The Greens have intensified their opposition to key elements of the Australian government’s proposed tax reforms, demanding the removal of broad discretionary powers granted to the Treasurer amid concerns that wealthy families could exploit a loophole to avoid new taxes on discretionary trusts. The reform package, spearheaded by Treasurer Jim Chalmers, aims to impose a 30 percent minimum tax on discretionary trusts starting from July 2028, with the government projecting more than $4 billion in additional revenue over the coming years.

The Greens’ central objection lies in the potential for parents to use tax-free discretionary trusts to pay private school fees without triggering the new tax liability. They argue that the current drafting of the bill contains overly expansive powers for the Treasurer to define eligibility criteria, which could allow educational expenses to remain tax-exempt despite existing anti-avoidance rules.

Senator Nick McKim, the Greens’ economic spokesman, stated that the legislation as it stands enables considerable ministerial discretion reminiscent of provisions in previous tax laws, potentially permitting school fees to be excluded from the new tax’s scope. He called for the complete removal of this discretion to close what he described as a “mile-wide” loophole, accusing the bill of offering undue leniency to the country’s wealthiest taxpayers.

The Albanese government rejected these concerns, asserting on Wednesday that longstanding tax integrity measures would prevent trusts from circumventing the reforms by funding private education costs. According to the government, current rules would classify payments made by trusts for tuition as banned “reimbursement agreements,” subjecting trustees to the highest marginal tax rate.

Supporting this position, Liam Telford, a partner at accounting firm RSM Australia, commented that the Australian Taxation Office (ATO) is likely to treat trust payments covering school fees as taxable transactions under existing law, thereby closing avenues for avoidance.

Despite this expert view, the Greens have referred the bill to a Senate inquiry and remain wary of potential gaps. Their refusal to unequivocally support the legislation complicates the government’s efforts to secure the minor party’s backing, a crucial component for Labor as the main opposition Coalition party remains firmly against the proposal.

Further reinforcing the Greens’ stance, community legal organization Justice Connect has highlighted the reforms as exposing significant inequities within Australia’s tax framework. The organization’s concerns align with calls for more robust measures to ensure trusts do not become vehicles for tax avoidance by high-income families.

As the government aims to pass the trust reforms by the end of the year, negotiations with the Greens are poised to shape the final scope of the legislation, particularly in regard to safeguarding the integrity of the tax system and closing loopholes related to the funding of private education.