Minimum Tax on Discretionary Trusts – Exposure Draft Legislation
While we support the fact that distributions made by discretionary trusts to deductible gift recipient’s (DGR) and charities will be exempt from the proposed the 30% Trust Tax, the Community Council for Australia (CCA) continues to call on government to take more action needed to prevent the reduction in philanthropic giving and inequities created by the Trust Tax. The government must commit to further steps by the end of 2026 that provides a pathway to fit for purpose DGR reform.
The Trust Tax reforms enable giving through trusts to continue without penalty, but it also creates an unfair two-tiered system for individual taxpayers who want to support Australia’s charities compared to those who benefit from a discretionary trust. Just as importantly, the current proposal will lock-in the existing inequities and disincentivise giving to most of Australia’s 300,000 community organisations and not-for-profits (NFPs).
The government should ensure the Trust Tax proposal does not add to the growing red tape, compliance and administrative burdens facing our sector. Charities and NFPs are at the heart of our communities, our productivity, our health and wellbeing, our disaster preparedness, response and recovery. Our sector enables the generous and flourishing communities that Australia relies on.
The government can do significantly more to genuinely support charities and NFPs by acting on the key recommendations of five major government endorsed reports undertaken over the last three decades. This includes the government’s own commissioned Productivity Commission’s Foundations for Giving Report (2024)1, calling on reform of a broken DGR system that this Trust Tax reform proposal will further entrench.
The policy choices of governments reflect their values and priorities. By not acting on DGR reform, the government will be indicating that it is comfortable with leaving a diverse group of charities and change making community organisations locked out from accessing more philanthropic support, whether from individuals, Giving Funds or discretionary trusts.