Churches demand trust tax exemption

By the Editorial Team · Friday, August 7, 2026

Religious leaders in Australia are urging the government to exempt donations from discretionary trusts to faith-based charities from proposed tax reforms that would impose a minimum 30 percent tax on such trust income. They warn that without these exemptions, funding for religious and other nonprofit organizations could decline significantly, jeopardizing social services relied upon by vulnerable communities.

Religious leaders across Australia are urging the federal government to exempt trusts that donate to faith-based organizations from proposed tax changes, warning the reforms could significantly reduce philanthropy to religious charities and other not-for-profits. The leaders are appealing to Prime Minister Anthony Albanese and Treasurer Jim Chalmers to consider their concerns as the government advances its overhaul of the taxation of discretionary trusts.

Currently, charities benefit from an estimated $2.9 billion in pre-tax distributions from discretionary trusts. The government's plan includes imposing a minimum 30 percent tax on discretionary trust income, a move projected to raise $4.5 billion over five years but likely to reduce funds available for charitable causes. Religious groups fear this will impede their ability to support vulnerable communities, potentially leaving gaps in social services that would otherwise be filled by non-governmental organizations.

In a joint submission to Treasury, a coalition of more than a dozen faith leaders, spanning from Catholic Archbishop Anthony Fisher to Australian National Imams Council president Shadi Alsuleiman, expressed concern that the reforms overlook the contributions of religious charities. They highlight that a recent Productivity Commission (PC) report recommended expanding deductible gift recipient (DGR) status for certain charities to help maintain philanthropy. However, the report’s categories excluded many community, sporting, educational, and religious organizations, focusing instead on human rights groups and charities involved in advocacy or public interest journalism.

The religious leaders urge the government not only to implement the commission’s recommendations but also to broaden DGR status further. Their key proposal is to ensure that gifts from discretionary trusts and companies to all qualifying charities—not just those currently recognized as DGR entities—retain their tax-preferred status. This approach aims to prevent “adverse distortions” in philanthropic giving and maintain financial support for a wide range of charitable activities.

The submission outlines three potential options to mitigate the impact of the trust tax reforms: excluding distributions to charities and income tax-exempt not-for-profits from the new tax; expanding DGR settings to include more charities; or allowing discretionary trusts to convert into hybrid trust structures. Charity law specialist Mark Fowler noted that balancing the reform to preserve current levels of philanthropy without increasing compliance burdens will be challenging. He suggested the changes might represent the most significant tax reform affecting religious institutions since Australian Federation.

The government has not yet publicly detailed the anticipated impact of the reforms on charitable giving or the nonprofit sector. Meanwhile, religious leaders caution that failing to shield philanthropy to faith-based groups could have unintended social consequences and call for a careful review of the tax proposals to ensure the charitable sector remains sustainable.

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