Bereaved family to be over $7,000 worse off under Labor’s ‘unfair and unjust’ new rules on discretionary trusts

A bereaved family is expected to be over $7,000 worse off under Labor’s “unfair and unjust” new rules on discretionary trusts.

Rod Mitchell’s brother-in-law, John, died from bone marrow cancer in April 2024.

Before his death, John made arrangements which included setting up a discretionary trust to provide for his teenage children.

However, under new rules outlined by Treasurer Jim Chalmers in the latest federal budget, the trust will now be subject to a 30 per cent tax.

The Albanese government will impose the levy on income generated from inherited assets held in discretionary testamentary trusts, as part of wider reforms to family trusts.

Existing discretionary testamentary trusts will be exempt from the new tax, but the change essentially renders new discretionary trusts redundant.

Speaking to Sky News host Chris Kenny, Mr Mitchell said the rules would clearly disadvantage his late brother-in-law’s two children during an already difficult time.

“It was (John’s) explicit wish for him to set up a trust and leave money to his two children left behind, so they can get on in life,” he said.

“That sum of money was put into a discretionary trust, which my wife and I were made trustees of.

“One of the children suffered from a severe seizure at birth, resulting in brain damage, and has additional needs.

“Now we have this issue with proposed laws coming into the trust and they’ll take thirty per cent of any earnings from the trust.

“I discussed this with my accountant, who said, yes, these laws will clearly disadvantage the children and they’ll be worse off.”

Mr Mitchell said the two children already have enough to deal with, without the added stress of losing money under the new rules.

“The government will take $7,500 straight from the kids and that just makes them poorer, it doesn’t help their lives,” he said.

“They’ve got enough challenges, they’ve lost their father and they are two kids on a single mum’s income. It’s unfair and unjust.

“At this stage, we’re trying to shelter the children from the news, but they are surrounded by a very wonderful, caring community of people.”

Nationals leader Matt Canavan previously declared the Albanese government’s “heartless” death tax would pile extra stress on grieving Australians.

“The government has imposed heartless extra stress on Australian families, both having to plan for their own passing or their family loved ones’ passing,” he told Sky News on Tuesday.

“I don’t think people want the Australian tax office involved in these discussions. It should be stuff dealt with between family members, your lawyers and that’s about it.”