Australia’s federal government introduced legislation on 14 October 2026 to impose a 30 per cent minimum tax on taxable income from many discretionary family trusts from 1 July 2028. It has not become law. The proposal is significant for business owners, families holding investments through trusts and advisers considering succession plans, but not every trust—or every distribution—will be subject to the new minimum.
The package contains substantial exclusions and two major pathways for affected trusts: a proposed election involving pre-nominated beneficiaries and distributions, and three years of rollover relief beginning 1 July 2027 for eligible restructures. Before changing a trust deed or selling an asset, families need to understand the difference between these options and the risk of triggering tax or state duties.
Updated 19 October 2026. This report analyses the legislation as introduced, not enacted law. It is general information, not financial, legal, tax or investment advice. Rules and exclusions could change through Parliament.
What exactly has the government proposed?
Treasurer Jim Chalmers introduced the Treasury Laws Amendment (Tax Reform No. 3) Bill 2026 alongside the Income Tax Rates Amendment (Minimum Tax on Discretionary Trusts) Bill 2026 on Wednesday 14 October. Under the proposed arrangements, the trustee of an affected discretionary trust would pay a minimum tax of 30 per cent on taxable income, starting 1 July 2028. The current regime generally assesses appropriately distributed trust income in the hands of beneficiaries, subject to existing complex exceptions.
The government says a minority of wealthier households use discretionary trusts to distribute income among family members on lower marginal tax rates, an option not available to ordinary PAYG workers. It says the reform would better align taxation of income derived from assets and labour. Treasury’s 14 October release states that more than 95% of individual tax filers do not receive trust income and more than 90% of small businesses would not be affected in a given year.
Opponents, including business and industry representatives, warn about effects on legitimate family businesses, double-taxation risk in structures using companies, administrative expense, and the difficulty of changing longstanding arrangements. Those concerns are disputed: government supporters say the measure targets unfair income splitting and comes with substantial exemptions. The Guardian’s explanation reports the competing positions.
Who could pay more?
The most exposed households are generally those with a discretionary trust holding taxable investment or business income and beneficiaries who currently receive distributions taxed below the proposed 30% minimum. But the final outcome depends on the trust’s legal structure, type of income, beneficiaries, credits, other taxes and whether an election or exclusion applies.
| Situation | Potential impact if enacted | What to investigate |
|---|---|---|
| Family trust distributes investment income to lower-income adult relatives | Some current income-splitting advantages may fall away | Trustee minimum, individual offsets, other income and entitlements |
| Small business trading through discretionary trust | May face a 30% trustee minimum unless an exclusion or election applies | Business payroll, entity structure, election and rollover relief |
| Discretionary trust pays income to a corporate ‘bucket company’ | Specific concerns over layered taxation and lack of offset for corporate beneficiaries | Company tax, Division 7A/UPEs, available credits and future dividends |
| Genuine fixed trust with fixed beneficiary interests | Generally outside the proposed discretionary minimum | Legal deed, proposed fixed-trust definition and anti-avoidance rules |
| Eligible farm income in a discretionary trust | Primary production income specifically excluded | Which income is genuinely primary production versus other investments |
| Qualifying testamentary or special disability trust | Express exclusions proposed | Whether establishment and beneficiary conditions are met |
Do not confuse the proposal with a blanket 30% surcharge. It is a proposed minimum at trustee level, not an automatic additional 30% charged on every beneficiary’s normal tax. The bill contemplates non-refundable tax offsets for individual beneficiaries reflecting trustee tax paid. Corporate beneficiaries are treated differently, making the interaction with companies an important area for tailored professional review. See the Treasurer’s second reading speech.
Which trusts and income are exempt?
The government has specifically identified several categories that would be excluded from the proposed 30% minimum, subject to the legislation’s definitions and integrity provisions.
| Category | Proposed treatment | Qualification |
|---|---|---|
| Fixed trusts, including qualifying commercial arrangements | Excluded | Must meet the new legal definition; not simply a trust labelled ‘fixed’ |
| Charitable trusts and qualifying charity/DGR distributions | Excluded or exempt distributions | Relevant charity and deductible-gift-recipient status required |
| Special disability trusts | Excluded | Must meet applicable statutory conditions |
| Complying superannuation funds | Excluded | Applicable entity rules continue |
| Deceased estates and genuine discretionary testamentary trusts | Excluded | Specific anti-avoidance and genuine-testamentary conditions matter |
| Primary production income | Excluded income | Other income from the same trust may need separate analysis |
| Specified income relating to vulnerable minors | Excluded income | Only the defined categories, not all minors |
| Distributions to other tax-exempt bodies, e.g. sporting clubs | Exemption subject to a cap | Reasonable cap and final legislative wording must be checked |
Having a family trust is not itself an exemption; conversely, being a small business owner does not automatically mean the new tax applies. Government documents also refer to widely held, managed investment, bare and employee share trusts under relevant exclusions and definitions. The September exposure draft release and October bill announcement set out the policy’s exclusions.
The new ‘opt-out’ election: what does it mean?
Under Schedule 3 of the introduced legislation, an eligible discretionary trust could elect to be outside the 30% minimum tax if it distributes income in line with an upfront nomination of beneficiaries and distribution proportions. The election is described as a tax election, not necessarily a legal amendment of the trust deed.
This could preserve a trust’s form while sacrificing some of the annual flexibility to direct income wherever it is most tax-efficient. The government says the election would not require restructuring or restrict discretionary legal powers, and is not expected to create state or territory stamp duty. But it is a trade-off, not a universal exemption available while continuing unrestricted tax-driven distributions. Deed compatibility, connected entities and detailed election rules must be reviewed.
Rollover relief: important dates before the proposed 2028 start
Schedule 2 provides for expanded rollover relief over three years from 1 July 2027 to help eligible businesses and other taxpayers move from a discretionary trust to a company, fixed trust or other arrangement. Rollover relief generally aims to defer or reduce particular tax consequences; it is not proof that all legal, financing or duty costs disappear.
| Date | What it means |
|---|---|
| 14 October 2026 | Federal government introduced the relevant Bills |
| 19 October 2026 | Not yet enacted; parliamentary scrutiny continues |
| 1 July 2027 | Proposed three-year restructuring rollover window begins |
| 1 July 2028 | Proposed minimum tax commences for affected trusts |
Potential restructuring consequences can include stamp duty depending on state law and relief, capital gains tax, GST, losses, borrowing security, contracts, licensing, estate planning and control of assets. Different states may legislate separate relief. Never transfer property or amend a trust deed based solely on a news article.
Worked examples: how could a 30% minimum change the result?
These examples are deliberately simplified arithmetic illustrations, not tax advice or calculations under the proposed law. They ignore franking credits, beneficiary offsets, deductions, Medicare levy, foreign tax interactions and other statutory rules.
Example A — $100,000 taxable trust income
An affected discretionary trust with A$100,000 in relevant taxable income would face a headline A$30,000 trustee minimum under a simple 30% calculation. That does not establish an extra A$30,000 on top of all beneficiaries’ income tax. Eligible individual beneficiaries would potentially receive non-refundable offsets in accordance with the enacted rules. The family’s net burden can differ substantially from the simple multiplication.
Example B — a business using a bucket company
A family business distributes some income to a company beneficiary. Because the legislation differentiates corporate beneficiaries from individuals in the tax-offset rules, advisers warn about complex effective rates when profits later reach shareholders. There is no reliable one-size-fits-all total percentage without mapping the entire structure, payments, franking credits and existing anti-avoidance provisions.
Example C — eligible primary-production income
A trust derives genuine primary-production income from farming and also has separate rental income. The primary-production element is proposed to be excluded, but advisers would need to determine whether other income is covered and how the allocation and reporting rules work.
Who is arguing for the reform — and who is concerned?
The government’s case: trust flexibility can allow tax outcomes unavailable to employees, and income from investments should not systematically receive a lower burden than labour income. The Treasurer points to the concentration of trust wealth in higher-income households, and says the exclusions protect genuine family, charitable, disability and primary-production purposes. Read the second reading speech.
Business and tax-professional concerns: ordinary businesses use discretionary trusts for succession planning, risk separation and legitimate operations; changes could increase compliance expense or discourage investment. Advisers have called for more scrutiny of how tax paid at trust level is treated when income flows through corporate beneficiaries, and warn that restructures may carry unexpected tax and state-duty consequences. PwC’s technical summary analyses election and rollover proposals.
Both propositions can be relevant: the measure may limit certain forms of aggressive income splitting while imposing practical costs on some legitimately operated businesses. The legal question is how the final legislation balances those outcomes.
Checklist for Australian family-trust owners before taking action
- Confirm the entity: identify whether you actually have a discretionary trust, fixed trust, testamentary trust or other structure under the proposed legal definitions.
- Break down income: separate business, investment, primary-production, charitable and other relevant types of taxable income.
- Map beneficiaries: identify individuals, corporate beneficiaries, registered charities and other entities; consider both distribution entitlements and tax treatment.
- Review existing trust deed: confirm what it permits, how any tax election would interact with current legal powers and whether family succession arrangements are affected.
- Analyse credits and offsets: examine franking credits, non-refundable offsets, company profits and existing ATO obligations.
- Compare choices: obtain written modelling of retaining the current trust, making the proposed election or restructuring during the rollover window.
- Check state and transaction costs: verify CGT, transfer duties, GST, borrowing, leases, licences and contract consequences before signing anything.
- Watch Parliament: the proposal may be amended or delayed. Confirm the passed law before treating any date, exemption or planning mechanism as final.
Frequently asked questions
Is the 30% Australian family-trust tax already law?
No. The relevant bills were introduced on 14 October 2026. Parliament must consider them; provisions and commencement could still change.
Would all family trusts pay 30%?
No. The proposal targets defined discretionary trusts, with exclusions for several trust types and types of income. An eligible election may also take a trust outside the minimum.
Does it mean a 30% additional surcharge?
No. It is proposed as a minimum trustee-level tax, with non-refundable offsets for eligible individual beneficiaries, not a universal 30% surcharge on ordinary personal taxes.
Are testamentary trusts and special disability trusts exempt?
The government proposes specific exclusions for genuine testamentary structures, special disability trusts and deceased estates. Eligibility needs detailed review.
Could farm trusts be affected?
Primary-production income is explicitly proposed to be excluded. A farm trust’s non-primary-production income could require separate treatment.
Should we restructure a family trust immediately?
Not based on a news report. Obtain qualified tax and legal advice and model all consequences. The law is not final, and restructuring can trigger its own costs.
Will Google Search ads or investment marketing tell me whether I’m exempt?
No. Search-result advertisements are not authoritative explanations of enacted law. Confirm the actual bills and independent advisers’ professional advice.
The NextNews conclusion
The proposed 30% minimum tax is a material regulatory change for some Australian family trusts, not an immediate tax bill for every family or small business. The two most important steps are identifying whether the legislation would apply to the actual trust and income, and comparing the proposed fixed-distribution election and rollover relief against the costs of doing nothing.
The safest approach in October 2026 is informed preparation, not rushed restructuring. Parliament has not passed the bills, and the eventual law—not a headline—will govern tax obligations.
Sources, image credits and editorial notes
- Treasury Ministers — 14 October 2026 introduced bill and exemptions
- Treasurer Jim Chalmers — second reading speech and trustee-offset mechanics
- Treasury — September exposure-draft details
- Australian Treasury — 2026–27 tax reform summary
- PwC Australia — technical discussion of trust-election and rollover choices
- The Guardian — reaction and implications for small businesses
Image: Illustration of tax paperwork and calculator by Joe lope / Wikimedia Commons, CC BY-SA 4.0, resized from the original. It is not an image of Australia’s legislation, a current tax statement or a particular family business.
Independent financial, tax and legal-advice disclaimer: NextNews publishes general news and educational information, not personal tax, legal, accounting, investment, financial or restructuring advice. The proposed 30% minimum tax has not become law as at 19 October 2026. Exceptions, elections and tax-credit rules may change, and simplified calculations are illustrative only. Family-trust consequences depend on the full legal and tax structure. Before acting, consult appropriately qualified independent Australian tax and legal professionals and check the final legislation and ATO guidance. See the NextNews disclaimer.
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