Testamentary Trusts Likely Spared Under Proposed Tax Reforms

In our previous blog article, we explored the key estate planning measures announced in the Federal Budget for 2026–27. Since then, the government has provided further clarification on its proposed 30% minimum tax rate for non-fixed testamentary trusts, easing concerns for many families and advisers.

While the final position will depend on the legislation ultimately introduced and passed by Parliament, the latest announcement indicates that the long-standing concessional tax treatment of testamentary trusts is expected to remain available in appropriate circumstances.

Key Takeaways

The recent announcement provides a degree of certainty for those using testamentary trusts as part of their estate planning strategy. Key points include:

• Testamentary trusts continue to be a valuable estate planning and tax management tool.

• Proper structuring during the Will-drafting process is essential to ensure the trust satisfies legislative requirements.

• Careful administration after death, including accurate record-keeping and asset tracing, will become increasingly important.

• Compliance with the original purpose and intent of the trust will be a key factor in maintaining access to concessional tax treatment.