Australia’s proposed 30% minimum tax on discretionary trusts could change how many families and privately owned businesses manage their income, investments and tax planning. For business owners who use family trusts to distribute profits among beneficiaries, the proposed changes may require a closer look at their existing structures.

The Federal Government introduced legislation for the trust tax reform package in October 2026, following the release of draft legislation earlier in the year. The proposed minimum tax is scheduled to commence on 1 July 2028, subject to the legislative process.

John Saade of Latitude Accountants helps Australian business owners understand financial and tax developments that could affect their operations. For families using discretionary trusts, understanding the proposed changes early can help them assess potential implications and discuss appropriate options with a qualified tax professional.

What Is Australia’s Proposed 30% Minimum Trust Tax?

Under the proposal, discretionary trusts would generally face a minimum tax rate of 30% on relevant taxable income, with the trustee responsible for paying the tax.

Currently, discretionary trusts can distribute taxable income to eligible beneficiaries according to the trust deed and applicable tax rules. Individual beneficiaries generally pay tax on their share of trust income at their applicable marginal tax rates.

This flexibility can support legitimate family and business arrangements. However, the Government argues that it can also enable some taxpayers to reduce their overall tax liability by distributing income to beneficiaries on lower tax rates.

The proposed reform aims to reduce this difference by introducing a minimum tax rate for income within the scope of the new rules.

According to the Australian Government’s trust tax reform announcement, the measure is intended to bring the tax treatment of discretionary trust income closer to the treatment of income earned by workers.

Important: As at October 2026, the changes are part of a legislative reform process. The final application depends on the enacted law and relevant provisions.

When Will the Proposed 30% Trust Tax Start?

The proposed minimum tax is scheduled to apply from 1 July 2028, covering relevant income years beginning on or after that date.

The Government has also proposed transitional arrangements to help eligible businesses and other taxpayers review their structures before the changes commence.

The proposed timeline includes:

• From 1 July 2027: Expanded rollover relief is proposed to help eligible taxpayers restructure out of affected discretionary trusts.
• From 1 July 2028: The proposed 30% minimum tax is scheduled to commence.
• From the 2028–29 income year: Eligible existing trusts may be able to elect into an alternative arrangement involving nominated beneficiaries and fixed distribution proportions, subject to the proposed rules.

These dates make early planning important. Trust restructuring can involve legal, tax and administrative considerations, so business owners should avoid making decisions based solely on headlines or assumptions about the final legislation.

Which Family Trusts Could Be Affected?

The proposed changes primarily concern discretionary trusts, including many family trusts used to hold investments, operate businesses or distribute business income among family members.

A discretionary trust generally allows its trustee to decide how income and capital are distributed among eligible beneficiaries, subject to the trust deed and relevant law.

Potentially affected arrangements include:

• Family trusts distributing business profits to individual family members.
• Trusts holding investment assets that generate taxable income.
• Privately owned businesses operating through discretionary trusts.
• Trust structures distributing income to corporate beneficiaries, sometimes called bucket companies.

However, not every trust or every type of income will necessarily fall within the minimum tax rules.

The Government has identified several exclusions, including fixed trusts, charitable trusts, special disability trusts and superannuation funds. Certain primary production income and income relating to vulnerable minors may also be excluded, subject to the applicable requirements.

Trustees should not assume their structure is exempt simply because it is described as a family trust, unit trust or investment trust. The trust deed, beneficiaries, income sources and legal arrangements may all matter.

How Could the Proposed Trust Tax Affect Family Businesses?

The potential impact will depend on how a trust earns income and distributes it.

1. Distributing Income to Family Members

Under the current general framework, discretionary trust income distributed to individual beneficiaries is usually assessed at the beneficiary’s applicable tax rate.

Under the proposal, the trustee would pay the minimum tax on relevant trust income. Eligible non-corporate beneficiaries would generally receive a non-refundable tax offset for the tax paid by the trustee, subject to the proposed rules.

This could change the overall tax outcome for families that currently rely on distributing income to beneficiaries on lower marginal tax rates.

2. Distributions to Bucket Companies

Some family businesses distribute trust income to a corporate beneficiary to manage tax and retain funds for business or investment purposes.

The proposed rules could make these arrangements more complex because corporate beneficiaries would not receive the same non-refundable offset available to eligible individual beneficiaries.

Depending on the structure and subsequent use or distribution of the funds, additional tax may arise. Business owners should obtain advice based on their specific circumstances rather than assuming the final outcome will be identical for every bucket company arrangement.

3. Business Cash Flow and Investment Decisions

If a trust becomes liable for additional tax, the timing of tax payments may affect the cash available for business expenses, debt repayments and investment.

Businesses should assess whether their existing cash flow forecasts account for potential tax liabilities under the proposed framework.

This is particularly important for businesses that rely on trust distributions to fund operations, purchase equipment or support future growth.

What Can Family Trusts Do to Prepare?

Although the proposed commencement date is not until July 2028, reviewing your structure early may provide more time to understand the options.

1. Review Your Trust Deed and Existing Structure

Confirm how the trust operates, who the beneficiaries are and how income is currently distributed.

Ask your accountant or tax adviser whether the trust is likely to fall within the proposed rules and whether any exclusions may apply.

2. Assess Your Current Distribution Strategy

Review how trust income is distributed among individual beneficiaries and companies.

Compare the current tax outcomes with possible outcomes under the proposed rules. Consider how distributions, retained profits and future investment decisions may be affected.

3. Understand the Proposed Alternatives

The draft framework includes options intended to reduce the impact of the proposed minimum tax for eligible trusts.

These include expanded rollover relief for eligible restructuring and an election pathway under which qualifying trusts would nominate beneficiaries and fixed proportions of income and capital.

The election pathway may limit future distribution flexibility. It should not be treated as a simple or automatically beneficial solution.

4. Review Potential Restructuring Costs

Moving from a discretionary trust to another structure can involve legal, tax and administrative costs. Depending on the circumstances, capital gains tax, stamp duty and other consequences may need to be considered.

Obtain professional advice before transferring assets or changing the structure. A change intended to reduce tax could create other costs or affect asset protection and succession planning.

5. Keep Business and Tax Records Up to Date

Accurate financial records make it easier to assess different scenarios and prepare for changes.

Review trust income, distributions, company balances, tax liabilities and upcoming financial commitments with your accountant. This will help you make decisions based on reliable information rather than estimates.

Should You Change Your Family Trust Before 2028?

Not necessarily. The proposed minimum tax does not mean every family trust should be restructured or that trusts will no longer be useful.

Trusts can serve legitimate purposes, including succession planning, asset ownership and business arrangements. The appropriate structure depends on your family’s circumstances, commercial objectives and legal and tax obligations.

Before making changes, consider:

• Whether the proposed rules apply to your trust.
• The likely tax impact under different distribution arrangements.
• The costs and consequences of restructuring.
• The importance of flexibility in future income distributions.
• Whether your existing structure still meets your business and family objectives.

An informed review is generally more useful than rushing into a restructure based on a general interpretation of proposed legislation.

How Can an Accountant Help With the Proposed Trust Tax Changes?

An accountant or qualified tax adviser can review your current arrangements and explain how the proposed changes may affect your trust, business and beneficiaries.

Depending on your circumstances, this may include reviewing trust distributions, modelling potential tax outcomes, assessing cash flow implications and discussing whether an alternative structure or election may be appropriate.

At Latitude Accountants, the focus is on helping business owners understand their financial position and make informed decisions. Early advice can give families more time to evaluate their options before the proposed commencement date.

Frequently Asked Questions About Australia’s Proposed 30% Trust Tax

Is the 30% minimum tax on family trusts already law?

As at October 2026, the Government has introduced legislation to implement the reform, but the proposal should not be treated as fully enacted without confirming its current legislative status. The proposed commencement date is 1 July 2028.

Will every family trust have to pay 30% tax?

No. The proposal targets relevant discretionary trust income, and several trust types and categories of income are intended to be excluded. Whether a particular trust is affected depends on its legal and tax characteristics.

Will the proposed tax apply to bucket companies?

It could affect arrangements involving corporate beneficiaries. Corporate beneficiaries would not receive the same non-refundable tax offset proposed for eligible individual beneficiaries, so the overall tax consequences need careful assessment.

Should I restructure my trust now?

Not automatically. Review your current arrangement with a qualified adviser before making changes. Restructuring may have tax, legal, stamp duty and administrative consequences.

When should I review my family trust?

Consider reviewing it well before the proposed 1 July 2028 commencement date. Early planning gives you more time to understand the legislation, compare available options and prepare for any required changes.

Get Advice on Your Family Trust From Latitude Accountants

The proposed 30% minimum tax could affect how some Australian families and privately owned businesses manage trust income. However, the impact will depend on the trust structure, income sources and final legislative requirements.

Latitude Accountants can help you review your financial arrangements, understand potential tax implications and plan for upcoming changes.

Contact Latitude Accountants:

📍 Sydney Olympic Park | Marrickville | Melbourne | Loxton | Adelaide
📞 1300 706 597
📧 info@latitudeaccountants.com.au

Disclaimer

This article provides general information only and does not constitute tax, accounting, financial, legal or business advice. The proposed trust tax rules and their application may change during the legislative process. Seek advice from a suitably qualified professional before making decisions about your trust or business structure.