Labor has been fielding questions about the so-called death tax during its nationwide campaign to promote the budget, which it has dismissed as a Coalition scare campaign.
Prime Minister Anthony Albanese has refused to rule out changes to what the Coalition have branded a "death tax".
The federal budget will place a 30 per cent tax on discretionary trusts from July 2028, including discretionary testamentary trusts, which take effect after a person dies.
Labor has been fielding questions about the so-called death tax during its nationwide campaign to promote the budget, which it has dismissed as a Coalition scare campaign.
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But the Sydney Morning Herald reported the government was open to changes.
Questioned about his stance at a press conference today, Albanese did not rule out whether he was considering a carve-out for discretionary testamentary trusts.
Instead, he said they had planned to hold consultations before the tax reform legislation is introduced to parliament in the second half of the year.
"Let's be very clear that we've said, when it comes to some of the misreporting that's there, we're not interested and there's no measures in there that are going to hurt inheritances," he told reporters today.
"On trusts, there'll be a consultation period about that, and we made that clear on budget night."
A discretionary testamentary trust is created under a will and takes effect when the trustee dies. The assets are still legally owned by the trustee, allowing beneficiaries to receive income or capital from the trust while avoiding paying extra income tax.
Under the budget's proposed changes, any testamentary trust that takes effect after May 12 will be subject to the minimum 30 per cent tax rate when it comes into effect in two years.
There are currently a little over 10,000 testamentary trusts, according to the latest data from the Australian Tax Office from 2022-23.
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The government are reportedly not considering carve-outs for changes to the capital gains tax discount, but is holding consultations with the start-up sector.
Earlier today, Labor MP Andrew Charlton admitted concerns over the capital gains tax were "valid" but that was why Treasury would hold consultations.
"It's a valid point, because that new regime doesn't interact well if you have a really low capital base, because you've got nothing to inflate off, so there are real concerns out there," he said.
"The government recognised those concerns, the treasurer recognised them before the budget."
Opposition Leader Angus Taylor said the government is panicking about the reaction to the budget and carve-outs would not be enough.
"We want an axe," he said.
"What they're saying now is they're saying we'll have a carve-out for tech entrepreneurs but not for a hairdresser, not for a fitness instructor.
"There's a panic and they're scrambling for the exit because they hadn't realised what they were doing."
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Nationals Leader Matt Canavan said the government is "desperately now trying to plug holes in a budget that proved leaky".
"They haven't been able to justify exactly why they are making these changes," he told Sky News.
"They've clearly done them either with an ill intent, a hidden agenda, or they just were totally ignorant of why these or how these changes would affect people's wills and testaments."
The government has failed to gain the Coalition's support for their trio of tax reform - discretionary trusts, capital gains tax discount and negative gearing - and needs the support of the Greens for the legislation to pass.
Greens Senator Nick McKim said changes will not meaningfully address the housing crisis or intergenerational inequity and criticised the grandfathering of negative gearing.
"The way that we are going to approach this is that we'll wait to see the legislation, we'll have a look at it, we'll have a look at all the detail, we'll listen to the debate and then we'll work these processes," he said.
"We want to see this package fairer and we want to see the balance of this package right."
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