Federal Budget 2026-27 – Testamentary Trust Exemption From Minimum Tax Rate Disputes relating to Wills, Estates, Trusts and SMSF Deceased Estates Wills, Estate Planning and Structuring 29th June 2026 Author Luke Haley & Jennifer Dixon The Budget announcements of 12 May 2026 proposed changes to the taxation of discretionary trusts, including those created by a Will (testamentary trust). See our article here for our initial summary of proposed discretionary trust provisions. Updated Budget Announcements – Testamentary Trust Exemption There has been a significant policy change announced on 18 June 2026. Again, we do not have full details or proposed legislation, but the further announcement is that: Income from all types of discretionary testamentary trusts will be exempt from the minimum 30% tax rate ‘provided they are established for genuine testamentary purposes’. The exclusion will be limited to income from assets of the deceased estate. It is not clear if this would include income from reinvestment, if original estate assets are sold and reinvested. For testamentary trusts created from 1 July 2028, the exemption will apply only to trusts that can only benefit individuals and income tax exempt entities, so presumably requiring exclusion of related companies and trusts from any beneficiary class. The announcement stated the implementation details will be included in further consultation. In addition to the asset protection and other benefits offered by testamentary trusts, this announcement has the potential to make testamentary trusts an extremely valuable estate planning tool, potentially with access to tax rates that cannot be achieved through any other structuring options. We await further details and the introduction of implementation legislation, to confirm the exact impact on our clients and any necessary amendments to our planning approach. How we can help At Moores, our experienced Private Clients team can assist with reviewing existing estate plans and advising on flexible testamentary trust structures in light of the proposed reforms. We work with individuals and families to develop practical estate planning strategies that balance tax, asset protection and succession considerations. Contact us Please contact us for more detailed and tailored help. Subscribe to our email updates and receive our articles directly in your inbox. Disclaimer: This article provides general information only and is not intended to constitute legal advice. You should seek legal advice regarding the application of the law to you or your organisation.