Proposed Trust Tax Changes: What Family Trusts Need to Know
The Federal Government has released further detail on its proposed 30% minimum tax on discretionary trusts. While the measure is not yet law, the latest guidance provides greater clarity on how the proposed rules may operate from 1 July 2028 and the trusts that may be affected.
What is being proposed?
As part of the 2026-27 Federal Budget, the Government announced plans to introduce a minimum 30% minimum tax on taxable income earned through discretionary trusts from 1 July 2028. The stated aim is to reduce differences between the taxation of trust income and employment income.
Importantly, the proposal is not yet law. Treasury’s consultation process has now concluded, and draft legislation is expected to be released at a later date.
What do we know so far?
The consultation paper indicates that a range of trusts are expected to be excluded from the proposed rules, including:
- Fixed trusts
- Widely held trusts
- Complying superannuation funds
- Charitable trusts
- Special disability trusts
- Deceased estates
- Genuine testamentary trusts
Income exclusions
In addition to excluding certain trusts, Treasury has also proposed excluding particular classes of income from the minimum tax regime, including:
- Primary production income
- Certain income relating to vulnerable minors
The Government has also proposed a three-year period of restructuring relief from 1 July 2027 to assist eligible taxpayers who choose to move away from discretionary trust structures if the measure proceeds.
What does it mean for you?
For most taxpayers, there is no immediate action required. The proposed changes are not expected to commence until 1 July 2028.
However, individuals and businesses using discretionary trusts should stay informed as the proposal develops. Depending on the final legislation, the changes could influence future decisions around:
- Business structures
- Investment ownership
- Succession planning
- Trust distribution strategies.
Looking ahead
While the latest update provides greater clarity around the Government’s intentions, a number of important details are yet to be finalised. Until draft legislation is released, the full impact on affected taxpayers remains uncertain.
At Lockwood Partners, we are monitoring developments closely and will keep clients informed as further information becomes available. If you have questions about how these proposed changes may affect your circumstances, please contact our team.