Labor’s Trust Tax Could Strip $3 Billion From Churches and Charities
Labor’s socialist trust tax changes will take 30% of funds directed to churches and charities, leaving holes in their budgets for schools, hospitals, and other important work.
Nineteen of Australia’s most senior religious leaders don’t often come together to agree on something, but in June, they did. Buried inside Labor’s budget is a tax that threatens something every one of them depends on: the flow of donations that keeps parishes, schools, food banks and community groups running.[2][3]
Their warning was blunt. From the 1st of July 2028, the Albanese government plans to apply a new 30% minimum tax to discretionary trusts.[5] Because that tax is charged before a trust distributes a single dollar, the leaders warned that charitable and community organisations could lose close to $3 billion in donations over the tax’s first five years, a figure that could climb past $8 billion if business giving through trusts is included.[2][6]
Taxing the Giving, Not the Charity
When the leaders raised the alarm, Treasurer Chalmers had a ready answer: charities remain exempt from income tax, so nothing changes for them.[6] But this response completely misses the point.
The new tax doesn’t touch the charity. It touches the trust that gives to the charity, and it’s charged before any of that money is distributed.[1][6] A discretionary trust that currently donates $100,000 a year to a parish welfare fund or a Christian school building appeal will instead lose $30,000 in tax. The charity still pays no tax on what it receives. It simply receives less because there’s less left to give.
That’s the exact mechanism the 19 leaders flagged to Chalmers: tax a trust’s income before it reaches its beneficiaries, and you shrink what charities and not-for-profits actually receive, however generous the trustee wants to be.[2] Unless Parliament writes in a clear carve-out, the whole charitable and philanthropic sector faces a lasting funding squeeze, directly undermining Labor’s own stated goal of doubling philanthropic giving by 2030.[2][6]
What Did the Government Know?
During a parliamentary inquiry, Liberal Senator Dean Smith pressed Treasury officials on whether the government had modelled the tax’s impact on charitable donations. They answered that no such analysis exists.[4]
Weeks later, at the National Press Club, Assistant Minister for Charities Andrew Leigh told a different story. The government had modelled the impact on donation levels, he just wouldn’t disclose what it showed. Leigh said the government was “engaging really constructively with the group of people who’ve raised this issue,” and floated a possible exemption for discretionary trust distributions to non-profits, though he was careful to add, not from the separate 30% minimum tax.[4]
If the modelling shows churches and charities can absorb the hit, Australians are entitled to see it. If it shows something worse, they’re entitled to know that too, not find out in 2028, when the donations simply stop arriving.
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Nothing Has Changed
That was June. By early July, despite Dr Leigh’s talk of “engaging constructively,” the same tax measures were still sitting untouched in Treasury’s policy package.[1] Mark Fowler, principal of Fowler Charity Law and an adjunct associate professor at the University of Notre Dame Australia, had hoped for an amendment excluding charitable and tax-exempt distributions from the 30% trustee tax. It hasn’t happened. Professor Fowler now says the fight over the donation shortfall will have to play out during the legislation’s consultation process instead.[1]
Churches are reportedly considering an urgent follow-up submission to Chalmers.[1] Two months after 19 leaders representing millions of Australians across these faiths warned him that a multibillion-dollar hole was opening up under the charitable sector, the government’s response has amounted to promises of further consultation.
One thing is in the churches’ favour: the trust tax bill itself has not yet been introduced to Parliament.[4] The window to force a written exemption into the legislation is still open. But it won’t stay open forever.
What You Can Do
Charitable giving isn’t a loophole to be closed. It’s how parishes run food pantries, how faith-based schools get built, and how community groups survive between government grants. A tax that quietly drains billions of dollars from that pipeline deserves more than a one-line dismissal in Question Time.
Tell Treasurer Chalmers that churches, charities and the community groups they fund shouldn’t pay the price for this socialist tax change. Sign the petition to demand a clear, written guarantee that charitable and not-for-profit distributions are exempt from the new 30 per cent trust tax.
References
- Dennis Shanahan, “Churches alarmed by $3bn donation tax hit,” The Australian, 10 July 2026; reported in CathNews, “Churches consider urgent appeal to Treasurer over tax changes,” 10 July 2026.
- Dennis Shanahan and Matthew Cranston, “Labor’s trusts tax raid ‘to cost’ churches and charities $3bn, Anthony Albanese warned,” The Australian, 8 June 2026; reported in CathNews, “Religious leaders fear tax changes will cost charities $3bn,” 9 June 2026.
- “Religious leaders warn Albanese about $3b tax hit to trusts,” Australian Financial Review, 4 June 2026.
- Matthew Cranston, The Australian; reported in CathNews, “Labor considers tax exemptions after warning from religious groups,” 11 June 2026.
- Australian Government, Budget 2026–27, Minimum Tax on Discretionary Trusts fact sheet, budget.gov.au.
- Grafa (Liezl Gambe), “Religious leaders warn Albanese of $3B tax hit,” 8 June 2026.