If your business, farm or family group runs through a discretionary (family) trust, this one is for you. A proposed 30 per cent minimum tax on discretionary trusts has moved from the Budget to draft law, and the politics are heating up. Nothing has passed yet, so there is nothing you must change today, but it is worth getting ready.

Where things stand

The Treasurer announced the measure in the May Budget. Treasury released exposure draft legislation on 3 September 2026, with the tax to apply from income years starting on or after 1 July 2028. Consultation closed on 18 September. Media reports say the bill was due to be introduced this week, but it cannot pass until at least late 2026, and the Greens are pushing for a Senate inquiry into the carve outs.

What the draft proposes

Law firm and adviser summaries of the draft say trustees would broadly have three paths:

  • Pay the minimum tax at the trustee level.
  • Elect into a fixed distribution regime, naming beneficiaries and allocating 100 per cent of income and capital to them. This gives up much of the trustee's flexibility.
  • Restructure using a roll over, with the draft allowing choices before 30 June 2030.

Some income is excluded, including primary production income and certain income for vulnerable minors. Reports also say the draft appears to keep the "bucket company" approach, where a trust distributes to a company taxed at company rates, although a corporate beneficiary would not get an offset for the trustee's minimum tax. State stamp duty on assets moved in a restructure is still an open question.

Reaction so far

CPA Australia has called the election option a genuine improvement, while the small business council COSBOA says the one off nature of the election is unnecessarily punitive. The Treasurer has said there are legitimate reasons to have a trust, and Treasury expects about 210,000 business trusts to be affected.

What to do now

  • Do not restructure yet. The rules may change, and moving assets early could trigger costs, including stamp duty.
  • Pull together your documents. Find the trust deed, recent distribution resolutions, a list of beneficiaries and a note of who really benefits from the income.
  • Map your income. Work out how much trust income is business profit, primary production or investment income, since the treatment may differ.
  • Book a planning chat. Ask your accountant to model the three paths for your numbers well before 1 July 2028.
  • Watch the bill. The final law may look different from the draft.

The sensible approach is to prepare quietly and decide once the law is settled.