with a minimum 30 per cent tax rate<\/a>, before backtracking a month later to carve out an exemption for them.<\/p>\nBut wealth transfer lawyer Rachael Rofe says the promised exemption in draft legislation working its way through parliament is so narrow that few Aussies will be eligible for it.<\/p>\n
In the new law, the government has \u201ceffectively reintroduced\u201d the death tax all over again, she told news.com.au. <\/p>\n
\u201cIt\u2019s a way of saying, \u2018Look, here, enjoy the exemption\u2019, but hardly anyone qualifies for it. It feels a little disingenuous to me,\u201d she said.<\/p>\n
The headache comes from a clause in the Treasury Laws Amendment Bill 2026, currently being reviewed by the Senate Economics Legislation Committee.<\/p>\n
It dictates that for testamentary trusts established after July 1, 2028, the tax exemption is strictly limited to trusts where the beneficiaries are individuals, charities or special disability trusts. <\/p>\n
Trusts that have the potential to distribute money to corporate beneficiaries like family companies or other trusts will be hit with the new tax \u2014 regardless of whether they actually receive a cent.<\/p>\n
Ms Rofe, however, said it was standard legal practice to include the option to distribute to corporate beneficiaries and therefore, most testamentary trusts will be caught out. <\/p>\n
\u201cThese clauses are common in wills because they give trustees flexibility to manage family wealth and respond to changing circumstances,\u201d she said. <\/p>\n
\u201cThe policy is great that they\u2019ve exempted testamentary trusts, but they\u2019ve drafted it in a way that makes most people ineligible to enjoy it.<\/p>\n
\u201cWe\u2019re not talking about thousands or tens of thousands, we\u2019re talking about hundreds of thousands of wills. This has been the cornerstone of modern estate planning for decades.\u201d<\/p>\n
Ms Rofe said if the law goes ahead, many Aussies will be hit with legal fees if they want to change their wills in order to get the exemption.<\/p>\n
\u201cPeople are now going to have to redraft their will. And that is not a cheap exercise. Let alone those people who may not be capable of redrafting their will if they\u2019ve lost testamentary capacity,\u201d she said.<\/p>\n
\u201cThe only way that they can go ahead and get a will redraft to satisfy this new requirement is by applying to the court. Now that is a stressful and expensive exercise on its own.\u201d<\/p>\n
Ms Rofe said she and other experts had repeatedly told the government about the issue in consultations over the law, but \u201cthey ignored the consultations\u201d.<\/p>\n
Her message for Treasurer Jim Chalmers was simple: \u201cYou got the policy right, but you have got the drafting wrong\u201d. <\/p>\n
\u201cLet\u2019s do this in a way that doesn\u2019t require ordinary Australians having to fork out thousands to get their wills redrafted for something that is a very easy legislative fix,\u201d she said.<\/p>\n
News.com.au has contacted the Treasury for comment. <\/p>\n
Why include a Discretionary Testamentary Trust in your will?<\/p>\n
The two main reasons people include Testamentary Discretionary Trusts in their wills are tax efficiency (income splitting and use of lower tax rates) and asset protection (shielding inherited wealth from relationship breakdowns, bankruptcy, and creditors).<\/p>\n
If you inherit assets directly in your own name, all future income and capital gains from those assets are taxed at your personal marginal tax rate.<\/p>\n
So if you already earn a high salary, extra income from inherited shares or property could be taxed at the highest rate of 47 per cent.<\/p>\n
But if the assets are held in a Testamentary Discretionary Trust, the trustee can distribute income across multiple beneficiaries, such as a lower-income spouse, a parent or grandparent on the pension, or even minors, allowing each person to use their own tax-free threshold and lower tax brackets.<\/p>\n","protected":false},"excerpt":{"rendered":"A key detail buried in the wills of hundreds of thousands of Australians will see them hit 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