Dr Joseph De Zylva didn’t grow up rich. His family, he says, were likely below the poverty line. His school supplies in high school came from a bursary that set him on the path to university, and medicine.
“Clearly it was a person from an area of privilege who supported me,” the Northern Territory doctor said. “I’m concerned these changes will mean trust funds will now be offloading that money to the government … and they’ll be unwilling or unable to help kids like me in the future.”
That is a reference to the federal budget announcement on Tuesday that there would be a 30 per cent minimum tax on a trust’s taxable income from July 2028, replacing the current system where the amount of tax paid is based on the marginal tax rate of the trust’s various beneficiaries.
The current system – which remains in place while the government attempts to legislate the changes – allows the beneficiaries of the more than 840,000 family trusts in Australia to split income between parents who may be earning more, and children earning less, reducing their overall tax bill.
About 90 per cent of private trust wealth is held by the wealthiest 10 per cent of households, according to data cited by the government on Tuesday.
Treasurer Jim Chalmers branded the government’s planned change as one that would “level the playing field”, better aligning taxes paid on earnings from vehicles such as trusts with taxes on wages.
But there are other reasons people use trusts. IQ Accountants partner Kyelie Baxter said many people had come to her concerned about the changes but that there was not yet enough detail about how it would work.
“It could affect how people pay their mortgage and how they fund their children’s education,” Baxter said. “Trusts can also be used to handle bankruptcy and divorce, and are often used to plan out succession. They’re a clean way of passing on a business to next generations.”
De Zylva said he was also worried about the impact the changes would have on some of his female relatives.
“Being able to access a family trust allows them to have a supported income at an older age, reducing the burden on the aged care pension,” he said. And he said it benefited younger women in his family too, who could access more of their family’s wealth directly.
Some forms of trust are exempt from the government’s planned changes, including charitable trusts.
Opposition Leader Angus Taylor has vowed to repeal Labor’s tax changes, including to family trusts, while shadow treasurer Tim Wilson said Prime Minister Anthony Albanese and Chalmers were leading the highest taxing government in Australian history.
HLB Mann Judd tax consulting partner Peter Bembrick said the latest change came as little surprise but would lead to “a lot more compliance”, hesitation to open trusts, and some people potentially moving their finances towards a company structure rather than a trust.
“Companies are already attractive vehicles,” he said. “But it’s a bit of a ‘wait and see’ situation. People shouldn’t make rash decisions based on the announcement because the start date [for the change] is not immediate.”
Business groups have claimed the new tax on trusts could stifle business investment.
Australian Chamber of Commerce and Industry acting chief executive David Alexander said the new tax would hit family-owned businesses hard at a time when they were already struggling. “Higher taxes on these small and medium-sized businesses will cut their ability to employ, innovate, and invest in the future,” he said.
Business Council of Australia chief executive Bran Black said he was “disappointed” in the decision to introduce the new tax on trusts, and that a huge number of tradespeople relied on trust arrangements.
A spokesperson for the Council of Small Business Organisations Australia said feedback it received suggested the measures were still being worked through by small business owners, accountants and advisers, with many still trying to understand the practical implications and potential unintended consequences of the policy change.
The Business Briefing newsletter delivers major stories, exclusive coverage and expert opinion. Sign up to get it every weekday morning.
Millie Muroi is the economics writer at The Sydney Morning Herald and The Age. She was formerly an economics correspondent based in Canberra’s Press Gallery and the banking writer based in Sydney.Connect via X or email.
Bridget McArthur is The Age’s sports affairs reporter. She previously worked for ABC News across several bureaus, including as WA’s sports reporter, and has worked as a freelance writer and podcast host. Have a story you want to share? Contact Bridget McArthur at bridget.mcarthur@nine.com.au, or at bridgetmcarthurtips@proton.me if you’re sharing sensitive information. You’ll need to set up your own account to ensure communication is encrypted.Connect via X.
