Greens concerned private school fees paid out of trusts could escape Labor's 30pc tax: news
13-10-2026
Greens Raise Concerns That Private School Fees Paid via Discretionary Trusts Could Bypass Labor’s 30% Tax
The Australian Greens have raised significant integrity concerns regarding the federal Labor government’s proposed minimum 30 percent tax on discretionary trusts, warning that wealthy households could exploit legal loopholes to fund elite private school tuition entirely tax-free.
The Discretionary Trust Loophole Explained
Under proposed reforms aimed at curbing aggressive tax minimization, distributions from discretionary family trusts are intended to face a standardized 30 percent baseline tax rate. However, exemptions remain for distributions routed to registered charities, deductible gift recipient (DGR) funds, and non-profit educational institutions.
Because many non-government, independent private schools operate under not-for-profit models or maintain school building funds with tax-deductible status, tax specialists and crossbench lawmakers warn that high-wealth families could allocate trust income directly to these entities to cover tuition and related institutional levies, bypassing the 30 percent tax threshold entirely.
Greens Demand Stricter Tax Compliance and Integrity Measures
Arguing that these carve-outs effectively create a taxpayer-subsidized path to elite education, the Greens are urging the government to strengthen the draft legislation. Key demands include:
Closing Education Carve-Outs: Ensuring that any discretionary trust distributions allocated directly or indirectly toward non-government school fees, capital funds, or auxiliary levies remain subject to the full 30 percent tax rate.
Tightening Anti-Avoidance Rules: Implementing strict integrity tests through the Australian Taxation Office (ATO) to prevent the mischaracterization of private living and educational expenses as charitable donations.
Scrutiny via Senate Inquiry: Examining the distributional impact of the proposed trust taxation framework to verify whether existing exemptions dilute projected tax revenues and exacerbate educational inequality.
The push adds mounting parliamentary pressure on Labor to tighten definitions around non-profit distributions before the trust tax package faces a vote in the Senate.