Estate Planning Update: Tax changes to Testamentary Trusts
If you have a testamentary trust in your Will — or were planning to set one up — this is the update you need to read. The Federal Government’s 2026–27 Budget announcement had fundamentally changed the estate planning landscape, but today’s further announcement offers some much hoped-for relief for testamentary trusts.
What Is a Testamentary Trust?
A testamentary trust is a trust created by your Will that comes into existence only after you die. For decades, they have been a cornerstone of sophisticated estate planning, allowing families to distribute income from inherited assets among beneficiaries in lower tax brackets — often children — significantly reducing the overall tax burden on an estate. They are also powerful tools for asset protection, shielding an inheritance from the claims of a beneficiary’s creditors, relationship breakdowns, or spendthrift tendencies.
The Game-Changer: A 30% Minimum Tax
On 12 May 2026, as part of the 2026–27 Federal Budget, the Albanese Government announced it will introduce a 30% minimum tax on the income of discretionary trusts, commencing 1 July 2028. The tax is paid at the trustee level — meaning the trustee writes the cheque to the ATO before a single dollar reaches a beneficiary.
Today’s update
Today, the Albanese Government has announced the proposed 30% minimum tax will not apply to testamentary trusts established for genuine testamentary purposes. This means Testamentary Trusts are still a valuable estate planning tool continuing to provide significant asset protection and tax benefits.
Contact Marnie Papst or Tom O’Dwyer at Nevetts Lawyers to discuss your estate planning needs – mpapst@nevetts.com.au or todwyer@nevetts.com.au
Author: Marnie Papst
Published: 18 June 2026