30% Minimum Tax on Discretionary Trusts: What’s Changed?
The proposed 30% minimum tax on discretionary trusts has moved another step forward, with legislation introduced into Federal Parliament on 14 October 2026.
While the legislation has not yet passed Parliament, the proposed changes are intended to apply from 1 July 2028 and could have significant implications for businesses, investors and families using discretionary trusts.
What is being proposed?
Under the proposed rules, a minimum 30% tax would apply to the net income of certain discretionary trusts from 1 July 2028.
The legislation broadly follows the draft rules released in September but provides further clarity around how the new regime would operate.
Key features include:
- a non-refundable tax offset for eligible non-corporate beneficiaries where minimum tax has been paid by the trustee
- restructuring relief for eligible transfers between 1 July 2027 and 30 June 2030
- an exclusion for taxable primary production income
- an alternative option for certain existing trusts to elect to become an Excluded Election Trust (EET).
Which trusts may be excluded?
Not all trusts would be subject to the proposed minimum tax. The legislation currently proposes exclusions for:
- fixed trusts
- deceased estates
- special disability trusts
- complying superannuation entities
- employee share trusts
- approved worker entitlement funds.
The definition of a fixed trust has also been refined, potentially allowing more trusts with limited discretionary features to fall outside the new regime. Whether a particular trust qualifies will depend on its individual arrangements.
Multiple trust structures may need closer attention
One area of concern is structures where income passes through more than one trust before reaching the ultimate beneficiary.
Structures involving distributions through multiple trusts may require particular attention, as the proposed tax offset rules may not operate in the same way through each entity.
Families and businesses operating with multiple trusts may therefore need to review how income currently flows through their structures.
What about restructuring?
The proposed legislation includes restructuring relief for eligible transfers made between 1 July 2027 and 30 June 2030.
Although the proposed roll-over relief would remain available until 30 June 2030, trusts seeking to restructure before the minimum tax commences may need to act by 30 June 2028.
Another possible option for some existing trusts is to elect to become an Excluded Election Trust. This could keep an eligible trust outside the minimum tax regime but would require nominated beneficiaries and fixed proportions of income distributions. Changes to those arrangements in the future could have significant tax consequences.
Trusts holding property should obtain specific advice before changing their structure or making an election, as Victorian duty and other state tax consequences will depend on the final rules and the trust’s circumstances.
What should you do now?
For most clients, there is no need to make immediate changes.
The legislation has not yet passed Parliament, and a number of technical, administrative and implementation details may still change as the Bills progress through Parliament.
However, if you use a discretionary trust, particularly as part of a more complex group structure, now is a good time to make sure your arrangements are on the radar for review.
At Lockwood Partners, we are continuing to monitor the proposed changes and will keep clients informed as the legislation progresses.
If you would like to discuss how the proposed rules may affect your trust or existing structure, please contact our team.