Treasury Submission 2026

1. Introduction and Outline

1.1. This submission is made by Savrow Private and authored by Michael Dundas, Co-Founder and Director. Michael’s experience includes 20 years as a Partner of Pitcher Partners Sydney and its predecessor firms, including 13 years as the partner-in-charge of the Private Business and Family Advisory Division, and 3 years as the chairperson of the Pitcher Partners National Private Business and Family Advisory Committee. His career and expertise include a specialist focus on taxation, business advisory and private group structures.

1.2. For ease of reference, the Treasury consultation paper titled Minimum tax on discretionary trusts, dated 8 July 2026, and the implementation approach described in it are referred to in this submission as the Proposal.

1.3. For ease of reference, the Policy Intent means the Government's objective of ensuring that relevant discretionary trust income bears a minimum 30 per cent rate of tax, together with the stated concern in respect to discretionary trusts being used to facilitate unreasonable income splitting strategies.

1.4. This submission does not comment, nor take a position, on the Policy Intent. Our comments are reserved for the appropriateness, necessity and effectiveness of the Proposal to achieve the Policy Intent, and on whether material features of the Proposal extend beyond that intent.

1.5. The submission first outlines Savrow Private's core positions on the Proposal, and its primary recommendations in that context. It then responds to each consultation question in turn.

2. Core Positions

2.1. Central to our submission are the following core positions:

2.2. Core Position 1: that the punitive and penalty taxation outcomes in the Proposal are an unconscionable, destructive and unnecessary approach to the achievement of the primary Policy Intent.

2.3. Core Position 2: that the proposed restructuring relief falls materially short of providing the tools necessary for businesses in particular to restructure away from these punitive and penalty taxation outcomes.

2.4. Core Position 3: that dependency on restructuring relief and the inherent costs therein, would be materially reduced if not extinguished by removing the punitive and penalty taxation outcomes in the Proposal.

3. Supporting Commentary

3.1. The Policy Intent of the Proposal is to ensure a minimum tax of 30% is applied to distributions from discretionary trusts, noting the comment in the Proposal’s introduction: “Discretionary trusts allow lower tax rates to be achieved through ‘income splitting’…this reduces the progressivity of the tax system”. While a Policy Intent of a minimum of 30% tax implies taxation at a higher rate is an acceptable outcome, the Proposal knowingly and intentionally goes far beyond this Policy Intent without satisfactory substantiation for the outcomes.

3.2. The documented minimum 60% taxation of company beneficiaries and the 30% withholding of tax on distributions to charities are clear examples. The impact is punitive in nature. However, there are other circumstances in which the Proposal imposes either permanent additional tax, denies or extinguishes tax attributes, reduces the value of tax already paid, or makes the continued use of otherwise legitimate structures economically punitive.

3.3. Several of these adverse outcomes appear intended to discourage particular structures and encourage (or more accurately, force) taxpayers to restructure. The Proposal itself states the intention of the restructuring relief is “to support transition out of discretionary trust structure arrangements with more fixed and transparent economic outcomes”.

3.4. Discretionary trusts, operating companies, corporate beneficiaries and asset-holding entities are commonly combined for asset protection, risk segregation, succession planning, financing, business continuity and family governance. Penalising those structures merely on the basis of a concern that they are not sufficiently ‘fixed or transparent’ is inconsistent with the Government’s own public statement that the reform will not change or limit the use of trusts for legitimate reasons. (Treasury Ministers, 8 July 2026.)

3.5. The inference here is that the Proposal converts a 30 per cent minimum-tax policy into a broader and forced restructuring regime. It intentionally creates penal tax outcomes in the hope that taxpayers will utilise restructuring relief to adopt structures that Treasury, or others, have themselves assessed as preferred. We have two fundamental concerns with this position:

3.5.1. the restructure relief fails to address the material cost businesses will face in restructuring, including state duties, refinancing and security costs, contractual consents, licence and lease issues, valuation costs or operational disruption.

3.5.2. the restructuring relief fails to acknowledge the justifiable, non-tax role these structures play in business and family affairs.

3.6. A tax regime should not first create an unnecessary structural penalty and then rely upon transitional relief to encourage taxpayers to rearrange otherwise legitimate commercial affairs. If structural reform is the true intention, it should be identified expressly, justified on its own merits, and subjected to specific consultation.

3.7. Moreover, the failure of the restructuring relief to provide low- or nominal-cost restructuring solutions (notwithstanding these structures being established legitimately for non-tax purposes) means that many taxpayers will face materially higher levels of tax without reasonable basis. We find this to be an unconscionable, destructive and unnecessary outcome.

3.8. If we revert to the base Policy Intent of a minimum 30% tax and measures that prevent abusive income-splitting activities, we believe variations of the Proposal can easily be made that remove penal outcomes, protect existing business structures from expensive restructures, and still deliver on the primary objectives.

3.9. Beyond these amendments, we support retaining the restructuring relief options, with some edits, to enable those who are able to use the relief to consider restructuring.

4. Primary Recommendations

4.1. In line with our Core Positions, Savrow Private recommends that Treasury first correct the unnecessarily punitive outcomes within its Proposal as a core objective, thereby reducing reliance on the limitations of restructuring relief.

4.2. Our primary recommendations in this context are:

4.3. Recommendation 1: The ‘Trustee Tax Offset’ should not be positioned as a universally non-refundable tax offset. It should be:

4.3.1. non-refundable for individual beneficiaries to achieve the Policy Intent.

4.3.2. non-refundable for corporate beneficiaries (coupled with our Recommendation 2) to achieve the tax-integrity objective of income passing through companies.

4.3.3. refundable in all other contexts to remove punitive outcomes outside of the Policy Intent for charities, other income tax-exempt beneficiaries and trustee beneficiaries, and to mitigate unforeseen complexities associated with established investment trust structures.

4.4. Recommendation 2: Remove the completely unnecessary and materially disproportionate penalty tax outcome outlined in the “Treatment of corporate beneficiaries” example on page 7 of the Proposal, through the combination of Recommendations 2.1 and 2.2.

4.5. Recommendation 2.1: Where a trustee pays the minimum tax and distributes the net amount to a corporate beneficiary, the cash received should be treated as Exempt Trustee Income, a statutory category of income that is not assessable to the company.

4.6. Recommendation 2.2: A company should be permitted to maintain an account of its net Exempt Trustee Income after directly attributable expenditure and an appropriate allocation of indirect expenditure. To the extent a later dividend is paid out of, or attributed to, the retained Exempt Trustee Income, this dividend should be independently classified and carry a corresponding entitlement to the Trustee Tax Offset.

4.7. This approach:

4.7.1. does not involve any amendments to the imputation system, consistent with the desired outcome.

4.7.2. eliminates penal tax outcomes in the hands of the company and on the flow-through to shareholders.

4.7.3. income that flows through the company to an individual beneficiary is still subject to the minimum 30% tax rate via the flow-through of the Trustee Tax Offset and the application of its non-refundable status, as outlined in Recommendation 1.

5. Responses to Consultation Questions

Question 1: How should discretionary trusts be defined to appropriately distinguish them from fixed trusts for the purposes of the minimum tax?

‍5.1. It is outside our technical capabilities to comment specifically on the legal challenges associated with contemplating a definition of a fixed trust. Genuinely fixed components of unitised and commercial trust arrangements should be preserved, and incidental administrative or protective powers should not of themselves cause fixed economic entitlements to be treated as discretionary. Care should be taken to work within existing taxation concepts as much as possible.

5.2. Nevertheless, we advocate for a ‘substance over form’ approach, which considers whether the relevant income entitlement is fixed or subject to substantive trustee discretion, as opposed to considering complex legal concepts.

Question 2: What is the appropriate minimum tax treatment for income tax-exempt entities?

‍5.3. In line with our Core Position 1 and Recommendation 1: The Trustee Tax Offset should be fully refundable to charities and other income tax-exempt beneficiaries.

5.4. The idea that Trustee Tax is not refundable to these entities presents one of the significant overreaches of the Proposal and extends well beyond the Policy Intent. In an example of $100 of Trustee income being taxed at 30%, under the Proposal, $70 of that income goes to the charity or income tax-exempt beneficiary and $30 to the Government. Currently, that $30 ends up in the hands of the charity or income tax-exempt beneficiary. This Proposal is therefore diverting $30 of charity receipts to government receipts, an outcome that bears no correlation to income splitting or other tax mischief.

Question 3: Are there any other implementation matters not addressed in this paper that should be considered in designing the minimum tax on discretionary trusts?

5.5. In line with our Core Position 1 and Recommendation 2: The most significant issue omitted from the discussion is the unnecessary and unconscionable penalty outcome for corporate beneficiaries.

5.6. Trusts and corporate beneficiaries are being targeted on the basis that their sole application is for wealth creation through taxation advantages. However, they have been legitimately established and operated by many businesses, often in structures that also hold business premises. Further, given the existence of those business premises, the suggestion that the restructuring relief provides a practical solution to this proposed taxation outcome would require taxpayers to:

5.6.1. ignore the fact that state taxes alone single-handedly prevent restructuring relief from providing an effective solution; and

5.6.2. ignore the fact that the penal taxation does not need to exist to achieve the Policy Intent.

5.7. We contend that this is the most significant issue in the Proposal and one that will cause material damage to many small-to-medium-sized businesses. We have clients that we have already identified who would not be able to implement the restructuring relief as proposed and would thereby end up with business profits being taxable at rates well above the 25% corporate tax rate by virtue of this measure.

5.8. Stated simply: remove the penal outcomes for corporate beneficiaries and adopt, at a minimum, our Recommendation 2. This would substantially reduce the pressure on businesses to restructure without impacting the underlying Policy Intent.

Question 4: Are the proposed rollover relief arrangements appropriate?

5.9. The proposed relief contains two critical features: a three-year availability period and extension beyond active business assets. Those features are necessary and welcome, given the breadth of assets commonly held in private trust groups.

5.10. However, in line with our Core Position 2, the relief falls materially short. The relief does not remove transfer duty, landholder duty, lender and security costs, contractual and regulatory consents, legal costs or business disruption. Those costs may make restructuring uneconomic or unviable.

5.11. If our Recommendation 2 is not adopted, we advocate, at a minimum, for immediate upfront tax deductibility of any state taxes, legal costs or structural costs associated with restructuring.

5.12. Further, the relief must also extend to corporate entities. Existing groups commonly include operating companies and asset-holding companies. A workable restructure may require a sequence of trust-to-company and company-to-company steps. Existing rollovers contain limitations associated with back-to-back rollovers. Specific provisions are needed to ensure these limitations do not apply in this context.

5.13. These improvements remain secondary to our Core Position 3. The need for relief would be materially reduced if the penalty outcomes in the Proposal were removed first.

Question 5: Are existing integrity rules sufficient to address arrangements that substantially preserve discretionary economic outcomes through alternative legal structures?

5.14. In our view, yes. There is a comprehensive array of integrity rules within the existing taxation regime that address a significant proportion of disproportionate income-splitting or tax minimisation activities. Specifically, the combination of the Personal Services Income rules, Division 7A and section 100A serves to ensure:

5.14.1. income from personal services is unable to be streamed to low-income family members or retained in lower-taxed structures;

5.14.2. profits within a company are unable to be utilised by shareholders or associates of shareholders without legitimate arrangements in place; and

5.14.3. distributions of other income are unable to be fictitiously made to low-income beneficiaries where the income is not actually intended to be theirs.

5.15. In this context, the author questions what mischief is truly being targeted by these measures and whether that mischief warrants the level of complexity and penal outcomes arising from this Proposal. Discretion in structures is a critical consideration for businesses and families alike, for many reasons that have no tax basis. It will remain an important feature going forward for these same non-tax reasons.

Question 6: Is it appropriate that the rollover is designed to prevent FTDT from applying where a discretionary trust with an existing family trust election and/or interposed entity election(s) transfers property to an entity that is not a member of the family group?

5.16. The Family Trust Distribution Tax regime has concerning elements in its present form. Its unlimited statutory review period and high penalty regime create the potential for material adverse taxation consequences arising from innocuous errors or inadvertent documentation or election mistakes.

5.17. To have rollover relief provide an amnesty from FTDT for distributions or transfers outside the family group is arguably a generous policy consideration, as it would allow for outcomes that currently fall within the scope of FTDT.

5.18. However, it is critical to provide families with a pathway to FTDT compliance under as clear and simple a regime as possible. To this end, we would advocate for any rollover to allow for a review or reset of the family group definitions, or for revisions to the existing Family Trust and Interposed Entity election rules to provide a clearer regime for defining the family group.

Question 7: Are there any other matters that should be considered in finalising the design of the rollover relief?

5.19. We have nothing further to add beyond the matters already raised in this submission.

Question 8: Are there other approaches that could reduce the need for upfront restructuring? What practical or legal considerations would arise in implementing these approaches, including their interaction with trust law and trustees' obligations?

5.20. As already stated, and in line with our Core Position 3, the cost of restructuring is likely to render restructuring an unviable option for many taxpayers. Where the pressure to restructure is underpinned by unconscionable penal taxation outcomes well in excess of what is needed to achieve the Policy Intent, the entire situation can be described as entirely unnecessary.

5.21. The most effective strategy to reduce the need for upfront restructuring is to eliminate the penal taxation outcomes, in line with Core Position 1, the most significant of which is the penalty taxation of distributions to corporate beneficiaries.

5.22. Once those outcomes are corrected, many taxpayers will have no reason to restructure. This avoids state duties, contractual and financing disruption, and the legal consequences of moving assets or fixing economic rights, without diluting the achievement of the Policy Intent.

Question 9: Having regard to tax system integrity, compliance costs and administrative simplicity, should excess franking credits be refundable to the trustee? Why or why not?

5.23. Yes. Excess franking credits should remain refundable to the trustee. The refund of excess franking credits is a long-established integrity measure within the system that ensures the ultimate beneficiary is liable for taxation at their individual rate.

5.24. Where our Recommendation 1 is adopted, the trustee would consider its income and apply all available credits (franking credits and Trustee Tax Offsets received), with any excess credits from either source being refundable. This maintains system integrity and provides the most administratively straightforward methodology for agents to apply. In effect, this approach achieves a tax reset at the trustee level, with the Trustee Tax Offset passing to the next beneficiaries. It eliminates any need to consider a carry-forward model for either franking credits or Trustee Tax Offsets.

5.25. Where our Recommendation 1 is not adopted, we advocate for ordering rules under which the Trustee Tax Offset would be applied first to any Trustee Tax payable, followed by refundable franking credits.

5.26. It is a common structure to have business entities owned by family trusts, such that the only income of the family trust is franked income. In many structures, the property is owned by the family trust. In this context, if the franked income were not refundable to the trustee, the carry-forward model would result in a near-permanent loss of the franking benefit, as there is no other foreseeable income against which to apply it. This loss is unnecessary to achieve the Policy Intent and is materially inconsistent with the long-standing principles of the imputation system.

Question 10: What compliance costs or tracing requirements may arise under a carry-forward model? Could existing integrity rules adequately address these matters?

5.27. A carry-forward model would require, at a minimum, maintenance of ongoing balance registers and additional reporting between trusts to support tracing.

5.28. This proposal serves only to benefit Treasury. It deviates from the existing franking regime and adds unnecessary complexity. Our Recommendation 1 is simpler, fairer, easier to implement and preserves the outcomes of the Policy Intent.

Question 11: Are there any other matters that should be considered when finalising the treatment of excess franking credits?

5.29. The complexity created by Questions 9 to 11 is evidence of the consequential burden created by trustee-level assessment. Treasury should consider an ultimate-beneficiary taxation model as an alternative and much simpler approach to implementing the Policy Intent. This is discussed further in Section 6 below.

Question 12: What additional safeguards, administrative modifications, or beneficiary notification requirements should be considered to support the effective operation and collection of the minimum tax, particularly for arrangements involving corporate trustees?

5.30. In the context of the administration and collection of Trustee Tax, we urge strong caution.

5.31. We appreciate the benefits of the PAYGI system in ensuring tax is paid closer to the time of receipt of income and limiting future collection risk. However, there are existing difficulties associated with identifying income of the trust estate on a regular or recurring basis. Where the trust estate constitutes a trading business, existing instalment income determinations may be appropriate. However, other forms of income may depend on a chain of reporting dependencies from companies, other trusts, managed investments or other third parties. Endeavouring to increase the timeliness and accuracy of this reporting would constitute a material and disproportionate modification to compliance and reporting processes.

5.32. In Section 6 below, we advocate for an ultimate-beneficiary taxation model rather than a trustee-level approach. An ultimate-beneficiary assessment regime would be fundamentally easier to implement and administer. This question highlights another reason for this position. We do not believe it is feasible to adopt a uniformly regular or PAYG reporting regime, and there will always need to be some reliance on the ultimate preparation of annual tax returns to properly assess income.

Question 13: What notification arrangements would be most effective for trustees and beneficiaries to give effect to the minimum tax in a way that minimises compliance costs?

5.34. Every effort should be made to avoid a separate notification or reporting regime for this Proposal, to minimise the risk of materially higher compliance costs.

5.35. In the context of year-end beneficiary reporting from a trustee to a beneficiary, adoption of our Recommendations and our commentary at Question 9 would require only the Trustee Tax paid by the reporting trustee to be included in the beneficiary tax schedules and distribution statement of that trustee. The resetting of the taxation position through the refunding of any excess tax ensures that the existing reporting infrastructure from trustee to beneficiary need only identify the reset Trustee Tax Offset, which would then be either refunded or applied in accordance with the type of beneficiary to which it is distributed (Recommendation 1).

5.36. More regular reporting than year-end reporting is inherently problematic where there are dependencies on the flow of tax reporting to the trustee from other parties.

Question 14: Are the complementary collection mechanisms for trustees and corporate trustees proportionate to support the effective collection of the minimum tax?

5.37. Refer to our answers at Question 12.

Question 15: Are there any other matters that should be considered in the design of the collection mechanisms?

5.38. We have nothing further to add beyond the matters already raised in this submission.

Question 16: What, if any, consequential interactions arise between the minimum tax on discretionary trusts and the revised 2018-19 Budget measure?

5.39. We advocate for the minimum-tax regime and any measures concerning corporate beneficiary unpaid present entitlements (“UPEs”) to be addressed as separate issues.

5.40. More specifically, to the extent that the penal taxation outcomes in the Proposal are intentionally designed to deter trustees from making distributions to companies in order to render the UPE matter obsolete, we reject that approach in the strongest possible terms.

5.41. As stated, many businesses rely on these structures for legitimate non-tax-driven purposes. Rendering this arrangement obsolete through the imposition of penal tax, without sufficient restructuring relief, is of material concern to us.

5.42. Where Treasury remains concerned about the outcome of the Bendel case or remains concerned that UPEs with corporate beneficiaries involve tax mischief, we strongly advocate for this to be dealt with under its own clearly outlined policy. Whether that involves an extension to Division 7A in line with the 2018–2019 Budget announcement, or the utilisation of section 100A, we advocate for this to be considered as an independent matter and not through the mechanisms in the current Proposal.

Question 17: Are there any other issues or implications as a result of the High Court's decision in Bendel that should be considered as part of the design and implementation of the revised 2018-19 Budget measure?

5.43. Savrow Private welcomes the opportunity to consider this question in detail. However, in accordance with our answer to Question 16, we do not believe this issue should form part of the current Treasury consultation and have therefore elected not to address it here, so as not to detract from our Core Positions and Recommendations in this submission.

6. Ultimate Beneficiary, Versus Trustee Taxation

6.1. The above recommendations and commentary have focused primarily on the implementation and operation of a Trustee taxation regime as the bedrock of the Proposal.

6.2. However, it is our view that the objectives of the Proposal could be achieved more succinctly through the implementation of an ‘ultimate beneficiary’ assessment regime whereby there is:

6.2.1. no liability at the trustee level;

6.2.2. tracing of trust income through entities; and

6.2.3. application of the minimum taxation at the ultimate recipient level.

6.3. It is our view that this architecture would present a simpler regime to implement, with the minimum tax applied in the intended circumstances without the complexity or penal outcomes associated with many of the issues presented in the Proposal.

6.4. While this view is not presented as a primary recommendation, we strongly advocate for Treasury to thoroughly consider this alternative approach as part of its review.

7. Conclusion

7.1. The Proposal can achieve the Policy Intent without imposing penalty company tax, reducing charitable receipts, destroying offsets through trust chains or compelling taxpayers to incur substantial restructuring costs merely to avoid punitive outcomes.

7.2. Aside from our recommended consideration of an ultimate-beneficiary regime, we strongly advocate for the adoption of our Recommendations to remove the serious structural penalties within the Proposal while leaving the Policy Intent intact.

7.3. Only after those defects are corrected should Treasury determine what restructuring relief remains necessary. Any such relief must extend to the complete restructuring of trust and corporate structures. Treasury should also test whether ultimate-beneficiary assessment offers a simpler and more durable implementation model.

7.4. Where the structural penalties were intentional, we strongly advocate for transparency. Where these penalties are intended to address other concerns, such as the UPE/Bendel matters raised, we advocate for those concerns to be addressed independently through industry consultation.

‍