New Minimum Tax Rate for Discretionary Trusts
Introduction
The federal government has announced a new 30 per cent minimum tax on income earned through discretionary trusts, which will start on July 1, 2028.
Main Body
This new tax rule aims to reduce the gap between the tax paid on trust income and the tax paid on regular wages. According to the Treasury, people using these trusts paid about 4 per cent less tax than those with similar incomes who did not use them. The government emphasizes that 90 per cent of private trust wealth is held by the richest 10 per cent of households. Consequently, this change is expected to raise $4.47 billion in the first year, which will be used to fund a $250 tax credit for workers. Under the new system, the trustee will pay the tax before the money is given to the beneficiaries. To avoid paying tax twice, individual beneficiaries can receive non-refundable credits. However, corporate beneficiaries cannot get these credits, which means they could face a very high effective tax rate. It is important to note that some groups, such as charities and special disability trusts, are exempt from this new rule. Many professionals and business groups have expressed concerns about this policy. While the government targets wealthy individuals, accountants suggest that about 350,000 small businesses may be affected because they use trusts to plan for the future. Furthermore, business groups argue that higher taxes could discourage investment and innovation. To help with the change, the government will offer a 'rollover relief' period from 2027 to 2030, allowing taxpayers to move their assets into other structures, such as companies.
Conclusion
The government wants to make wealth distribution fairer through these changes, but the political opposition has promised to remove these rules if they take power.
Learning
🚀 The 'Bridge' Concept: Moving from Simple to Sophisticated Logic
An A2 student says: "The government wants more money, so they made a new tax." A B2 student says: "Consequently, this change is expected to raise $4.47 billion..."
To move to B2, you must stop using only "and," "but," and "so." You need Logical Connectors that show cause, effect, and contrast.
🛠️ The 'Connector' Toolkit from the Text
| The Word | What it does | Simple Version (A2) | B2 Upgrade (Example from text) |
|---|---|---|---|
| Consequently | Shows a direct result | So | "Consequently, this change is expected to raise..." |
| Furthermore | Adds a strong new point | Also | "Furthermore, business groups argue..." |
| While | Shows two opposite ideas | But | "While the government targets wealthy individuals..." |
🧠 Linguistic Shift: The 'Passive' Perspective
B2 English often focuses on the action or the result, not the person. Look at this shift:
- A2 (Active): "The government will give a credit to workers."
- B2 (Passive): "...which will be used to fund a $250 tax credit for workers."
Why this matters: Using "will be used" or "is expected to" makes you sound professional and objective. It removes the "I" or "They" and focuses on the fact.
⚠️ The 'Hedge' (Softening your claims)
Notice the phrase: "may be affected."
At A2, students say: "350,000 businesses are affected." (This is a 100% fact). At B2, we use modal verbs (may, might, could) to show that something is a possibility, not a certainty. This is the hallmark of an advanced speaker.
- "Higher taxes could discourage investment." (Not 'will'—because we aren't 100% sure).