The Government's Trust Tax Reform and What It Means for Wage Earners
From July 2028, discretionary trusts face a 30% minimum tax. Here's what PAYG employees need to know — and how novated leasing still stacks up. Read more.
On 8 July 2026, the Treasurer released a consultation paper on a significant change to how discretionary trusts are taxed in Australia. According to the Treasury Ministers release, from 1 July 2028 trustees will pay a minimum tax rate of 30 per cent on the taxable income of discretionary trusts. The stated goal is to better align the tax treatment of trust income with the tax rates already paid by ordinary wage earners.
If you're a PAYG employee, your first reaction might be: "What does this have to do with me?" Fair question. You can't split your salary across family members in a trust. You've never had access to that kind of planning. This reform is essentially closing a gap that most workers never had access to in the first place.
What this means for novated lease customers
The government's framing here is explicit — the minimum trust tax is designed to fund income tax cuts for workers, as noted in the Treasury consultation paper. If those income tax reductions are legislated and flow through, the pre-tax benefit of a novated lease shifts slightly — because your marginal rate affects how much you save by paying for a car with pre-tax dollars.
The broader takeaway is straightforward: the tax system is moving toward treating different income types more similarly. For PAYG employees, novated leasing remains one of the few legitimate pre-tax structuring tools available to you that isn't subject to this kind of scrutiny — it's an employer-facilitated arrangement operating under the Fringe Benefits Tax regime, not a discretionary trust. If anything, the political direction of travel makes salary packaging more attractive relative to structures that are being wound back.
We'll update this page as the consultation closes and legislation is introduced. Nothing changes for novated lease holders before 1 July 2028 at the earliest, and these reforms don't touch the FBT framework that underpins novated leasing.
Common questions
Does the 30% minimum trust tax affect my novated lease?
No. Novated leasing operates under the Fringe Benefits Tax system, not through a discretionary trust. These are separate parts of the tax law and the trust reform does not apply to your salary packaging arrangement.
When does the minimum trust tax take effect?
The proposed start date is 1 July 2028, according to the Treasury Ministers consultation paper released on 8 July 2026. This is still subject to consultation and legislation.
If income tax cuts flow from this reform, does that change my novated lease savings?
Potentially, yes — in a minor way. A lower marginal income tax rate slightly reduces the pre-tax saving on a novated lease, but the GST exemption and fleet discount components of the benefit are unaffected. Any impact would depend on the size and timing of legislated tax cuts.
Why is the government doing this now?
The government's stated reason is fairness — discretionary trusts allow some people to direct income to lower-taxed individuals in ways that wage earners cannot. The reform aims to align the minimum tax on trust income with the rates most workers pay.
Should I rush into a novated lease because of this?
Not on the basis of this news alone. A novated lease should make sense for your individual circumstances regardless of political changes. Speak to a licensed adviser — millarX is ACL-licensed and AFCA-registered and can walk you through the actual numbers.