Australia has more than 900,000 family trusts. From 1 July 2028, most of them face a brand-new tax: a 30 per cent minimum tax on the taxable income of discretionary trusts. The Government estimates the measure will raise $4.5 billion over five years, and it explicitly targets a structure that has long allowed business owners and higher-income families to access lower effective tax rates than salary earners.
The 30 per cent minimum tax is the most contested measure in the 2026–27 Federal Budget. But it also comes with a three-year rollover relief window that lets trustees restructure without triggering CGT. If you control a family trust, the next 24 months are the decision window. This article unpacks what changes, what doesn’t, and what to consider before the deadline.
What is the new 30% minimum tax on discretionary trusts?
Under current rules, the taxable income of a discretionary trust is generally distributed to beneficiaries and taxed in their hands at their marginal rates. This has long allowed family groups to allocate income to lower-earning members typically adult children at university or a non-working spouse — to access lower marginal rates than the controlling family member would pay on their own.
Under the new rule, the trustee of a discretionary trust will pay a 30 per cent minimum tax on the taxable income of the trust before that income reaches beneficiaries. Beneficiaries (other than corporate beneficiaries) receive non-refundable credits for the tax paid by the trustee, which they apply against their own tax liability.
In practical terms, a discretionary trust can no longer be used to push income through to a beneficiary who would otherwise pay less than 30 per cent. The credit is non-refundable, which means it can reduce a beneficiary’s tax to zero but cannot generate a refund.
When does the minimum trust tax start?
The 30 per cent minimum tax applies from 1 July 2028 the start of the 2028–29 income year. The rollover relief window opens earlier, from 1 July 2027, so trustees have a year of overlap to restructure if they choose to.
The Government framed the timeline deliberately: a long lead time, plus a structured rollover concession, gives trustees and small businesses time to plan rather than rushing into reactive decisions.
Which trusts are excluded from the 30% minimum tax?
The minimum tax applies only to discretionary trusts. Several common trust types are explicitly carved out:
- Fixed trusts (where beneficiaries have a defined entitlement to income or capital).
- Widely held trusts — including fixed testamentary trusts.
- Complying superannuation funds (including SMSFs).
- Special disability trusts.
- Deceased estates.
- Charitable trusts.
For trusts that don’t fit neatly into one of these categories, the practical question is how the trust deed defines beneficiary entitlements. Many “discretionary” family trusts may be amendable into fixed or partially fixed arrangements, but the tax and stamp duty consequences of those changes need to be modelled carefully.
The ATO’s Trusts guidance is the starting point for understanding which trust type you’re actually operating, but trust deed interpretation is genuinely a job for an accountant and lawyer working together.
What income is excluded from the minimum tax?
Even for caught discretionary trusts, certain categories of income sit outside the new rule:
- Primary production income — farming and agricultural income is fully excluded. This protects family farm structures.
- Income relating to vulnerable minors — certain amounts where the beneficiary is a minor in vulnerable circumstances.
- Income subject to non-resident withholding tax — amounts to which non-resident withholding tax applies.
- Existing discretionary testamentary trust assets — income from assets held by discretionary testamentary trusts in existence at the time of announcement.
That final exclusion matters for estate planning: testamentary trusts created (or assets transferred in) after the announcement may be caught, while existing structures retain their current treatment for the assets they held at announcement.
What is the rollover relief window for trust restructures?
For three years from 1 July 2027, expanded rollover relief allows small businesses and other discretionary trust controllers to restructure out of a discretionary trust into another entity type — most commonly a company or a fixed trust — without triggering an immediate CGT liability.
This is a meaningful concession. Restructuring a trust typically triggers CGT on the transfer of trust assets, plus potential stamp duty on the transfer of real property. The rollover relief is designed to remove the CGT obstacle for trustees who choose to restructure in response to the new rule.
The window opens 1 July 2027 and closes 30 June 2030. Stamp duty remains a state matter and is not necessarily relieved by the federal rollover — this is one of the issues to review with both your accountant and a property lawyer if real estate is involved.
Should I restructure my family trust?
There is no general yes-or-no answer. The right answer depends on:
- Whether the trust actually distributes to beneficiaries on rates below 30 per cent. If everyone in your trust group is already on the 30 per cent (or higher) marginal rate, the minimum tax may have no practical impact on you.
- Whether the trust holds appreciating assets where the streamlining of CGT through beneficiaries is part of the planning rationale.
- Whether the trust’s primary role is asset protection or succession planning rather than tax optimisation. These benefits don’t disappear under the new rule.
- Whether a company structure (paying 25–30 per cent and offering franking credits) achieves similar outcomes with less complexity.
For some family groups the answer will be “do nothing.” For others, a restructure into a company or fixed trust during the rollover window will be the optimal path. Our business advisory service can model the post-2028 tax position under each scenario so you make the decision with numbers, not guesswork.
How does this affect testamentary trusts and estate planning?
Fixed testamentary trusts are explicitly excluded from the 30 per cent minimum tax. Discretionary testamentary trusts that existed at announcement keep their current treatment for the assets they held at that time.
For estate planning still in draft, this changes the calculation. A discretionary testamentary trust drafted into a Will today may be taxed at the 30 per cent minimum rate on its income after it’s established post-death, depending on how the rules treat trusts that come into existence in the future. A fixed testamentary trust (with defined beneficiary entitlements) sidesteps the issue.
If your Will currently relies on a discretionary testamentary trust for income-splitting benefits across adult children or grandchildren, this is the year to review the Will with your solicitor and accountant together.
What should family trust owners do now?
A four-step plan over the next 12–18 months:
- Confirm your trust type. Discretionary, fixed, hybrid, widely held — the answer comes from your trust deed, not the trust’s name.
- Map current distributions against the 30% rate. Identify which beneficiaries are receiving distributions taxed below 30 per cent today — those are the streams the new rule will hit.
- Model the alternatives. Run the numbers for keeping the trust (paying 30%), restructuring into a company, or moving to a fixed trust. Include stamp duty and any other transaction costs in your state.
- Review your Will and estate plan. If your estate plan uses a discretionary testamentary trust, ask your accountant and solicitor whether a fixed structure now makes more sense.
Book a trust review with our taxation service. The rollover window opens 1 July 2027 — the work to be ready for it should be done in 2026.
