Testamentary trusts · Wills

Testamentary trusts under the proposed minimum tax: why your will matters more.

The Bill leaves one discretionary trust alone: the testamentary trust, established under a will for genuine testamentary purposes. Its income stays outside the minimum tax, its trustee keeps the discretion, and the concessional treatment of minors' income continues. For a family losing the advantages of a lifetime trust, the will becomes the place where those advantages survive.

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Proposed law

The 30% minimum tax on discretionary trusts is before Parliament and is not yet law. The Treasury Laws Amendment (Tax Reform No. 3) Bill 2026 and the Income Tax Rates Amendment (Minimum Tax on Discretionary Trusts) Bill 2026 were introduced on 14 October 2026. As introduced, the tax would apply from 1 July 2028 and the restructure roll-over would run from 1 July 2027 to 30 June 2030. The detail may change before enactment. Last reviewed 27 October 2026.

The exclusion

What the testamentary carve-out covers.

Income of a testamentary trust is excluded where the trust was established as a result of a will, codicil, intestacy or court order, consists of assets from the deceased's estate, and the assets have not been added to from elsewhere. Property injected after 7.30pm AEST on 12 May 2026 that is unrelated to the estate is caught, and a testamentary trust established on or after 1 July 2028 keeps the exclusion only while its beneficiaries are individuals or exempt entities. A scheme to use a testamentary trust to route income to companies or other trusts is caught by an anti-avoidance override.

The will

What it means for the will.

A will that leaves the estate outright, or leaves "my interest in the family trust" to a child, gives the next generation nothing the Bill protects. A will that establishes a testamentary trust for each child, with the right trustee and appointor succession, carries the discretion across a generation. Where the family trust is being wound up or rolled into a company, the shares in the company and the assets that come out of the trust are what the will now has to deal with.

Where it goes wrong

Where it goes wrong.

A will that refers to a trust that no longer exists

The gift fails or falls into residue, and the plan with it.

Superannuation outside the will

Death benefits that bypass the will and the trust entirely, unless the nomination directs them to the estate.

A testamentary trust drafted too wide

Companies and other trusts as beneficiaries can take a trust established after 2028 outside the exclusion.

Assets added after Budget night

Property added to an existing testamentary trust after the integrity date is not covered.

FAQs

Common questions.

Still unsure? Call us on (03) 9008 7224 and speak to a lawyer, not a call centre.

Is a testamentary trust caught by the minimum tax?

Not where it was established for genuine testamentary purposes and holds estate assets. The integrity rules about added property and about beneficiaries of trusts established after 2028 are the conditions to watch.

Can I add assets to a testamentary trust now?

Property added after Budget night that is unrelated to the estate is excluded from the carve-out, so the added property would be caught. The trust's own accumulated income and replacement assets from arm's-length sales remain covered.

Should the family trust be wound up and the assets left through the will instead?

For some families, yes. It depends on the age of the controllers, the assets, the tax on vesting now against the benefit of a testamentary trust later, and what the family needs in the meantime.

Do I need a new will if I restructure?

Almost always. The will has to deal with the shares in the new company, or the assets that came out of the trust, and any clause written around the old trust has to go.

Trust tax changes

This page is general information about proposed Commonwealth legislation and current Victorian law. It is not legal or taxation advice and does not take your circumstances into account. The Bills may change before they are enacted, and some matters, including capital gains tax interactions, are to be dealt with in later legislation. Advice should be obtained before any election is made or any asset is transferred.

Page TT-13 · Trust tax changes · Last reviewed 27 October 2026

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