If you have a family trust, you’ve probably heard some noise about the Government’s proposed new 30% minimum tax on discretionary trusts.
And understandably, we’ve already had business owners asking:
Does this mean family trusts are no longer worthwhile?
Are distributions to family members going to be taxed at 30%?
Do we need to get rid of our trust?
And what are we supposed to do before 2028?
There are a lot of headlines flying around, but before anyone starts dismantling structures that may have been in place for years, it’s worth understanding what has actually been announced.
The short version?
Yes, this is a significant change. But no, it doesn’t mean every family trust suddenly needs to disappear.
Here’s what we know so far.
Keeping in mind – exactly how the trust tax changes will affect you will depend on the type of trust you have, how income is distributed and how the trust fits within your broader family group.
What’s changing with family trusts?
As part of the 2026–27 Federal Budget tax reforms, the Australian Government announced that from 1 July 2028, a minimum tax rate of 30% will apply to discretionary trusts, subject to a number of exceptions.
Under the proposed model, the trustee will pay the minimum tax on the taxable income of the discretionary trust.
Beneficiaries will still declare trust distributions in their individual tax returns. Under the Government’s current proposal, beneficiaries other than corporate beneficiaries would receive non-refundable credits for the minimum tax already paid by the trustee.
That’s a fairly substantial change from the way many family trusts currently operate.
You can read the Government’s overview of the proposed changes in the Treasury 2026–27 tax system changes.
The proposed trust tax changes are significant, particularly for families and businesses that currently use discretionary trusts as part of their broader structure.
Why is the Government changing the rules?
One of the features of a discretionary family trust is exactly what the name suggests.
Discretion.
Subject to the trust deed and tax law, trustees can generally decide which beneficiaries are entitled to trust income.
That flexibility has made family trusts useful for many reasons, including running businesses, holding investments, succession planning and asset protection.
It can also create opportunities to distribute income between family members who are on different marginal tax rates.
The Government’s position is that this has allowed some families using discretionary trusts to achieve lower overall tax rates than families earning similar amounts without them.
According to Treasury, families with discretionary trusts had an average tax rate around four percentage points lower than comparable families without discretionary trusts in 2022–23.
The Government says the new minimum tax is intended to more closely align tax paid on discretionary trust income with tax paid by Australians earning wages.
Whatever your view on the policy, the practical issue for business owners is the same:
If you have a discretionary trust, you need to understand whether the change will affect you.
So, does this mean every trust pays 30% tax?
No.
And this is where some of the headlines can be misleading.
The proposed minimum tax is aimed specifically at discretionary trusts, and there are exclusions.
The Government has indicated the new minimum tax will not apply in the same way to structures including:
- fixed trusts
- widely held trusts
- complying superannuation funds
- charitable trusts
- special disability trusts
- deceased estates
- primary production income
- certain income relating to vulnerable minors
- qualifying discretionary testamentary trusts.
The Government has also said that more than 90% of Australia’s active small businesses are not expected to be affected by the discretionary trust minimum tax in any given year.
Treasury estimates that around 350,000 active small businesses operated through discretionary trust structures in 2022–23, with around 140,000 of those not expected to pay additional tax under the proposed changes.
Treasury has published a useful small business explainer on the discretionary trust reforms.
The important thing to remember is that these trust tax changes don’t automatically mean family trusts are no longer worthwhile.
Does this mean income splitting is finished?
This is probably the part that will get the most attention.
At the moment, a discretionary trust may distribute taxable income among eligible beneficiaries, and those beneficiaries are generally taxed based on their own circumstances and marginal tax rates.
The new system is intended to create a 30% minimum level of tax at the trust level.
That means the tax benefit of distributing income to beneficiaries on tax rates below 30% may be reduced under the new arrangements.
But that does not mean every trust distribution will simply be taxed twice or that beneficiaries automatically pay another 30%.
The mechanics are more nuanced than that.
Under the proposed approach, the trustee pays the minimum tax and eligible beneficiaries receive a credit reflecting tax already paid by the trustee.
And importantly, some of those implementation details are still being worked through.
Treasury released a consultation paper in July 2026 covering issues including credits, losses, capital gains, franking credits, collection mechanisms and the interaction between the new minimum tax and other trust rules.
So this is absolutely an area where we need to watch the detail, not just the headline.
What about distributing income to a company?
This is another area business owners with family trusts should watch carefully.
Many existing structures use what is commonly referred to as a bucket company, where trust income is distributed to a corporate beneficiary.
The interaction between corporate beneficiaries, unpaid present entitlements and Division 7A has already been a complex area of tax law.
The Government’s July consultation specifically considers how these arrangements should interact with the new minimum tax.
That means businesses using a trust-and-company structure shouldn’t assume their current strategy will simply continue unchanged from 1 July 2028.
It also doesn’t mean you need to change it tomorrow.
We need the final rules first.
What if our family trust runs the business?
This is where the change becomes particularly relevant for small and family businesses.
Family trusts aren’t only used by wealthy investors.
They are woven through the structures of many Australian businesses.
A trading business may operate directly through a discretionary trust.
A trust might hold shares in the trading company.
Another trust may hold business premises or investments.
There may be a corporate beneficiary sitting alongside it.
And one family might have several entities working together.
So when tax rules affecting discretionary trusts change, the impact isn’t necessarily isolated to one tax return.
It can affect the way the entire family and business structure works.
That’s why we don’t think the answer is simply:
“Trusts are bad now. Get rid of them.”
It’s much more likely to be:
“Let’s understand exactly what your trust does, why you have it and whether it still makes sense under the new rules.”
At Amarose Accounting, our Business Accounting work includes companies, trusts, partnerships and SMSFs, so when we’re reviewing a structure we want to understand how all of those pieces fit together rather than looking at one entity in isolation.
Don’t forget, tax isn’t the only reason you have a trust
This is really important.
If your family trust was established solely because someone once told you it would save tax, then yes, the new rules may trigger a fairly important conversation.
But tax isn’t the only reason discretionary trusts exist.
Depending on the circumstances, trusts may also form part of strategies around:
- asset protection
- business ownership
- investment ownership
- succession planning
- family wealth
- estate planning
- flexibility around future generations.
The Government itself has acknowledged that trusts have legitimate uses, including succession planning and asset protection.
So even if the tax benefits change, that doesn’t automatically mean the purpose of the trust has disappeared.
The right question isn’t:
“Are trusts still good?”
It’s:
“Is our trust still the right structure for what we’re trying to achieve?”
What if we decide the trust no longer makes sense?
This is another important part of the announcement.
The Government recognises that some businesses and families may decide they want to restructure before the new rules commence.
As a result, it has announced expanded rollover relief for three years from 1 July 2027 to support eligible businesses and individuals who choose to restructure out of discretionary trusts.
That doesn’t mean restructuring will automatically be simple, tax-free or appropriate for everyone.
There may be capital gains tax, duty, legal, asset protection, financing, commercial and other consequences to consider.
And the assets sitting inside one trust can look completely different from another.
A trust holding shares in a business is very different from a trust holding property, investments or operating assets.
This is exactly why we’d strongly caution against making structural changes based purely on a headline.
Do you need to do anything right now?
For most people, probably not anything drastic.
But we do think you should know what you’ve got.
If you have a discretionary family trust, now is a very good time to understand:
- what type of trust you have
- why it was originally established
- what assets it owns
- whether it operates a business
- who the beneficiaries are
- how income is currently distributed
- whether there is a corporate beneficiary
- whether there are unpaid present entitlements or loans
- who controls the trust
- how the trust fits with your broader business and family structure.
And most importantly:
Don’t restructure simply because you’ve heard that trusts are being taxed at 30%.
We have time.
The proposed start date is 1 July 2028, and implementation details are still being settled.
The sensible approach is to understand the rules as they develop, model the potential impact on your particular structure and then make a decision based on facts.
This is exactly why tax planning shouldn’t happen once a year
Changes like this are a great example of why we believe accounting should be forward-looking.
Your accountant shouldn’t just prepare the trust tax return after the year has finished.
If the tax landscape is changing in two years’ time, we should be talking about what that could mean before we get there.
Does the existing structure still make sense?
What would the tax position look like under the proposed rules?
Are there other reasons the trust should remain in place?
What would restructuring actually involve?
What other entities or family members would be affected?
And what are you trying to achieve over the next five or ten years?
Those are the conversations that matter.
Our Business Advisory work is built around looking forward with business owners, rather than simply reporting on what’s already happened.
The takeaway for family trusts
If you have a discretionary family trust, don’t panic, but don’t ignore this either.
A 30% minimum tax from 1 July 2028 is a significant change and, for some families and businesses, it could change the tax outcomes their existing structure produces.
For others, the impact may be much smaller.
And for some, the non-tax reasons for retaining the trust may continue to outweigh the tax considerations.
There isn’t going to be one answer that suits every family trust in Australia.
That’s why the next couple of years are an opportunity to review, understand and plan, rather than react.
At Amarose Accounting, we’ll be keeping a close eye on the legislation and implementation details as they develop.
If you operate through a family trust, have investments held in one, or have a discretionary trust sitting somewhere within your family group, get in touch with Amarose Accounting and we can help you understand what the proposed changes could mean for your structure.
Because when the tax rules change, the best time to start planning isn’t after they take effect.
It’s before.
This article is based on information available at August 2026. The discretionary trust reforms are subject to implementation and further detail. This information is general in nature and does not take into account your individual circumstances. We recommend obtaining appropriate tax, accounting, legal and financial advice before changing an existing trust or business structure.