A senior sector executive has suggested SMSF trustees must now choose between asset protection and an optimal tax outcome when putting together an estate plan given the proposal for a 30 per cent tax to apply to discretionary trusts that was handed down in the 2026 federal budget.
Accurium head of SMSF education Mark Ellem made the declaration during a panel session at the SMSF Professionals Day 2026 held in Sydney last week in response to the course of action that may need to be taken to retain the tax outcome of current estate plans that use a testamentary trust.
To this end, fellow panellist Hall and Wilcox private clients partner Laura Hanrahan explained what SMSF trustees face now to retain the benefits of their current estate plan that uses a testamentary trust and noted the adverse consequences of these actions.
“The choice will be to use a fixed testamentary trust where there will not be a discretionary class of beneficiary,” Hanrahan suggested.
Further, she illustrated what would need to happen in a situation where a family contained more than one child.
“So you can set up a fixed testamentary trust for each child of which they are the only beneficiary and presumably that trust will still be exempt from tax and they will still get their acceptant trust income,” she said.
“But if you want the asset protection of a discretionary trust, then you don’t get the tax advantage.”
Ellem then recognised: “So with trust structures we’re really coming down to a choice between asset protection and tax – it’s one or the other.”
The panel also foreshadowed the changes to the tax rules relating to discretionary trusts will have a greater effect than the changes to the capital gains tax (CGT) framework.
Accurium head of tax education Lee-Ann Hayes noted: “The introduction of the 30 per cent minimum tax on discretionary trusts is so much bigger than the CGT changes.”
To contextualise the magnitude of the change to the taxing of trusts, Hayes pointed out government statistics reflect around 1 million trusts lodge a tax return each financial year.
The online presentation of SMSF Professionals Day 2026 will take place on Thursday 28 May. To register for the sessions please click here.
Darin Tyson-Chan
Editor
Darin is the founder and publisher of Benchmark Media, an independent publishing house whose mastheads include financialobserver, selfmanagedsuper and smstrusteenews. He has been covering the financial services space for over a decade and in this time he has worked for a variety of trade publications. Darin has also written for the Money section published in The Sydney Morning Herald and The Age.
Articles by Darin