The Australian Government has released exposure draft legislation setting out further details of its proposed 30% minimum tax on discretionary trusts, following the measure announced in the 2026–27 Federal Budget.
Under the proposal, from 1 July 2028, trustees of affected discretionary trusts would generally be subject to a minimum tax rate of 30% on relevant trust taxable income. A corresponding non-refundable tax offset may be available to eligible non-corporate beneficiaries. Corporate beneficiaries would generally not be entitled to this offset, potentially increasing the tax cost of distributions to companies.
The exposure draft also introduces two important pathways for affected trusts:
- Transitional restructuring relief: a proposed three-year rollover period would allow eligible trusts to restructure from 1 July 2027 without immediate capital gains tax consequences in qualifying circumstances.
- Excluded Election Trust regime: certain existing discretionary trusts may elect to remain outside the minimum tax regime by adopting fixed nominated beneficiaries and distribution proportions, subject to proposed ongoing restrictions.
The proposed reforms may have significant implications for family businesses, private investment structures, corporate beneficiaries and succession planning arrangements. Trustees and beneficiaries may need to reconsider existing distribution strategies and assess whether restructuring or an election under the proposed regime would be appropriate.
The legislation remains in draft form, and further tranches of legislation are expected. Businesses and trustees should therefore monitor the consultation process before undertaking any restructuring solely in response to the proposed changes.
We will continue to monitor developments and provide updates as the proposed trust tax reforms progress.
Source
Australian Treasury, “30% minimum tax on discretionary trusts – exposure draft legislation”.
Australian Treasury – Exposure Draft Consultation: 30% minimum tax on discretionary trusts