New budget for Aussies affects and downfalls
I did an AI overview of the detrimental and unfair effects of the new 30% on trusts, and this is what came up:
Hits low-income beneficiaries hardest
Under the proposed measure, a discretionary trust with net taxable income of just $15,000 would be subject to the 30% tax, whereas an individual earning the same income would fall below the tax-free threshold and pay no income tax at all. This is a fundamental inequity baked into the design.
Lost credits for those on lower tax rates
If a beneficiary's personal tax rate is below 30%, the excess credit will simply be lost — it is non-refundable. This means families distributing to children, students, or low-income members are penalised without any mechanism to recover the overpaid tax.
Double taxation via corporate beneficiaries
Corporate beneficiaries will not receive a credit for the tax paid by the trustee, which appears deliberately designed to result in double taxation to discourage their use.
Disproportionate impact on small Small Business Development Corporation WA
Around 350,000 active small businesses currently operate under discretionary trusts. Many have used this structure for legitimate reasons like succession planning and asset protection — not tax avoidance — and now face costly restructuring.
Restructuring costs and state-level complications
While rollover relief provides some transitional support from an income tax perspective, taxpayers may face material transactional costs — particularly around stamp duty at the state and territory level — that inhibit efficient restructuring if relief is not coordinated across all levels of government.
No grandfathering for existing structures
No grandfathering applies, meaning existing discretionary trust structures will be captured from 1 July 2028 — giving families and businesses limited time to adapt arrangements that may have been in place for decades.
In short, while the government frames this as a fairness measure, critics argue it is a blunt instrument that punishes ordinary families and small businesses alongside genuine high-wealth tax minimisers
Hits low-income beneficiaries hardest
Under the proposed measure, a discretionary trust with net taxable income of just $15,000 would be subject to the 30% tax, whereas an individual earning the same income would fall below the tax-free threshold and pay no income tax at all. This is a fundamental inequity baked into the design.
Lost credits for those on lower tax rates
If a beneficiary's personal tax rate is below 30%, the excess credit will simply be lost — it is non-refundable. This means families distributing to children, students, or low-income members are penalised without any mechanism to recover the overpaid tax.
Double taxation via corporate beneficiaries
Corporate beneficiaries will not receive a credit for the tax paid by the trustee, which appears deliberately designed to result in double taxation to discourage their use.
Disproportionate impact on small Small Business Development Corporation WA
Around 350,000 active small businesses currently operate under discretionary trusts. Many have used this structure for legitimate reasons like succession planning and asset protection — not tax avoidance — and now face costly restructuring.
Restructuring costs and state-level complications
While rollover relief provides some transitional support from an income tax perspective, taxpayers may face material transactional costs — particularly around stamp duty at the state and territory level — that inhibit efficient restructuring if relief is not coordinated across all levels of government.
No grandfathering for existing structures
No grandfathering applies, meaning existing discretionary trust structures will be captured from 1 July 2028 — giving families and businesses limited time to adapt arrangements that may have been in place for decades.
In short, while the government frames this as a fairness measure, critics argue it is a blunt instrument that punishes ordinary families and small businesses alongside genuine high-wealth tax minimisers