Proposed 30% minimum tax on discretionary trusts from 1 July 2028

Overview

Treasury has now released a consultation paper on the proposed 30% minimum tax on discretionary trusts, first announced in the 2026-27 Federal Budget. From 1 July 2028, trustees of discretionary (family) trusts will need to pay a minimum 30% tax on the trust’s taxable income, regardless of how that income is split between family members, closing the current strategy of distributing to lower-taxed beneficiaries to reduce the overall tax bill. Rollover relief will be available to restructure ahead of the start date.

Who it affects

Applies to standard discretionary (family) trusts.
Excluded: fixed trusts, widely held trusts, super funds, special disability trusts, deceased estates, charitable trusts, and primary production income.
Genuine testamentary trusts are exempt, provided the income comes from assets of the deceased estate, assets injected after Budget night don’t qualify and, for trusts established on or after 1 July 2028, the trust can only benefit individuals and tax-exempt entities. Fixed testamentary trusts are excluded outright.

How it will work

The trustee pays the 30% minimum tax up front. Individual beneficiaries get a non-refundable offset for tax the trustee already paid:

Above a 30% average tax rate: the offset fully covers it, no extra cost, but no benefit from splitting income to a lower tax bracket either.
Below a 30% average tax rate: the unused offset is lost, not refunded, so the family’s effective rate is still lifted to 30%.

Corporate beneficiaries (“bucket companies”) get no offset at all, trustee tax and company tax both apply in full.

The relief on offer

A 3-year window from 1 July 2027 allows restructuring e.g. into a company or fixed trust without triggering CGT. It covers investment assets and real property, not just active business assets, but essentially all trust assets must move together, and the new structure must have genuinely fixed (non-discretionary) ownership to qualify.

What's still undecided

The legal definition of “discretionary trust” for these purposes.
Whether leftover franking credits are refunded or carried forward.
How the tax will be collected, including possible personal liability for directors of corporate trustees.
State/territory stamp duty treatment of restructures, not addressed in this federal paper, a real risk for property-holding trusts.

What do you need to start thinking about?

This isn’t yet law, consultation closes 31 July 2026 and the rules may change. If you use a discretionary trust, especially one that splits income to lower-taxed family members, distributes to a corporate beneficiary, or holds property, now is the time to prepare for a restructure review once legislation has passed parliament.

Map your discretionary trust structures. Identify every discretionary trust across your family and business group, and who the trustee and typical beneficiaries are. Include trusts that hold passive investments as well as trading entities.
Consider whether restructuring makes sense for you. For businesses and investment structures currently held in a discretionary trust, weigh up moving into a company (noting companies cannot access the CGT discount or indexation, but can retain income at the corporate rate or a fixed trust, using the proposed rollover relief).
Check testamentary trust asset origins. If you act as trustee of, or benefit from, a testamentary trust, start tracking which assets originate from the original deceased estate versus assets injected after 12 May 2026. This affects both minor beneficiaries’ access to adult marginal rates and, now, minimum tax exposure.

A quick reminder

This will primarily affect taxpayers and groups whose average marginal tax rate is below 30% — if your average marginal rate is already 30% or more, or the income is derived by a company or superannuation fund, this measure will not change your outcome.

Next steps

We will continue to monitor developments as exposure draft legislation and further Treasury guidance are released, and will update you as details are confirmed. In the interim, we recommend you begin mapping your discretionary trust structures and consider whether restructuring ahead of 1 July 2028 is appropriate for you.