Should You Change Your Family Trust Because of the Proposed 30% Tax?
Australia’s proposed 30% minimum tax on discretionary trusts is not a reason to restructure a trust immediately based on media reports alone. The Government has proposed that the measure start on 1 July 2028, but the legislation is still in draft form and key implementation details are being developed.
Treasury released exposure draft legislation on 3 September 2026. The draft provides more detail about potential exclusions, a three year rollover period for certain restructures and a proposed election that may let eligible trusts make fixed distributions to nominated beneficiaries instead of restructuring. Treasury’s consultation deadline for the exposure draft was 18 September 2026.
For family groups, investors and business owners, this is a significant proposal to monitor. It is also a change that should be assessed in the context of each trust’s deed, assets, beneficiaries, business arrangements and long term purpose.
The proposal at a glance
| Question | Current proposal |
|---|---|
| What is proposed? | A minimum 30% tax on taxable income of certain discretionary trusts |
| When could it start? | 1 July 2028 |
| Is the draft final law? | No. The legislation and implementation details remain subject to the legislative process |
| What options are being discussed? | Continuing with the trust, making a proposed fixed distribution election if eligible, or considering a restructure using proposed rollover relief |
| What should trust owners do now? |
What is a discretionary trust?
A discretionary trust is a legal arrangement where a person or company (the trustee) holds and manages assets for people who may benefit from them (beneficiaries), often family members. Unlike a fixed trust, where each beneficiary’s share of the trust’s income or assets is set in advance, the trustee can choose which eligible beneficiaries receive distributions and how much, within the rules of the trust deed.
In Australia, these trusts are often used by families and businesses for reasons that can include asset ownership, succession planning and managing family or business interests.
How would the proposed 30% minimum tax work?
Under the proposal, the trustee of an in-scope discretionary trust would be responsible for paying a minimum amount of tax on the trust’s taxable income covered by the regime. The aim is to ensure that the tax paid on that income is not below 30%, even when the trustee distributes income to beneficiaries on lower tax rates.
The proposal is not simply a 30% flat tax that caps everyone’s tax. Individuals and other non-corporate beneficiaries would generally be expected to receive a non-refundable tax credit for tax paid by the trustee. A non-refundable credit can reduce tax payable, but it cannot necessarily be used to create a refund. Corporate beneficiaries would be treated differently and would not receive the same proposed credits.
This may be relevant to trusts that distribute income to a company, sometimes called a “bucket company”. The arrangements for each trust and company would need to be reviewed together, including any related tax obligations.
The proposed tax is also not intended to apply to every trust or every category of trust income. The draft includes proposed exclusions, and the scope depends on how the final rules define the trusts and income covered.
What changed in the 3 September exposure draft?
The September draft provided the first detailed legislative outline of the proposal. It also set out developments that were not clear from the original Budget announcement.
1. More detail about proposed exclusions
The Government has identified a number of trust types and income categories that are expected to be excluded, including certain charitable trusts, special disability trusts, complying superannuation funds and deceased estates. The draft also addresses genuine testamentary trusts, some primary production income and certain income relating to vulnerable minors.
The draft proposes a broader definition of fixed trusts intended to keep some commercial trust arrangements without material discretionary features outside the regime. Whether a particular trust qualifies would depend on the final statutory tests, not simply the label used for it.
2. A proposed three year rollover period
The Government has proposed rollover relief for certain taxpayers who choose to restructure out of a discretionary trust. The proposed period would start on 1 July 2027 and run for three years.
The relief is intended to reduce specified income tax consequences, including potential capital gains tax consequences, for eligible restructures. It should not be treated as a general promise that every restructure will be tax free or free of other costs. The final eligibility conditions and the treatment of other taxes and obligations need to be checked before acting.
3. A proposed fixed distribution election
The draft introduces an alternative to restructuring. An eligible trust may be able to elect to make fixed distributions to beneficiaries nominated in advance. Treasury says this option would not require a restructure and is not expected to result in state or territory stamp duty.
This is still a proposed mechanism. The conditions, ongoing obligations and practical impact of committing to fixed distributions need to be understood before deciding whether it could suit a particular trust. An election may affect the trustee’s flexibility to distribute income in future years.
Should you restructure your trust now?
For most trust owners, the sensible next step is to review the structure and understand the options, rather than make a rushed change because of a headline.
Restructuring a trust can have tax, legal and commercial consequences. These may include capital gains tax, stamp duty, financing or lender requirements, asset protection, succession planning and professional fees. A restructure may also be difficult or impossible to reverse once completed.
The proposed federal rollover relief does not mean every other issue disappears. For example, a family or business with Victorian property should separately check whether a transaction involving that property could raise Victorian land transfer duty or other state tax questions. The Victorian State Revenue Office notes that duty may apply to certain transfers to a trustee or changes in beneficial ownership of land.
The proposal does not commence until 1 July 2028, while the proposed rollover window would begin earlier, on 1 July 2027. That gives trust owners time to gather information and compare scenarios once more details are known.
What should you do now?
A structured review can help identify whether the proposal is likely to be relevant and what decisions may need to be made later.
Collect the trust’s governing documents. Locate the current trust deed, amendments, trustee details and records showing who can make decisions about the trust.
Map the wider structure. List connected companies, corporate beneficiaries, other trusts, business entities and the assets held by each structure.
Review recent distributions and tax returns. Understand what income the trust has earned, how it has been distributed, which beneficiaries received it and whether any income has been retained.
Identify assets and obligations that could be affected by change. This may include property, business assets, loans, guarantees, leases and financing arrangements.
Consider the trust’s purpose. A structure used for a trading business, long term investments, family succession or asset ownership may have different priorities and risks.
Compare the proposed pathways. Depending on the final rules and the trust’s circumstances, the options may include remaining in the structure, considering the proposed fixed distribution election or assessing a restructure.
Get advice before implementing a change. Tax, legal, finance and state duty implications may need to be considered together.
We do not recommend restructuring solely because of media coverage or speculation about the proposed changes. Reviewing the current structure now can help you make an informed decision when the final rules are clearer.
Frequently asked questions
Is the proposed 30% minimum tax on discretionary trusts law now?
The 3 September 2026 materials are exposure draft legislation. Treasury’s consultation deadline for that draft was 18 September 2026, and the Government has said further implementation legislation will follow. The proposal should not be treated as a final set of rules.
Will every family trust pay 30% tax?
No. The proposal is directed at certain discretionary trusts and includes proposed exclusions for some trust types and income categories. The trust’s deed and circumstances will need to be assessed against the final rules.
Should I move assets out of my trust now?
There is no single answer for every trust. A restructure can trigger tax, state duty, financing, legal and succession consequences. Trust owners should review their options and obtain advice before transferring assets or changing the structure.
What is the proposed fixed distribution election?
The draft proposes an election under which an eligible discretionary trust could make fixed distributions to beneficiaries nominated in advance. Treasury describes this as an alternative to restructuring. Its final conditions and ongoing effects need to be considered before relying on it.
When would the proposed rollover relief be available?
The Government has proposed a three year period beginning 1 July 2027 for eligible taxpayers who restructure out of a discretionary trust. The final conditions and scope of the relief will depend on the enacted legislation.
Could a trust restructure affect Victorian property?
It may. Certain transactions involving Victorian land held through a trust can raise land transfer duty questions. The consequences depend on the transaction and the trust’s circumstances, so obtain an assessment before making a change.
Advice for Melbourne families and business owners
For Melbourne and Victorian business owners, investors and family groups, a trust review should consider the federal proposal alongside the trust’s existing tax, legal, financing and property arrangements. The right approach will depend on why the trust was established, what it owns, who benefits from it and how it supports the family or business.
Alexander Spencer is a Melbourne-based tax and business advisory firm. We are monitoring the proposed trust tax changes and will provide further updates as the rules develop. If you have a discretionary trust, speak with your accountant before making structural changes.
Further reading
Treasury: Exposure draft legislation – Minimum tax on discretionary trusts
Budget 2026–27: Minimum tax on discretionary trusts explainer
This article is general information only and is not personal taxation, legal or financial advice. The proposal and its details may change. Individual circumstances vary, and specific advice should be obtained before taking action.