The Federal Government’s proposed 30% minimum tax on discretionary trusts continues to evolve, and there is encouraging news for families with testamentary trust wills.
The current exposure draft legislation preserves the exemption for testamentary trusts, confirming the Government’s intention that these important estate planning structures will continue to play a role in passing wealth between generations.
However, an important drafting question remains unresolved.
The exposure draft leaves some uncertainty about whether the new rules will focus only on who actually receives income from a testamentary trust, or whether they may also restrict who can be included within the beneficiary class itself. This distinction could have significant implications for many existing testamentary trust wills that contain broadly drafted beneficiary classes, as is commonly the case.
At this stage, we do not recommend rushing to amend existing wills. The legislation is expected to be considered by Parliament in the coming weeks, with enactment potentially occurring during the mid to late October sittings.
Once the legislation is finalised and the position is clear, we will undertake a detailed review of the changes and provide a firm recommendation on whether updates should be considered for wills containing testamentary trust provisions.
For now, the message is simple:
✅ Testamentary trusts appear set to survive the proposed reforms.
✅ Most clients should wait for the legislation to be finalised before making any changes.
✅ We will provide further guidance once the final position is known.
✅ If your estate planning includes a will with testamentary trusts, now is a good time to ensure we have your current contact details and that you are opted in to receive our client alerts, so we can keep you informed once the legislation is settled.
If you have any questions or wish to discuss anything in more detail please contact our Estate Planning team on (02) 4927 2900.