Accountant Perth WAAccountant Perth WA
The proposed 30% trust tax in Australia has become an important issue for small business owners, family businesses and taxpayers who use discretionary trusts.
The Australian Government announced a proposed minimum tax on certain discretionary trust income as part of the 2026–27 Federal Budget. More recently, exposure draft legislation was released in September 2026, providing further details about how the proposed rules could operate.
The proposed minimum tax is expected to apply from 1 July 2028, rather than immediately in 2026. The legislation is also still subject to consultation, meaning the final rules may change before they become law.
For business owners who have traditionally used a family or discretionary trust to distribute income between beneficiaries, understanding these proposed trust tax changes in Australia is important. The reforms could affect distribution strategies, tax planning and decisions about whether an existing business structure remains appropriate.
A discretionary trust is commonly used by Australian families and business owners for asset ownership, succession planning and income distribution.
Under the current tax system, a trust generally does not simply pay tax on all of its income in the same way as a company. Instead, trust income can be assessed to beneficiaries depending on their entitlement and the applicable tax rules.
This flexibility has made discretionary trusts a popular structure for some Australian small businesses.
The proposed reforms would introduce a minimum tax rate of 30% for certain discretionary trusts from 1 July 2028.
This does not necessarily mean that every beneficiary will personally pay tax at exactly 30%. The proposed rules involve tax being paid at the trustee level, with specific credit arrangements for certain beneficiaries.
The practical effect is that some existing trust distribution strategies may produce a different tax outcome once the proposed rules take effect.
One of the main policy objectives is to reduce the ability to achieve very low overall tax rates through discretionary trust distributions.
A discretionary trust can generally provide flexibility over which eligible beneficiaries receive distributions. Depending on the circumstances of those beneficiaries, distributing income to people on lower marginal tax rates may reduce the family’s overall tax liability under the existing system.
The proposed 30% trust tax would establish a minimum tax outcome for affected discretionary trusts.
For small business owners, this means that tax planning based solely on distributing income to beneficiaries with lower taxable incomes may need to be reconsidered.
This is particularly relevant where a trust has been used for many years and its distribution strategy has not recently been reviewed.
The proposed start date is 1 July 2028.
Therefore, business owners should not assume that the proposed minimum tax automatically applies to their current 2025–26 or 2026–27 tax returns.
However, the proposed changes are significant enough that affected businesses may want to start reviewing their structures well before the commencement date.
The Government has also proposed transitional arrangements and a period in which eligible trusts may be able to restructure under specific rollover rules.
Because the legislation is still being developed, business owners should monitor the final legislation rather than making decisions based only on early announcements.
The impact will depend on how a business currently uses its trust.
For example, consider a Perth family business that operates through a discretionary trust.
The trust earns $200,000 of taxable income. Under the current rules, the trustee may distribute income among eligible beneficiaries according to the trust deed and applicable tax rules.
If the proposed minimum tax applies to that trust from 1 July 2028, the overall tax outcome may be different.
The change could be particularly important where:
This is why small business accounting and tax planning should be considered together when reviewing the proposed reforms.
No.
The proposed measure is not intended to mean that every type of Australian trust will automatically be subject to a 30% tax rate.
The proposed reforms are primarily focused on certain discretionary trusts, and the legislation contains exclusions and specific rules for particular circumstances.
The Government has indicated exclusions for certain types of trusts and income, including charitable trusts, special disability trusts and superannuation funds. Certain primary production income and income relating to vulnerable minors are also subject to specific treatment.
Testamentary trusts have also been the subject of changes and clarification during the policy development process.
As a result, business owners should not determine their tax position simply by asking whether they have a “trust”. The actual type of trust, its activities, beneficiaries and income all matter.
This is one of the areas that could become particularly important for family businesses.
Under the proposed framework, tax paid by the trustee may generally be recognised through a non-refundable tax credit for eligible individual beneficiaries.
A non-refundable credit is different from a refundable tax offset.
If a beneficiary cannot use the full credit against their tax liability, the excess is not simply paid to them as a cash refund.
This means that traditional distribution strategies involving beneficiaries on lower tax rates may need to be reviewed carefully.
The final result will depend on the detailed legislation and the beneficiary’s individual circumstances.
Many Australian business structures involve a discretionary trust and a company that receives trust distributions.
These companies are sometimes referred to as “bucket companies”.
The proposed trust tax changes could affect businesses using this type of arrangement because the treatment of corporate beneficiaries will not necessarily be the same as the treatment of individual beneficiaries.
This is an area where business owners should avoid making assumptions.
A company may still have legitimate commercial and structural purposes, but the proposed tax rules need to be modelled against the way the business actually operates.
A small business accountant can help compare the potential tax outcomes before a business makes changes to its distribution strategy.
One of the important developments in the September 2026 exposure draft legislation is a proposed election for certain discretionary trusts.
The election is intended to allow eligible trusts to adopt fixed distributions to nominated beneficiaries under prescribed conditions.
If the requirements are met, the trust may be able to avoid the proposed minimum tax without undertaking a complete restructuring of the trust.
This could be particularly relevant for family businesses that want to retain their existing structure while moving towards a more fixed distribution arrangement.
However, eligibility and the long-term consequences need to be considered carefully.
Business owners should not assume that making the election will automatically be the best option. The trust deed, beneficiaries, distribution history and future plans all need to be considered.
For most business owners, the answer should not be based simply on the headline “30% trust tax”.
Changing a business structure can have consequences beyond income tax.
Depending on the circumstances, restructuring could involve issues such as capital gains tax, stamp duty, financing arrangements, legal documentation and changes to ownership.
The proposed reforms may provide certain rollover relief for eligible restructuring, but the conditions need to be satisfied.
This is why it is generally better to review and model the options first rather than immediately transferring assets or changing the business structure.
For example, a business could compare:
Existing discretionary trust → proposed minimum-tax rules → fixed-distribution election → alternative structure
The most suitable option will depend on the individual business.
For business owners in Perth, the proposed changes provide a good reason to review how their trust is currently being used.
A small business accountant can help identify which parts of the existing structure may be affected and what information should be considered before making a decision.
Start by reviewing the way your trust currently distributes income.
Look at the beneficiaries receiving distributions, the reasons for those distributions and whether the same strategy is likely to remain suitable after the proposed reforms commence.
It is also worth reviewing any company beneficiary arrangements and checking whether the trust deed supports the intended distribution approach.
Finally, consider modelling different outcomes rather than focusing only on the proposed 30% rate.
The proposed commencement date may seem a long way away, but structural tax decisions should not normally be left until the last minute.
A business may need time to consider:
Good tax planning is not simply about finding the lowest possible tax rate.
It is about understanding how different structures work and choosing an arrangement that supports the business’s commercial objectives while meeting Australian tax obligations.
For this reason, speaking with tax consultants perth may be useful for business owners who are uncertain about how the proposed reforms could affect their particular circumstances.
Imagine a family-owned Perth business operating through a discretionary trust.
The trust generates $300,000 of taxable income each year. Historically, income has been distributed between several adult family members depending on their individual circumstances.
Under the existing tax system, those distributions can result in different tax outcomes.
From the proposed commencement date, however, the trust may be subject to the new minimum tax rules if it falls within the affected category.
The family may then need to compare several possibilities.
They could continue using the trust under the new rules, consider whether the proposed fixed-distribution election is available, or investigate whether another structure better suits their long-term objectives.
The important point is that the answer should not be based on tax rate alone.
The business should also consider asset protection, succession planning, administration, ownership and future growth.
No.
The proposed reforms do not automatically make discretionary trusts unsuitable for Australian businesses.
A trust can have purposes that go beyond income tax planning.
For example, a business may have established its trust structure for succession planning, asset ownership or family wealth management.
The question is whether the structure continues to make sense under the proposed rules.
A structure that was appropriate when a business started may not necessarily be the best structure after ten or fifteen years of growth.
The proposed 30% trust tax Australia reforms provide another reason to conduct a proper structure review.
If your business operates through a discretionary or family trust, consider asking your accountant for tax advice on questions such as:
Getting these questions answered early can make future decisions much easier.
The proposed trust reforms are complex, and the rules are still subject to change.
If you operate a family business, discretionary trust or business structure involving trust distributions, a review with a tax accountant perth can help you understand the potential implications based on your circumstances.
A registered tax accountant can also help ensure that tax planning and reporting remain aligned with Australian tax requirements.
For Perth business owners, the goal should not simply be to react to the new rules when they commence. It is to understand the potential changes early enough to make informed decisions.
Also read: Best Business Structure for a Small Business in Australia
The proposed 30% trust tax in Australia could represent a significant change for many discretionary trusts and the small businesses that use them.
The most important point is that the proposed minimum tax is expected to apply from 1 July 2028, rather than immediately in 2026. The Government has also released exposure draft legislation that provides additional detail, including a proposed fixed-distribution election for eligible trusts.
For small business owners, the right response is not to automatically abandon a family trust or restructure the business.
Instead, review how the trust currently operates, understand how distributions are made, consider the proposed rules and model the available options.
For Perth businesses, early advice from Perth accountants can help turn a complicated proposed tax change into a practical planning exercise.
The final legislation will determine exactly how the new rules operate, so businesses should continue to monitor the Government’s announcements and obtain professional advice before making significant structural changes.
Disclaimer: This article provides general information only and does not constitute personal tax, financial or legal advice. The proposed trust tax legislation may change before becoming law. Businesses should obtain advice based on their individual circumstances.
Note: Tax laws and proposed legislation can change, and the application of any new trust tax rules may depend on the final legislation and individual circumstances. Always check the latest information from the ATO or seek advice from a qualified tax professional before making business or tax decisions.