Jim Chalmers offers Aussies an exemption to tax change
Treasurer Jim Chalmers has softened Labor's planned 30 per cent minimum tax on discretionary trusts, introducing exemptions after pushback from business groups, farmers and family-owned companies. Draft legislation released on Thursday allows charities, deductible gift recipients and tax-exempt bodies such as sporting clubs to avoid the levy, while trusts established before July 2028 can opt into a new fixed-distribution system to sidestep the tax without restructuring. The move matters because it significantly narrows the reach of a measure originally forecast to raise $44.9 billion over nine years, though the government has not published a revised revenue estimate.
Treasury will also widen the definition of a "fixed trust" to exclude commercial structures such as bare trusts and managed investment trusts, and is offering three years of capital gains tax rollover relief from July 2027 for those who do restructure. Uncertainty remains over whether state governments could still impose stamp duty on asset transfers, raising the possibility of future friction between Canberra and the states. Treasury estimates roughly 350,000 small businesses operate through discretionary trusts, of which about 140,000 are unlikely to face extra tax or need to restructure in any given year; a two-week consultation period is now open before final legislation goes to Parliament.
- Chalmers softens trust tax plan with new exemptions and carve-outs
- Charities, pre-2028 trusts and commercial structures largely exempted
- Stamp duty uncertainty and state disputes remain unresolved
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Labor's proposed tax on discretionary trusts was designed to close a loophole that lets some people funnel income through trusts to lower their tax bill. Discretionary trusts are widely used by small businesses, farmers and family firms in Australia to manage how profits are shared among family members, so any change to how they are taxed affects a large number of ordinary businesses, not just the wealthy.
Treasurer Jim Chalmers is the government minister responsible for tax and economic policy, and it falls to him to turn Labor's trust tax plan into detailed legislation. Business groups, farming organisations and family-company representatives had warned that the original proposal would catch many ordinary trusts not intended as targets, and had been lobbying for changes before the rules were finalised.
This matters because trusts are a common and long-established way of structuring small businesses and family finances in Australia, so the shape of the final rules will determine how many people actually face higher tax and how much extra revenue the government raises. The policy is still in draft form, with a period for public feedback before it goes to Parliament, meaning further changes are possible before anything becomes law.