In July 2026 China’s Ministry of Finance and State Taxation Administration issued new rules on the individual income tax treatment of offshore trusts. For many Mainland Chinese families, offshore trusts in Hong Kong, Singapore, the BVI or Cayman have been a core part of succession planning for years. The new rules change how those structures are viewed in China, and families with members, assets or beneficiaries in Australia need to consider the consequences on both sides.
What the new rules address
In broad terms, the rules set out how Chinese tax applies when Chinese tax residents put assets into an offshore trust, while the trust holds and earns income on those assets, and when the trust makes distributions or comes to an end. They also look through certain offshore companies controlled by Chinese residents, so that holding assets through an intermediate company does not necessarily change the outcome. A limited window was provided to deal with historical positions.
The detail is technical and the consequences depend on when and how the trust was funded, who funded it, what it holds and who benefits. Families should obtain advice from a qualified Mainland Chinese tax adviser on their own structure. This article does not attempt to summarise the rates or calculations.
Points families often overlook
- Moving overseas may not end Chinese tax residency. Obtaining foreign permanent residency or citizenship does not by itself end Chinese tax residency if a person’s household registration, family and principal economic interests remain in China.
- Assets with a Chinese connection. Shares in businesses whose operations are in China can carry Chinese tax consequences even where the holding company is listed or incorporated elsewhere.
- Valuation history matters. Where a founder settled shares in a trust before a later funding round or listing, the values at each stage may be relevant. Records of values and dates should be preserved.
- Information is exchanged. Under the Common Reporting Standard, trust and account information flows between China, Hong Kong, Singapore, Australia and many other jurisdictions.
The Australian side
Chinese rules do not displace Australian law. Where a family member is, or becomes, an Australian tax resident, Australia may tax distributions from a foreign trust and, in some cases, attribute the trust’s income to an Australian resident who transferred property to it. Whether foreign tax paid in China can be credited in Australia is a question for Australian tax advice. The two systems must be considered together, preferably before any restructuring, distribution or change of residency. See trusts and wills before becoming an Australian tax resident and offshore trusts with Australian beneficiaries.
Legal steps that support the tax work
- Confirm who controls the trust: the trustee, protector and any person who can appoint or remove them. See control of family trusts after death.
- Review whether the deed allows distributions, loans or use of trust property to be made in a way that suits the family’s position in each country.
- Make sure Australian wills, enduring powers of attorney and company documents are consistent with the offshore structure.
- Keep a single, accurate record of the structure that the family’s advisers in each country can rely on.
How we assist
We advise Chinese families and their advisers on the Australian legal aspects of offshore trust structures, including trust deeds, Australian wills and powers of attorney, and estate administration where a trust holds Australian assets or has Australian beneficiaries. We work alongside qualified tax advisers in China and Australia and do not provide tax advice ourselves. We act in Mandarin, Cantonese and English. Justin Chua is a Nationally Accredited Mediator and an Affiliate member of STEP, the worldwide professional body for trust and estate practitioners.
Frequently asked questions
Do China’s new offshore trust rules affect families living in Australia?
They can. If a family member who funded or benefits from an offshore trust is still a Chinese tax resident, or the trust holds assets connected with China, the rules may apply. Australian rules may apply at the same time to Australian residents. Advice is needed in both countries.
Does becoming an Australian permanent resident end Chinese tax residency?
Not automatically. Chinese tax residency can continue where a person’s household registration, family and principal economic interests remain in China.
Should an existing offshore trust be wound up?
Not without advice. Winding up, restructuring or making distributions can have tax consequences in China, Australia and elsewhere. The decision should be made with tax advisers in each relevant country and lawyers who understand the trust deed.
What can a lawyer in Australia do if the main issue is Chinese tax?
An Australian lawyer can review how the trust deed, control arrangements and Australian estate documents work together, advise on Australian trust and succession law, and coordinate with the family’s Chinese and Australian tax advisers.
Chua Tan Associates advises families, executors, trustees and their professional advisers on estate planning, estate administration and estate disputes, in Australia and across borders. To arrange a confidential consultation, please contact our Melbourne office on +61 3 9602 3988 or submit an enquiry. Advice is available in English, Mandarin and Cantonese.
Justin Chua (蔡智勋), lawyer and mediator, Chua Tan Associates, Melbourne. General information only, not legal or tax advice. Victorian law unless stated otherwise.
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