Mission Advisory Advocates for Charities and Churches in Treasury Trust Tax Consultation
The proposed changes to discretionary trust taxation have generated significant discussion across Australia’s charity, church, mission and not-for-profit sectors. For many organisations, the issue is not simply about tax policy. It is about protecting the flow of charitable funding that enables vital community services, ministry initiatives and social impact programs.
Over recent months, Mission Advisory has been actively engaged in raising awareness of the issue and supporting sector participation in the policy process. Contacting over 400 leaders across the nation, we at Mission Advisory have engaged with parliamentarians, media representatives and sector stakeholders, labouring to highlight concerns about the practical impact the reforms could have.
“Mission Advisory's engagement in this consultation was guided by a clear principle:
charitable income should remain available for charitable purposes.”
Why This Matters
Upon the release of the Federal Budget in May 2026, the Australian Federal Government proposed the introduction of a 30% minimum tax on discretionary trust income, to commence from 1 July 2028.
Under this proposal, distributions made to income tax-exempt entities, including registered charities and churches, could potentially be taxed before reaching the organisations themselves. While charities are generally exempt from income tax, the proposal would directly reduce the resources available to these charities by taxing funds intended for them from private donors.
Many charities and ministries rely on gifts distributed through discretionary trusts. If these distributions are subject to additional tax, organisations may see reduced funding available for community programs, ministry activities, future investment and responses to growing community need.
Local MP, Ted O’Brien, meets with our Partners Alison Bradford and Tristan Lindner to discuss Mission Advisory’s advocacy efforts concerning the proposed minimum tax.
Submission to Treasury
Following the public’s response, a Treasury Consultation was opened, providing organisations and individuals across the nation with an opportunity to highlight their concerns. Along with encouraging others to make their voices heard, Mission Advisory prepared their own submission to Treasury, which can be downloaded here.
Mission Advisory's engagement in this consultation was guided by a clear principle: charitable income should remain available for charitable purposes.
As specialists in giving and philanthropy, the proposed reforms have deeply and increasingly concerned us for the future of our nation’s not-for-profit landscape. As a country, Australia has long recognised the public benefit delivered by charities through income tax exemptions, and this principle should continue to apply when discretionary trust income is distributed to eligible tax-exempt entities.
The submission presents 3 recommendations that could turn the tide and curb the unintended negative consequences of the Trust Tax changes. These recommendations are summarised below…
Recommendations
(1) Exclusions for discretionary trust income distributed to income tax exempt entities
Mission Advisory proposes that discretionary trust income that is distributed to exempt entities (e.g. charities) should be excluded from the proposed minimum tax.
The exclusion should be based on the exempt entity’s share of the discretionary trust’s taxable net income as defined in section 95 of the Income Tax Assessment Act 1936, being the basis for the minimum tax under the proposed measure.
(2) Treatment of franking credits on income distributed to exempt entities.
Mission Advisory proposes that franking credits on franked distributions to exempt entities continue to flow-through the trust and are refundable to the exempt entity.
This maintains the current flow-through treatment of franking credits for entities that are not themselves subject to tax. Under the proposed measure, trustees would be required to use franking credits to pay the 30% minimum tax.
Where an exempt entity is presently entitled to franked income, the franking credits would be used to pay the minimum tax, thereby representing a reduction in the benefit ultimately paid to the exempt entity.
(3) Permit exempt-entity discretionary trusts in the rollover provisions
Mission Advisory strongly recommends that state law provides for exclusions from state duties & tax where the restructure provisions apply, however we understand that there will be many submissions on this matter and therefore this is not the primary focus of our submission.
Our submission focuses on the impact the proposed measures will have on exempt entities and family groups using discretionary trusts to distribute income to these entities.
As advocates for the sector, we believe the final legislation should preserve the long-established principle that charitable organisations should not be disadvantaged when receiving income intended for public benefit. A clear exemption for trust distributions to income tax-exempt entities would protect philanthropic giving, strengthen community outcomes and maintain confidence in Australia's charitable framework.
We are grateful to the hundreds of leaders, organisations and stakeholders who engaged with this issue and added their voices to the conversation. Together, the sector demonstrated the importance of informed advocacy and constructive engagement in shaping policy that supports the communities we serve.
About us
Mission Advisory is a leading national accounting and advisory firm. We are passionate about supporting effective stewardship, generosity, and sustainable charitable outcomes across Australia.
If you would like to discuss the proposed changes or collaborate on advocacy efforts, please contact us.