Key Takeaways
- Prime Minister Anthony Albanese and Treasurer Jim Chalmers are defending a new 30 % tax on discretionary trusts, arguing it aligns investment income with labour‑earned tax rates.
- Opposition Leader Angus Taylor has labelled the measure a “death tax by stealth,” reviving a scare tactic that hurt Labor in the 2019 election.
- Social Services Minister Tanya Plibersek insists the change does not affect fixed testamentary trusts and stresses that most Australians do not use discretionary trusts for wealth transfer.
- Approximately 840,000 discretionary trusts operate in Australia, holding assets for families; only about 10,500 testamentary trusts existed in 2022‑23, with the new tax applying to discretionary testamentary trusts from 1 July 2028.
- Critics, including One Nation’s Barnaby Joyce, warn the reform could push asset‑rich individuals into financial hardship, while the government maintains the policy is a commonsense step toward tax equity.
- Political polling shows the budget‑related trust tax has damaged Labor’s standing, with Albanese slipping behind Taylor as preferred prime minister in recent surveys.
Albanese Defends Trust Tax Amid Opposition Attack
Prime Minister Anthony Albanese has publicly backed the government’s decision to impose a 30 % tax on discretionary trusts, describing it as a necessary measure to ensure that income derived from assets is taxed similarly to wages. Speaking in Adelaide, Albanese argued that workers already pay tax on their earnings each week, and it is unfair for those living off investments to enjoy a lower effective tax rate. He framed the reform as a matter of fairness rather than a punitive move, insisting that the change will not disproportionately affect ordinary Australians.
Taylor Labels Reform a “Death Tax by Stealth”
Opposition Leader Angus Taylor seized on the announcement, declaring the trust tax a “death tax by stealth” and warning that it would punish families seeking to pass wealth across generations. Taylor’s rhetoric echoes the successful scare campaign used against Labor in the 2019 federal election, which contributed to the party’s loss and the resignation of then‑deputy leader Tanya Plibersek. By reviving that language, Taylor aims to mobilise voter concern over perceived threats to family wealth and inheritance rights.
Plibersek Rebutes the “Death Tax” Claim
Appearing on Seven’s Sunrise, Social Services Minister Tanya Plibersek vigorously defended the policy, rejecting the label of a death tax. She clarified that individuals wishing to avoid the new rate can still establish fixed testamentary trusts after the legislation takes effect in 2028. Plibersek emphasized that the reform targets discretionary trusts, which allow trustees to allocate income flexibly, rather than the more rigid fixed testamentary structures that are less commonly recommended by professionals.
Data Shows Limited Use of Testamentary Trusts
According to the Australian Tax Office, roughly 10,500 testamentary trusts were operating in the 2022‑23 financial year, the most recent period for which data is available. The ATO figures do not distinguish between discretionary and fixed testamentary trusts, but the government notes that the vast majority of trusts in Australia—about 840,000—are discretionary. Consequently, the new 30 % rate will affect a relatively small subset of trusts, specifically those that are discretionary and created via a will (discretionary testamentary trusts).
How the Tax Will Operate
Under current law, income distributed from a trust is taxed at the beneficiary’s marginal rate, which can reduce the effective tax burden to zero if the beneficiary falls into a low‑income bracket. From 1 July 2028, discretionary trusts will be subject to a flat 30 % tax on distributions, regardless of the beneficiary’s personal tax rate. Fixed testamentary trusts, where the will pre‑determines how assets are split, will remain exempt from the new rate, providing an avenue for those who wish to avoid the tax through alternative trust structures.
Political Fallout and Public Opinion
The budget‑measure has already begun to erode Labor’s standing. A Resolve Political Monitor conducted for the masthead shows the government’s support slipping three percentage points, with more than one‑third of respondents saying their view of Labor has been damaged. In preferred‑prime‑minister polling, Albanese now trails Angus Taylor by 33 % to 30 %. The trust tax controversy has become a focal point in the broader post‑budget narrative, prompting Albanese to embark on a multi‑state tour to defend the budget and counter opposition attacks.
Critics Warn of Unintended Consequences
One Nation MP Barnaby Joyce, who appeared alongside Plibersek on Sunrise, argued that the reform amounts to “socialism at play” and warned that it could force asset‑rich individuals into dire financial straits, even suggesting some might end up living in their cars because they could not afford rent. Joyce also accused the government of breaking election promises not to alter the capital‑gains‑tax discount and negative gearing, framing the trust tax as part of a broader pattern of fiscal overreach.
Government’s Rationale: Aligning Labour and Asset Taxes
Both Albanese and Treasurer Jim Chalmers have reiterated that the core objective of the trust tax is to create a fairer tax system where earnings from labour and earnings from assets are treated more uniformly. Chalmers described the changes as “sensible, commonsense” reforms that will not prevent Australians from using fixed testamentary trusts to minimise tax if they so choose. The government maintains that the measure targets a narrow set of arrangements used primarily for wealth‑protection strategies, rather than the everyday savings vehicles of most citizens.
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