What the 2026 Trust Tax Reforms Mean for Philanthropy, Family Foundations & Giving in Australia

The 2026 Federal Budget introduced one of the most significant tax reforms Australia has seen in decades – a new minimum 30% tax rate on discretionary trusts.

While much of the media coverage has focused on wealthy investors and tax minimisation, there’s another important conversation emerging beneath the headlines:

What does this mean for philanthropy, family foundations, charitable giving and the future of impact funding in Australia?

For many in the Grant’d community, including founders, business owners, family-run enterprises, charities and impact organisations this reform has the potential to reshape how wealth flows into the philanthropic sector over the next decade.

And while the changes don’t directly target charities themselves, they may influence how, when and where philanthropic capital is distributed.

Here’s what you need to know.

First, What Actually Changed?

From July 1, 2028, the federal government will introduce a minimum 30% tax on discretionary trust income.

Currently, discretionary trusts allow income to be distributed among beneficiaries, who then pay tax at their individual marginal tax rates. This has long been used by:

• family businesses,
• investment groups,
• founders,
• professional service firms,
• and wealthy households.

The Albanese government argues the current system allows some Australians to reduce tax in ways unavailable to ordinary wage earners.

Under the new rules:

• trustees will effectively pay a minimum 30% tax on trust income,
• beneficiaries will receive tax credits for tax already paid,
• and the flexibility of distributing income to lower-taxed family members will become far more limited.

The reform is expected to raise billions in additional government revenue over coming years.

But beyond tax reform, the change could have broader implications for how philanthropic giving is structured in Australia.

Why Philanthropy Is Connected to Trust Structures

Many philanthropic and charitable giving models are closely tied to family wealth structures.

In Australia, it’s common for:

• founders,
• family businesses,
• entrepreneurs,
• and high-net-worth individuals
  to build wealth through discretionary trusts before directing funds into:
• private ancillary funds (PAFs),
• charitable foundations,
• family giving programs,
• or structured philanthropic initiatives.

For decades, trusts have played an important role in:

• succession planning,
• intergenerational wealth transfer,
• investment management,
• and charitable legacy building.

That means changes to trust taxation don’t just affect accountants and business owners – they may also influence the broader philanthropy ecosystem.

Are Charitable Donations Being Taxed?

No.

This is an important distinction.

The reforms do not remove tax deductibility for charitable donations.

If individuals or trusts donate to:

• registered charities,
• deductible gift recipients (DGRs),
• or approved philanthropic entities,
  those deductions still remain available under existing tax law.

Private Ancillary Funds (PAFs) also remain intact under current settings.

So the issue is not that philanthropy itself is being penalised.

The bigger question is: what happens when the structures generating the wealth become less tax efficient?

What Happens to Family Foundations & PAFs?

At this stage, private foundations and philanthropic vehicles are not the direct target of the reform.

However, many family foundations are funded through:

• investment trusts,
• family offices,
• founder equity structures,
• and discretionary trust income.

If those structures face:

• higher tax liabilities,
• reduced flexibility,
• or increased restructuring costs,
  there may be less capital available for philanthropic distribution over time.

Some families may continue giving at the same level regardless.

Others may:

• pause giving temporarily,
• review their structures,
• or rethink how they approach long-term philanthropy.

Could Philanthropic Giving Slow Down?

Potentially – particularly in the short term.

Many SMEs and founder-led businesses already operate under significant financial pressure. Additional tax burdens may reduce discretionary cash flow, especially during periods of restructuring or economic uncertainty.

This could impact:

• annual donations,
• sponsorships,
• community grants,
• and founder-led charitable initiatives.

Smaller nonprofits and grassroots organisations may feel this most if they rely heavily on:

• family foundations,
• local business donors,
• or discretionary philanthropic support.

But that’s only one side of the picture.

A More Strategic Era of Giving May Emerge

Interestingly, these reforms could also accelerate a different trend: more intentional and structured philanthropy.

As wealth holders reassess tax structures, many may begin asking deeper questions around:

• legacy,
• impact,
• intergenerational wealth,
• and long-term giving strategy.

Australia has already seen growing interest in:

• impact investing,
• strategic philanthropy,
• ESG-aligned giving,
• and measurable social outcomes.

Rather than reducing philanthropy altogether, the reforms may encourage:

• earlier giving,
• more formalised charitable structures,
• and stronger partnerships between donors and organisations.

In other words: less reactive giving, and more deliberate impact funding.

What This Means for Nonprofits & Grant Seekers

For charities and impact organisations, this budget reinforces the importance of diversification.

Organisations that rely heavily on private philanthropy should begin thinking strategically about:

• funding mix,
• donor engagement,
• long-term partnerships,
• and impact reporting.

In a tighter economic environment, funders are likely to become increasingly selective.

The organisations that will stand out are those able to clearly communicate:

• measurable outcomes,
• community impact,
• sustainability,
• and strategic alignment with broader national priorities.

This also means relationship-building matters more than ever.

Philanthropy is unlikely to disappear, but expectations around accountability and impact may continue to rise.

The Bigger Shift Happening in Australia

The trust reforms signal something much broader than tax policy.

Australia is entering a new era where governments are:

• tightening wealth structures,
• increasing transparency,
• and reshaping how capital moves through the economy.

That affects:

• founders,
• investors,
• family businesses,
• and ultimately the future of philanthropy too.

At the same time, the government continues investing heavily into:

• social infrastructure,
• climate resilience,
• healthcare,
• education,
• advanced manufacturing,
• and community development.

So while private giving may evolve, opportunities across grants, impact funding and strategic partnerships are still growing.

Final Thought

The 2026 trust tax reforms are likely to create both disruption and opportunity.

For some families and businesses, the changes may mean:

• higher tax obligations,
• restructuring decisions,
• and reduced flexibility.

For others, it may become the catalyst for more intentional and long-term approaches to giving.

What’s clear is this: the philanthropy landscape in Australia is changing.

And for nonprofits, founders and community organisations alike, understanding how these economic shifts influence funding behaviour will be increasingly important over the coming years.

Because while the structures may evolve, the need for impact, community investment and meaningful change certainly won’t.