SENATOR DEAN SMITH
SHADOW ASSISTANT MINISTER TO THE SHADOW TREASURER
SHADOW ASSISTANT MINISTER FOR THE COST OF LIVING
LIBERAL SENATOR FOR WESTERN AUSTRALIA
22 May 2026
LABOR’S DISCRETIONARY TRUST TAX RISKS MAJOR HIT TO WA CHARITIES, CHURCHES AND COMMUNITY ORGANISATIONS
Labor’s proposed 30 per cent minimum tax on discretionary trusts could deliver a significant blow to Western Australia’s charity and not-for-profit sector, reducing support for churches, sporting clubs, community organisations and charities across the State.
Under the Budget proposal, discretionary trusts would face a 30 per cent tax before distributions are made — a change experts warn could materially reduce philanthropic giving, particularly from small business families operating through trust structures.
Analysis by Fowler Charity Law estimates the impact on small discretionary trusts alone could approach $635 million in lost charitable giving over the first five years of the reform, with the total impact likely to be significantly higher once medium and large trusts are included.
Discretionary trusts are commonly used by families running small businesses, including many family enterprises across Western Australia.
These arrangements currently allow distributions to income tax-exempt charities and community organisations before tax is imposed — enabling operators to direct more support to causes they value.
The reforms are expected to disproportionately affect organisations without Deductible Gift Recipient (DGR) status, including churches, religious institutions, social welfare charities, advocacy organisations, educational bodies, public interest journalism initiatives, sporting organisations, community groups and a range of tax-exempt not-for-profits.
For many Western Australian communities — particularly regional communities where local charities, churches, volunteer organisations and sporting clubs play a central role — reduced giving could have far-reaching consequences.
The proposal also sits uneasily alongside the Government’s stated commitment to doubling philanthropic giving by 2030, raising questions about whether the impact on charitable giving is an unintended consequence of the reform.
Experts have suggested a straightforward solution: exempting distributions made by discretionary trusts to charities and income tax-exempt not-for-profit organisations from the new minimum tax, avoiding unnecessary red tape while preserving support for the sector.
Comments attributed to Senator Dean Smith:
“In Western Australia, family businesses operating through discretionary trusts are often deeply connected to their communities — supporting local churches, sporting clubs, schools, charities and volunteer organisations.”
“Labor says it wants to double philanthropic giving by 2030, yet at the same time it is proposing a tax change that experts estimate could strip hundreds of millions of dollars from charities, churches and community organisations.”
“For many WA communities, particularly in regional and outer metropolitan areas, these organisations are not optional extras — they are part of the social fabric that keeps communities strong.”
“Under Labor’s proposal, there will simply be less money available to support the organisations that hold communities together.”
“This is not just a tax issue — it is a community issue.”
“Churches, sporting clubs, educational organisations, community service bodies and charities provide real support to Western Australians every day; reducing the capacity of families and small businesses to give will inevitably be felt by the people and communities these organisations serve.”
“If the Government proceeds with this reform, it should at the very least ensure distributions to charities and income tax-exempt not-for-profits are exempt from the new tax.”
“We should be encouraging generosity and philanthropy in Western Australia and across the country — not taxing it.”