Guides & Resources

Family Trusts Changed Forever: The 30% Minimum Tax Shockwave in the 2026 Federal Budget

The 2026 Budget proposes a 30% minimum tax on discretionary trusts from 2028,

What it means for family trusts, small businesses, and tax planning.

Book Your Free Consultation
*Free for all ABN holders Β· Limited spots available
Lodge My Tax Return
β˜…β˜…β˜…β˜…β˜… 600+ 5 Star Reviews
xero Xero Platinum Partner
Blog featured image
John Saade CEO Breakdown discussing Best Business Structure for 2026 including family trusts, holding companies, business tax planning and asset protection strategies for Australian business owners

The 2026 Federal Budget has delivered one of the most significant proposed shifts in Australia’s tax structure in decades.

Treasurer Dr Jim Chalmers has announced a planned 30% minimum tax on discretionary family trusts, targeting one of the most widely used structures for small business operations, wealth management, and family income distribution.

At Latitude Accountants, our philosophy is simple: the real impact of tax policy is not in the headlines, but in how it changes cash flow, structure, and long-term planning.

This guide breaks down what is being proposed, who it affects, and what business owners should consider next.

What Happened? Key Trust Tax Changes

The Federal Budget proposes a 30% minimum tax rate on discretionary trusts, scheduled to apply from 1 July 2028, with transitional relief beginning 1 July 2027.

Key changes include:

  • A 30% tax floor applied to trust distributions
  • Applies where beneficiaries are taxed below 30%
  • Designed to reduce income splitting via trusts
  • Transitional restructuring window over 3 years (from 2027)
  • Select exemptions may apply (details pending legislation)

Under the proposal, even if a beneficiary normally pays little or no tax, the trust distribution would still be effectively taxed at a minimum 30%.

Family Trusts Changed Forever: The 30% Minimum Tax Shockwave in the 2026 Federal Budget At Latitude Accountants

Why This Matters

Family trusts have long been used for:

  • Income distribution flexibility
  • Family tax planning
  • Asset protection
  • Small business structuring

This reform changes the equation.

By introducing a tax floor, the government is effectively aligning trusts closer to corporate tax settings and reducing the advantage of distributing income to lower-tax individuals.

For many small businesses, this may reshape whether a trust remains the most efficient structure going forward.

Who Should Pay Attention?

This change is not limited to high-net-worth families.

1. Small and Medium Business Owners

Businesses using discretionary trusts for trading, contracting, or service income.

2. Family Trust Groups

Families distribute income to adult children or multiple beneficiaries.

3. Property Investors

Those holding real estate or capital-growth assets inside trust structures.

4. Advisors and Trustees

Accountants, directors, and trustees are managing compliance, distribution, and structuring decisions.

What Are the Tax and Business Implications?

1. End of Low-Tax Income Splitting

Distributing income to low or zero-income beneficiaries will no longer produce near-zero tax outcomes.

Instead, a minimum 30% tax applies, reducing flexibility in family income distribution.

2. Greater Competition with Company Structures

With trusts effectively taxed at 30%, companies taxed at 25% may become more attractive for:

  • Retaining profits
  • Reinvesting earnings
  • Managing working capital

3. Capital Gains Tax Complexity

Trusts may still access CGT discounts, but the interaction with the 30% floor may reduce overall efficiency depending on distribution outcomes.

4. Increased Compliance Pressure (Section 100A Context)

This proposal builds on existing enforcement trends, such as Section 100A, increasing scrutiny around:

  • Distribution decisions
  • Reimbursement agreements
  • Beneficiary entitlements

What Should Business Owners Do Now?

There is no immediate action required, but planning is essential.

Review Your Structure

Assess whether your current trust setup still aligns with long-term tax efficiency.

Model Alternatives

Compare trust vs company structures under the proposed tax environment.

Use the Transition Window

The 2027–2028 rollover period may provide restructuring opportunities.

Plan Early

Waiting until the final year increases the risk of rushed and inefficient restructuring.

Common Mistakes to Avoid

  • Treating proposed laws as already active
  • Restructuring too early without advice
  • Assuming trusts lose all benefits (they still offer asset protection)
  • Ignoring compliance risks under ATO enforcement trends
  • Delaying review until 2028
Family Trusts Changed Forever: The 30% Minimum Tax Shockwave in the 2026 Federal Budget At Latitude Accountants

Frequently Asked Questions

Is the 30% trust tax law active now?

No. It is a proposed measure scheduled for 1 July 2028, pending legislation.

Does this apply to all trusts?

No. It primarily targets discretionary (family) trusts.

Can I still use a family trust?

Yes. Trusts still provide asset protection and structuring benefits.

Will companies be affected?

No change to the current 25% base corporate tax rate.

Is there a transition period?

Yes. A proposed 3-year restructuring window starting July 2027.

Should I restructure immediately?

No. Any changes should be based on professional advice and finalized legislation.

Final Thoughts

The proposed 30% minimum tax on discretionary trusts marks a major shift in how Australia treats family structures and small business taxation.

While the change is not yet law, it signals a clear policy direction: reducing the effectiveness of income distribution through trusts.

For business owners, the focus now is not reaction, but preparation.

Understanding your structure early allows for better decisions, fewer disruptions, and stronger long-term tax positioning.

Latitude Team

Need Help Reviewing Your Trust Structure?

If you are unsure how these proposed changes may affect your business or family trust, speak with Latitude Accountants.

We can help you:

  • Review your current trust structure
  • Model tax outcomes under new rules
  • Explore alternative structures
  • Improve long-term tax efficiency
  • Ensure compliance with evolving ATO requirements

πŸ“ Sydney Olympic Park | Marrickville | Melbourne | Loxton
πŸ“ž 1300 706 597
πŸ“§ info@latitudeaccountants.com.au

Disclaimer

This article is for general informational purposes only and does not constitute financial, legal, or tax advice. You should seek professional advice before making any structural or financial decisions.

Free Consultation

Got questions after reading this?

Book a call with our team. We'll walk through your situation and help you understand your options β€” no obligation.

Book Your Free Consultation

*Free for all ABN holders Β· Limited spots available

Call 1300 706 597
β˜…β˜…β˜…β˜…β˜… 600+ Five Star Reviews

What We Do

Chartered accountants who work proactively

Not just at tax time β€” all year round.

Tax compliance, planning & lodgements
Business structuring & setup
Asset protection strategies
Vehicle, property & investment accounting
Year-round support β€” not just EOFY

Before You Make a Move

Six times you should call us first

Most costly mistakes happen before the paperwork is signed.

01

Buying a vehicle

Structure, FBT, and depreciation all need to be right before you sign.

02

Taking money out

Wages, dividends, or drawings each carry different tax consequences.

03

Buying property

Who buys it changes your GST, land tax, and CGT position entirely.

04

Hiring your first employee

Payroll, super, and STP obligations kick in from day one.

05

Buying or selling a business

You can inherit someone else's tax debt. Know what you're buying first.

06

Taking on a partner

Equity splits need proper structure upfront. A handshake deal costs more to unwind.

Get In Touch

Phone

1300 706 597

Hours

Mon – Fri

9:00am – 5:30pm

Stop Guessing. Start Making Better Decisions.

Get clarity on your numbers, your structure, and your next move. Speak directly with our team and walk away knowing exactly where you stand.

Book Your Free Consultation
Completely Free No Obligation Fast Response

What Running 7 Major Marathons in One Year Does to You

Former NRL player Keegan Hipgrave is taking on a challenge most people would consider impossible: running all seven World Marathon Majors in a single year. In a conversation with Jacob Fahmy on The Account Rant, Keegan discussed what drove him to take on the...

How Property Growth Before and After 2027 Could Change Your Capital Gains Tax

For Australian investment property owners, the timing of property growth could become an important consideration when the Capital Gains Tax (CGT) rules change from 1 July 2027. The Government's planned reforms will replace the existing 50% CGT discount with an...

Australian Property Market 2026: Why Are Homes Taking Longer to Sell?

Australia's property market is showing signs of a significant shift in 2026. In parts of the country, homes are taking longer to sell, listings are building up and buyers are becoming more cautious about the prices they are prepared to pay. For sellers, that can mean...

ATO CGT Formula vs Property Valuation: Which Could Be Better for Your Investment Property?

Australia’s Capital Gains Tax (CGT) rules are set to change from 1 July 2027, making the way investment property gains are split between the existing and new rules an important consideration for property investors. John Saade of Latitude Accountants recently explored...

House Prices Are Falling Fast! 20% Or More?

Australia’s property market is entering a period of increasing uncertainty, with housing values falling for six consecutive months and declines spreading across most capital cities. In this episode of The CEO Breakdown, John Saade examines whether Australia's housing...

2027 CGT Changes Explained: How the Timing of Property Growth Could Affect Your Tax

Australia's Capital Gains Tax (CGT) rules are set to change from 1 July 2027, and investment property owners need to understand an important part of the transition: when their property's capital growth occurs. It is easy to look at an investment property and focus...

Investment Property Valuation for CGT: Should You Get Your Property Valued at 30 June 2027?

Australia's proposed Capital Gains Tax (CGT) changes from 1 July 2027 are putting a particular date on the radar of property investors: 30 June 2027. For investors who hold an investment property at that time, determining the property's market value could become an...

What Happens When a Business Cannot Pay Its ATO Debt?

For an Australian business, tax debt can quickly become a serious cash-flow problem. A business may be profitable on paper but still struggle to pay its GST, PAYG withholding, income tax or other ATO obligations when they fall due. When a business cannot pay the...

Could Australia Tax the Family Home? The Land Tax Debate Explained

Australia's family home has traditionally received significant tax protection. For many homeowners, the principal place of residence is generally exempt from land tax and capital gains tax under existing rules. However, Australia's property tax system continues to...

Australian Stamp Duty Revenue Is Falling: What It Means for State Budgets

Australia's property market does more than influence homeowners, buyers and investors. It also plays an important role in state government finances through taxes and duties collected when property changes hands. When property transactions slow, governments can collect...