target those high-risk entities rather than impose a blanket trustee tax on low-income family structures.
Over thirty years ago, the submitter and their spouse established a family discretionary trust. It holds four modest commercial retail properties and generates approximately $95,000 in net annual trust income — every dollar declared and assessed under existing law — funding self-funded retirement and support for family members through tertiary education.
$95,000 — illustrative case-study trust income $28,500 — upfront trustee tax at 30%, no floor 30+ years — operating history
Under the proposed 30% minimum tax, the trustee would pay $28,500 upfront ($95,000 × 30%), with non-corporate beneficiaries receiving a non-refundable, non-carriable tax offset. For self-funded retiree beneficiaries in lower marginal tax brackets, unused offsets can't be refunded or carried forward — trapping tax credits at the trustee level and directly reducing net income available for daily living and medical expenses. For student beneficiaries with little or no taxable income, non-refundable credits can't offset a liability they don't owe, removing the flow-through treatment such arrangements have historically relied on and increasing financial pressure on students.
Discretionary trusts already operate within a detailed integrity framework enforced by the ATO:
Commissioner of Taxation v Guardian AIT Pty Ltd [2023] FCAFC 3 is the leading authority on applying s100A and Part IVA to distributions made to corporate beneficiaries. The Full Federal Court held that s100A requires a reimbursement agreement to exist at or before the time trust income is appointed — advisor recommendations alone don't constitute such an agreement absent a mutual understanding between the parties — and that Part IVA applies where multi-step circular distributions have the dominant purpose of securing a tax benefit. Guardian AIT demonstrates the ATO already possesses the statutory tools needed to dismantle artificial trust-based tax schemes.
Commissioner of Taxation v Bendel [2026] HCA 18, decided 10 June 2026, held by majority that an unpaid present entitlement owed to a corporate beneficiary is not a "loan" for the purposes of section 109D of Division 7A. Bendel was a statutory interpretation case, not a tax evasion or anti-avoidance case — but its significance here is what it reveals about the limits of administrative guidance: the ATO's prior position (Taxation Determination TD 2022/11) had extended beyond what the statute supported. Bendel underscores the need for Parliament to draft trust legislation with statutory clarity, rather than leaving key thresholds — such as the net income floor proposed below — to broad administrative discretion.
Treasury's Consultation Paper proposes a three-year federal CGT rollover, from 1 July 2027 to 30 June 2030, to facilitate restructuring out of discretionary trusts. But transferring real property out of a trust and into a new entity triggers State transfer duty under State revenue legislation — federal rollover relief doesn't, of itself, remove this principal financial barrier for trusts holding real property.
| Metric | Value |
|---|---|
| Commercial real estate portfolio value | $2,500,000 |
| Estimated State transfer (stamp) duty | ≈ $130,000 |
| Net annual trust income | $95,000 |
| Duty burden relative to annual income | ≈ 1.4 years of gross income |
The $130,000 estimate reflects the average transfer duty payable on a $2,500,000 commercial property portfolio across three eastern seaboard jurisdictions: Victoria ($142,500 under s28, Duties Act 2000 (Vic)); New South Wales ($117,140 under s32, Duties Act 1997 (NSW)); and Queensland ($132,025 under s24, Duties Act 2001 (Qld)) — a three-state average of $130,555. Without coordinated State relief, federal CGT relief remains ineffective for trusts holding real property, creating a capital lock-in effect that undermines the policy intent of the restructuring window.
1. An objective net income floor of $100,000–$150,000. Below this threshold, compliant family trusts retain flow-through tax assessment. This improves administrative efficiency by eliminating compliance costs for low-risk trusts, directs compliance resources toward the high-wealth entities where Treasury's own data shows risk is concentrated, avoids forcing small family groups into costly restructures where integrity risk is low, protects self-funded retirees who rely on distributions for daily living costs, and prevents education support costs shifting onto student debt — while trusts above the floor remain fully subject to the 30% minimum tax.
2. Legislative alignment with the testamentary trust exemption. Treasury's Consultation Paper confirms discretionary testamentary trusts are exempt because they serve genuine family purposes rather than aggressive tax avoidance. That same rationale applies with equal force to long-established, compliant family investment trusts.
3. Intergovernmental restructuring relief. The Commonwealth should work through National Cabinet to coordinate State and Territory exemptions from transfer duty where a family trust restructures during the federal rollover window, so that federal CGT relief achieves its intended effect for trusts holding real property.
Parliament has a legitimate mandate to address tax avoidance and protect the national revenue base, and this submission does not dispute that mandate — but effective public policy requires legislative precision alongside legislative intent. Applying an upfront 30% minimum trustee tax without an income floor risks penalising compliant, long-established family trusts alongside the high-wealth arrangements the measure is intended to address. By adopting a net income floor of $100,000–$150,000, coordinating State stamp duty relief, and aligning the treatment of long-established family investment trusts with the existing testamentary trust carve-out, Parliament can achieve its integrity objectives while maintaining fairness for Australian families who have planned their retirement and family support in good faith and in full compliance with the law.
