The Government's New Trust Tax: Good News if You're on a Salary
From July 2028, discretionary trusts face a 30% minimum tax. Here's what it means for PAYG workers and whether a novated lease still makes sense.
On 8 July 2026, the Chalmers Treasury released a consultation paper on a significant shift in how discretionary trusts are taxed in Australia. From 1 July 2028, trustees will be required to pay a minimum tax rate of 30 per cent on the taxable income of discretionary trusts — according to the official Treasury Ministers release.
The stated rationale is straightforward: some Australians have been able to use discretionary trusts to pay lower effective tax rates than PAYG workers earning a comparable income. The Government wants to close that gap. If you're a salaried employee, that framing is deliberately aimed at you — the reform is being sold as fairness for wage earners.
What this means for novated lease customers
If you're a PAYG employee, this reform doesn't directly change your tax position — but it does shift the landscape around you. The consultation paper explicitly positions the reform as part of a broader package that includes income tax cuts for workers, funded in part by revenue raised from the trust minimum tax (Source). More income tax cuts could, over time, affect the marginal rate you're paying — which is the rate that drives the pre-tax benefit in a novated lease.
A novated lease works by redirecting some of your pre-tax salary to cover vehicle running costs, reducing your taxable income. The higher your marginal tax rate, the more you benefit. If future income tax cuts reduce your marginal rate, the pre-tax advantage narrows slightly — but for most Australian workers, the benefit remains meaningful. FBT concessions for eligible EVs and PHEVs are a separate lever entirely and are unaffected by this trust reform.
The bigger picture: the Government's direction of travel is toward tightening tax advantages that aren't available to ordinary workers while delivering cuts to income tax rates. Novated leasing is a legislated, employer-administered benefit available to any PAYG employee — it sits on the right side of that political distinction.
Common questions
Does the discretionary trust minimum tax affect my novated lease?
No, not directly. Novated leases are an employer-employee arrangement governed by FBT rules, not trust law. This reform targets how income distributed through discretionary trusts is taxed.
If income tax cuts are coming, does that reduce my novated lease benefit?
Potentially by a small margin — a lower marginal rate means a slightly smaller pre-tax saving. But most PAYG employees remain in tax brackets where a novated lease still delivers a real benefit, particularly if you're leasing an EV that qualifies for the FBT exemption.
When does the 30% trust minimum tax actually start?
The proposed start date is 1 July 2028. The consultation paper released in July 2026 is seeking industry and public feedback on implementation detail, so final legislation is still to come.
Is this reform confirmed law yet?
No. As of July 2026, it is at the consultation stage. Treasury is collecting submissions before drafting legislation. The 1 July 2028 start date is the Government's stated intention, not yet enacted law.
Why should a PAYG worker care about trust tax rules at all?
Mainly because the revenue raised is earmarked to help fund further income tax cuts for workers. It's also useful context: the political environment is favouring tax tools available to ordinary employees — like novated leasing — over structures that require a trust setup.