This week’s federal budget was already controversial — not least because Anthony Albanese and Treasurer Jim Chalmers broke their promise during the 2025 election campaign of not touching negative gearing or the capital gains tax (CGT) discount.

On budget night, Mr Chalmers walked back that commitment, abolishing negative gearing on established homes and removing the CGT discount (replacing it with an inflation-linked model); not just for investment properties, but for all assets including shares, start-ups and farms.

The broken promise has led Mr Albanese and Mr Chalmers to be repeatedly grilled on the question of a death tax, with both men denying that they will introduce the measure in future.

Treasurer Jim Chalmers broke his promise of not touching negative gearing or the capital gains tax (CGT) discount. Picture: NewsWire/Martin Ollman
But wealth transfer lawyer Rachael Rofe says Tuesday’s budget has already put an effective death tax on Aussie families — the latest in a string of new fees on the transfer of wealth.

The most common form of estate planning trust, the Testamentary Discretionary Trust, will now be hit by a minimum 30 per cent tax rate.

Ms Rofe described the provision to news.com.au as yet “another clip on the ticket as wealth moves to the next generation”.

She said Testamentary Discretionary Trusts were in 90 per cent of the wills she drafted and the change would affect thousands of Aussies — not just wealthy individuals, but anyone looking to offer their loved ones asset protection and tax effectiveness after death.

“In Australia we do not have death duties like they do say in the United States or the UK, but we definitely have a series of other provisions that effectively amount to death duties,” the lawyer said.

“It’s just not one big death duty tax. It’s a series of other things like death benefits tax, on your superannuation that passes to non-dependants. I mean, that’s called death benefits tax — if that’s not a death duty I don’t know what it is.”

Ms Rofe described the provision to news.com.au as yet “another clip on the ticket as wealth moves to the next generation”. Picture: Supplied
She mentioned the Division 296 tax liability — the extra 15 per cent tax on super balances above $3 million introduced into law earlier this year — which can result in a final tax bill being paid from a deceased person’s estate after death.

“And then now we have this tax on income that’s been generated on an inheritance,” she continued.

“What I feel is, this is just death duties by a thousand paper cuts. Yes, you can say it’s not a death duty, but the impact and the effect of it is precisely the same.

“When I saw this in the budget, it confirmed my sense that we are moving in the direction of more taxes on the transfer of wealth, both in lifetime and on death.

“I don’t think this is going to be the end of measures like this, with the great intergenerational wealth transfer ahead of us, and more wealth moving than ever before.”

Why include a Discretionary Testamentary Trust in your will?

The two main reasons people include Testamentary Discretionary Trusts in their wills are tax efficiency (income splitting and use of lower tax rates) and asset protection (shielding inherited wealth from relationship breakdowns, bankruptcy, and creditors).