A young Australian starting their first job gets a pay slip, and on the pay slip are the hours they work, their hourly rate, maybe their earnings, their superannuation and their tax. They can't decide that part of their salary should be taxed at somebody else's rate, and they can't divide their wages between family members when they're submitting their tax returns. They earn income. They pay the tax required. They contribute to our shared society. Australians should be able to expect that the tax system treats their work fairly, and they should be able to expect that access to sophisticated financial arrangements does not do not determine how much responsibility someone carries for our shared future. They should be able to expect that, when advantage in the system becomes difficult to justify, governments have the courage to act and to examine it.

That's why we're reforming the minimum tax on discretionary trusts. The central principle is straightforward: the structure through which income flows should not provide an open-ended advantage to one Australian over another. The consequences reach beyond this year's tax return. They go to the opportunities that we leave the next generation. They go to whether Australians believe effort will be rewarded. They go to whether our public finances can support the services and investments that future generations will rely on.

Let's be clear about what discretionary trusts do. A trust holds an asset. It might be money. It might be property. They do that for the benefit of a beneficiary, who's just simply a person or an entity. It's always made up of persons who are entitled to receive the assets. In a discretionary trust, the trustee generally has flexibility to determine which eligible beneficiaries receive the income and in what proportions.

That flexibility can serve legitimate purposes. Families are using trusts for succession planning. Businesses may be using them as part of asset protection arrangements. People perhaps use them to manage complicated family and financial circumstances. We should acknowledge those legitimate purposes, but we have to ask whether the rules themselves remain fair. An arrangement can be lawful and still deserve reform.

One of the advantages available through discretionary trusts is income splitting: distributing income among beneficiaries with different tax positions. Where income goes to beneficiaries facing lower marginal tax rates, the overall tax can therefore be lower. The budget explanation of this reform identifies that flexibility as an advantage is generally unavailable to people receiving wages and salaries. Consider this: two households have comparable financial resources. In one, income mainly comes in through employment. People doing their work are taxed on their earnings. In the other there's a bit of that, but income may also come through a discretionary trust, allowing distribution to be allocated among eligible family members. Depending on the circumstances, the second household may achieve a lower overall tax bill.

The difference need not reflect greater effort, a more productive investment or a greater contribution to the community. It simply reflects the legal structure through which income is received, and that is the fairness problem. A progressive tax system is intended to recognise a person's capacity to contribute. Its credibility is weakened when comparable economic circumstances can produce sustainably different outcomes because one household has access to greater flexibility than another. We want people to build successful businesses, and we want all Australians to save and invest, but we also want success to rest on creating value, providing services, employing people and taking on productive risks. Our tax rules should support those activities without making financial structuring a substitute for economic contribution.

Under the proposal, a 30 per cent minimum tax will apply to taxable income on discretionary trusts covered by the measures from 1 July 2028, and the trustee will pay. Beneficiaries will continue to declare their trust income, with beneficiaries other than companies receiving non-refundable offsets recognising the trustee's tax payments. There are two important words in that statement. The first is 'minimum'. It's a floor. There are many variables at play here, so a final tax rate can vary from that 30 per cent. The second is 'non-refundable'. For income covered by the measure, allocating a distribution to someone with a low tax liability will not ordinarily allow the trustee's minimum tax payment to be refunded through the beneficiary. That is central to reducing the income-splitting advantage. It changes the incentives created by the current rules. It makes it harder to use the flexibility of discretionary distributions to push tax on covered income below the proposed floor. We should explain that accurately.

Workers do not all pay an average tax rate of 30 per cent. Australia has a progressive personal income tax system; we all know that. The case for reform does not depend on pretending otherwise. The case is that discretionary arrangements can create tax advantages unavailable to most workers and a minimum tax can reduce those advantages. That's a strong enough argument without exaggeration. Why does this matter, though, for intergenerational fairness? That's something I mentioned earlier. It matters because every generation inherits more than the financial assets left behind by its parents. It inherits public institutions. It inherits infrastructure. It inherits education systems, health systems, the condition of the environment, the strength of public finances and more. It inherits the rules that determine who gets ahead.

If those rules consistently favour people who already have assets or can access a specialised advantage—maybe they can access specialist advice—each advantage can continuously reinforce itself. A lower tax bill can leave more net earnings that can then be invested. The investments can create future returns, the returns help finance another asset, and on and on it goes.

The policy question here is whether the tax system should provide an additional advantage that is much less accessible to families who mainly live on wages—the majority of Australian households. A young person cannot choose the financial arrangements into which they're born, they cannot choose whether their family has investment assets, and they cannot choose whether their parents can help with deposits. They should be able to expect, though, that the system is fair, and that means examining rules which allow established financial advantage to compound through preferential tax outcomes. Intergenerational fairness requires more than telling young people and young Australians to work hard. It requires asking whether the system gives work a fair chance.

This is not a contest between young people and old people either. Plenty of older Australians have spent their lives earning wages, paying taxes and raising families without a discretionary trust. Many now worry deeply about the opportunities available to their children and grandchildren. The question is how we share responsibility across different sources of income and different levels of financial opportunity. A fairer settlement, I think, can unite generations. It can honour the contribution of people who have worked all their lives while improving the prospects of those just beginning.

We should continually examine whether the balance between taxing work and taxing other income remains fair, and that's the principle behind this part of the bill, and we should be prepared to change that balance when arrangements have outgrown the justification, but supporting the principle does not mean ignoring the practical questions either. There's been a lot of consultation around the practical implications here. Some affected people will be running genuine family businesses. Some will have modest incomes. Some will have established their arrangements many, many years ago based on professional advice and probably based on, I gather, the law as it stood at the time. They deserve a workable transition. A reform can have a sound objective and still impose unnecessary costs if implementation is poorly designed, and that's why proposed transition arrangements matter.

Expanded rollover relief will be available for three years from 1 July 2027 for eligible taxpayers restructuring out of a discretionary trust. The legislation also offers an option under which trusts can be exempt from the minimum tax while continuing to distribute income, according to an upfront nomination of beneficiaries and their shares. These options recognise an important distinction. People may wish to retain their trust for legitimate family or commercial purposes, and we should listen when there are some genuine compliance problems. Concerns about administration, cash flow and restructuring should be tested against the legislation and addressed where necessary.

The proposal also contains some important exclusions. These include fixed trusts, charitable trusts, special disability trusts and superannuation funds. Primary production income and certain income related to vulnerable minors are excluded, alongside deceased estates and discretionary testamentary trusts established for genuine testamentary purposes. Legitimate deductions, properly designed business concessions and incentives that serve a clear public purpose all have a place in the tax system, and the aim is to reduce particular structural advantage while maintaining appropriate arrangements for genuine activity and genuine need.

The other elements of the tax reform package deliver on its commitment to strengthen innovation, investment and long-term economic growth. Innovation in particular is really important to many businesses in my electorate. As part of a broader economic reform agenda that includes support for first home buyers, further tax cuts and a fairer tax system, this bill provides businesses with greater incentives to invest, to innovate and to expand. The reforms are built on a $3.8 billion business tax relief and concessions, providing greater certainty for investors. They are designed to help Australians build wealth, support entrepreneurship and drive private sector led economic growth.

The one of the key measures are the new innovative business capital gains tax concession, which provides eligible founders, employees and investors with a 50 per cent capital gains tax discount on equity investments in innovation businesses. This will encourage early-stage investment and strengthen Australia's start-up and venture capital industries. The bill also reforms the research and development tax incentive, increasing support for genuine innovation. Changes include the higher research and development tax offset rates and increase in the refundable offset turnover threshold, lower R&D intensity thresholds and expanded eligibility for biotech and medical technology firms.

Access to the refundable tax offset will generally be limited to companies that have operated for less than 10 years. However, the higher $50 million turnover threshold will enable successful firms to continue receiving support for longer as they grow in scale. Eligible biotech and medical tech companies will be able to access the refundable offset now for up to 15 years. These reforms are expected to increase research and development investment by young firms by around $400 million annually—not a small amount. Additional measures expand the venture capital tax incentives and provide businesses with more flexibility to pay PAYG instalments monthly and strengthen compliance for consistent non-payers. Finally, the bill updates the electric vehicle tax concessions to ensure they remain sustainable while continuing to support EV uptake, which is a big part of our push to net zero.

Australians understand that everyone's circumstances are different. They don't expect every household to pay the same amount of tax. They are entitled to an explanation as to why people with comparable resources can face different obligations. 'Because one family could arrange its affairs more effectively through a legal structure' is not always a sufficient answer, especially when another family has little flexibility beyond taking another shift, working overtime or finding a second job. A nurse finishing a night shift should know that their contribution is respected, an apprentice should know that earning a living through a trade is valued, small business owners should know that success comes from serving customers and building a strong business rather than having to compete through increasingly elaborate tax structures, and a young Australian should know that the government is willing to examine advantages that have become entrenched in our systems.

We recognise legitimate uses of trusts, but we also recognise that we still need to reform taxation. We can support enterprise and still insist on fair contributions. We can respect families' desires to help their children while ensuring public policy also creates an opportunity for children whose families have less to give. Labor's proposed minimum tax is a step towards that balance. It addresses specific advantage and rebalances the tax system to be fairer to working Australians. It provides time and options to adjust, and it asks us to take seriously the relationship between today's tax choices and tomorrow's opportunities, because intergenerational fairness is built into the decisions made today. The rules we preserve, the advantages we reform and the responsibilities we share all shape the future of Australia. Our children should inherit a country where effort has value, public service has strength and opportunity is fairly available to all Australians.