A testamentary trust which comes into operation on or after 1 July 2028 may be caught by the proposed 30% minimum tax on discretionary trusts if its potential beneficiaries include a trust, company or other entity (e.g. corporate beneficiaries and family trusts).
Earlier this week, the Government released further guidance around the proposed taxes. The Explanatory Memorandum makes it clear that exemptions from the proposed 30% minimum tax will be available to testamentary trusts that have been created for a ‘genuine testamentary purpose’ and which meet certain criteria.
Because a testamentary trust only takes effect after you die, a Will you signed years ago could be affected if the testamentary trust comes into operation on or after 1 July 2028 and includes a class of potential beneficiaries that is broader than individuals, tax-exempt entities and special disability trusts.
What is being proposed
The Government has proposed a 30% minimum tax on discretionary trusts, which would include discretionary testamentary trusts, unless certain exemption criteria is met. The legislation is still a Bill, so the detail may change.
Which testamentary trusts qualify for the exemption?
To qualify, the beneficiaries under the trust instrument would need to be limited to one or more of the following:
individuals
tax-exempt entities (e.g. charities)
special disability trusts
If the Bill passes (based on current drafting and guidelines), a testamentary trust created on or after 1 July 2028 that includes a broader class of potential beneficiaries, such as companies or other trusts, would not be exempt from the proposed minimum 30% tax.
The catch: timing
A testamentary trust does not come into effect when you sign your Will. It only comes into effect after you die.
That means a Will signed in 2024 with testamentary trust provisions may not take effect until after 1 July 2028. If the class of potential beneficiaries in the testamentary instrument (whether Will, Codicil, intestacy or Court Order) includes a company or a family trust, the exemption criteria, as currently drafted, would not be met and the proposed minimum 30% tax would apply to income from the testamentary trust.
This is looking to be the case even if the corporate beneficiary or family trust never received a distribution of income from the testamentary trust. Simply being named in the class of potential beneficiaries may be enough to prevent the exemption from applying.
What this means in practice, is that a Will that looks well drafted today and which provides the greatest degree of flexibility to trustees by having a broad class of potential beneficiaries of the testamentary trust, may fail to meet the exemption criteria for a ‘genuine testamentary purpose’ by the time it is needed.
What you can do now
If you have a Will with testamentary trust provisions, or you are planning one, take these steps:
Check who is named, or could be named, as a potential beneficiary under the trust, including any companies or family trusts.
Ask your estate planning lawyer whether your Will & Testamentary Trust would meet the proposed exemption criteria if it came into effect on or after 1 July 2028 (presuming the legislation were to commence).
Revisit your Will once the legislation is finalised (but before it commences), as the detail may change.
If you need to make changes, do this promptly to avoid any road blocks that may arise if there is a deterioration in health.
If nothing else, use this as a friendly reminder to pull out your Will and succession planning documents to have a read through them. Make sure the documents continue to reflect your circumstances and instructions. If they do, great. If they don’t, speak to your estate planning lawyer to make adjustments based on your current circumstances and in light of the proposed tax changes, to get on the front foot.
Speak to Simmons Legal
Simmons Legal is a Melbourne firm focused on Wills, Estate Planning and Succession Law. If you would like your Will and any Testamentary Trust provisions reviewed against the proposed changes, get in touch.
This article is general information only and is not legal or tax advice. The proposed legislation is still a Bill and may change. This article is current as at 15 October 2026. Always speak to a suitably qualified lawyer about your personal circumstances.
