Proposed 30% minimum tax on discretionary trusts: What family groups and business owners should know

October 29 2026

Tax

STATUS Legislation was introduced into Federal Parliament on 14 October 2026. The measures are proposed and are not yet law. The final rules may change before enactment. The proposal in brief 30% 1 July 2028 1 July 2027 minimum trustee-level tax on relevant trust income proposed commencement date proposed start of three-year restructure rollover […]

STATUS

Legislation was introduced into Federal Parliament on 14 October 2026. The measures are proposed and are not yet law. The final rules may change before enactment.

The proposal in brief

30%	1 July 2028	1 July 2027
minimum trustee-level tax on relevant trust income	proposed commencement date	proposed start of three-year restructure rollover

How the proposed tax would work

An affected discretionary trust would generally pay a minimum 30% tax on income subject to the new rules.
An eligible non-corporate beneficiary may receive a non-refundable minimum tax offset for tax paid by the trustee.
If the beneficiary cannot use the full offset against their own tax liability, the unused amount would generally not be refunded.
The practical effect is that distributing affected income to beneficiaries whose effective tax rate is below 30% may provide less tax benefit than under the current rules.

Who should pay particular attention?

Investment trusts

Trusts holding Australian shares or receiving material franked dividends.

Bucket company structures

Trusts that distribute income to a corporate beneficiary may face materially different tax outcomes.

Lower-rate beneficiaries

Families that regularly distribute income to adult beneficiaries on lower tax rates.

Complex groups

Trusts with carried-forward losses, property, business assets, unit trusts or succession arrangements.

Potential pathways

1. Retain the trust Continue operating the discretionary trust and accept the proposed minimum-tax treatment where the trust’s non-tax benefits remain important.

2. Restructure Consider transferring eligible assets to another structure using the proposed rollover. CGT relief does not automatically remove duty, GST, finance or transaction costs.

3. Consider the EET election An Excluded Election Trust election may avoid the minimum tax without transferring assets, but would restrict future distribution flexibility and requires careful tax and legal review.

NSW Update

On 15 October 2026, the NSW Government announced that a re-elected Minns Government would provide stamp-duty relief for the initial choice to become an Excluded Election Trust. This is an announced commitment, not current operative relief, and it does not cover broader asset transfers.

What should clients do now?

Review existing trust arrangements and identify where the proposed rules could materially change the tax outcome.
Model the effect on franked dividends, lower-rate beneficiaries, corporate beneficiaries and carried-forward losses.
Review relevant trust deeds, unit trust deeds and company constitutions where fixed-trust or EET eligibility may be important.
Do not make irreversible changes solely in response to the current proposal. The legislation and associated rules are still being considered.

Our Recommendation

Review and model now, but do not rush to restructure. The appropriate response will depend on tax, asset protection, succession, financing and the cost of changing the existing structure.

Where the problems arise: practical examples

Issue	What it could mean in practice
Low-rate individual	The Government’s own example has a beneficiary with taxable income of $20,400 and a $720 minimum-tax offset. Only $308 is needed to eliminate their income tax liability. The remaining $412 is neither refunded nor carried forward. Result: part of the 30% trustee tax becomes a permanent cost.
Bucket company	A corporate beneficiary is not entitled to the minimum-tax offset. The Explanatory Memorandum gives an example where the company includes its trust share in taxable income but receives no offset for minimum tax paid at trustee level. This can create an additional layer of tax compared with today’s commonly used bucket-company strategy.
Franked-share portfolio	Franking credits attached to income subject to the minimum tax must first be used by the trustee against the minimum tax. Excess credits may be refundable to the trustee, but the mechanism changes the present flow-through treatment and can alter outcomes for families that currently stream franked distributions to individuals.
EET election becomes inflexible	The nomination must specify the beneficiaries and their shares. If the trustee distributes income or capital inconsistently with that nomination, the election can be automatically revoked. In the revocation year, the trustee can be taxed on all net income at the top marginal rate plus Medicare levy, with the trust subject to the 30% minimum tax in future years.
Family circumstances change	An EET nomination generally cannot be changed merely because family circumstances change. The legislation permits variation in limited cases such as death or relationship breakdown. The Explanatory Memorandum specifically says the Commissioner’s discretion is not intended to cover a trustee changing allocations simply because a beneficiary’s personal circumstances have changed.
Restructure is all-or-nothing	For the special rollover, all required assets generally need to go to the same transferee and be transferred by 30 June 2030. The Government’s example shows a trust transferring most assets to a company but retaining a substantial property: the rollover is then unavailable for any assets transferred as part of that restructure.
NSW duty relief is narrow	NSW has announced proposed stamp-duty relief for the initial EET choice. That announcement does not itself provide general duty relief for transferring property or other assets as part of a broader restructure.
Transfer to a loss trust	Example: Profit Trust distributes $100,000 to Loss Trust, which has $100,000 of carried-forward tax losses. Under the current family-trust rules, and assuming the relevant family trust and interposed entity elections and other loss-recoupment requirements are satisfied, Loss Trust may be able to use its losses against the distribution. Under the proposed minimum-tax regime, Profit Trust would first pay $30,000 of minimum tax. Loss Trust may use its losses so that it has no tax liability against which to use the $30,000 non-refundable offset. The offset cannot be passed through merely because Loss Trust has no tax payable. The economic result can therefore be $30,000 tax despite the family group having carried-forward losses equal to the income. Groups using distributions between related trusts should model this before 1 July 2028.

Further information

Sources include the Treasury Laws Amendment (Tax Reform No. 3) Bill 2026, the Income Tax Rates Amendment (Minimum Tax on Discretionary Trusts) Bill 2026, their Explanatory Memorandum, Treasury material and the NSW Government announcement dated 15 October 2026.

Important: This fact sheet provides general information only and does not constitute tax or legal advice. The proposals are not yet law and may change. Advice should be obtained before implementing or changing any structure.