“Trust tax changes” became one of the most searched business topics in Australia this week after Treasurer Jim Chalmers introduced legislation for a 30% minimum tax on discretionary trusts on 14 October 2026. Around 350,000 small businesses operate through a discretionary trust, including many Brisbane tradies, consultancies, clinics and family businesses, so it is worth understanding what is proposed.
This is a plain-English summary of what has been announced, who it affects, and what to do now. It is general information only, not tax or legal advice, and the bills had not passed Parliament at the time of writing. Talk to your accountant before changing anything.
What is proposed
- A 30% minimum tax on discretionary trusts, paid by the trustee on the trust’s taxable income.
- Start date: 1 July 2028, if the legislation passes.
- Credits for individual beneficiaries. Individuals and other non-corporate beneficiaries receive non-refundable tax credits for the tax the trustee paid, so the total tax on their share is not less than 30%.
- No credits for corporate beneficiaries. This is designed to stop income being routed through a company to avoid the minimum.
- Distribution flexibility stays. Trustees still decide each year who receives income. Asset protection and succession planning uses are not the target.
Who is likely to be affected
According to the government’s fact sheet:
- more than 95% of individual taxpayers are not expected to be affected in a given year
- around half of discretionary trusts are not expected to be affected in a given year
- of about 350,000 small businesses operating through a discretionary trust, about 40% are not expected to pay extra tax or restructure in a given year
- paying family members genuine wages for work they do is not subject to the minimum tax
Trusts that distribute to beneficiaries already taxed at 30% or more may see little change. Trusts that rely on distributing to low-income family members or a “bucket company” are the ones most likely to be affected.
What is excluded
The government’s fact sheet lists exclusions including fixed trusts, widely held trusts, complying super funds, special disability trusts, deceased estates and charitable trusts, as well as primary production income and certain other income types.
The politics
The proposal is contested. Industry groups such as the Housing Industry Association say restructuring advice could cost members $10,000 to $25,000, and the Property Council has raised stamp duty concerns. Supporters, including ACOSS, argue the current rules are exploited by high-income earners. Reports suggest the bills need crossbench or Greens support to pass the Senate, so the final design may change.
Restructuring means system changes too
If your accountant recommends a new structure, we can update invoicing, payroll, accounting connections and the platforms that run your business.
What to do now
- Do not panic or restructure yet. The start date is 1 July 2028 and the bills may change.
- Ask your accountant for a short review of each trust: who receives distributions and at what tax rates.
- Understand the options your adviser raises, such as accepting the minimum tax, changing distribution patterns, an election available under the bill, or restructuring. The government has proposed rollover relief for three years from 1 July 2027 for those who restructure out of a discretionary trust.
- Get your records in order. Clean bookkeeping, clear separation between business and family transactions and accurate payroll for family members make any review cheaper.
- Watch for support. The government says the Australian Small Business and Family Enterprise Ombudsman will help small businesses understand their options from 1 January 2027.
The hidden cost: systems
If a business does restructure, the change goes far beyond a tax return. A new entity can mean new ABNs, bank accounts, merchant facilities, payroll registrations, accounting files, Xero or MYOB connections, invoice templates, website legal pages and contracts. Plan those changes early and test them before a financial year starts.
FAQ
When does the trust tax start?
The proposed start date is 1 July 2028, if the legislation passes.
Will my family trust be affected?
It depends on who receives distributions and their tax rates. Many trusts are not expected to be affected in a given year. Ask your accountant to model it.