“We use a discretionary trust. If the proposed 30% minimum tax goes ahead, what could it mean for our structure?”

Discretionary trusts have been part of the Australian tax landscape for decades. They are commonly used by family businesses and investment groups because they can offer flexibility, help with succession planning and provide asset protection benefits. But one of the biggest proposals from the 2026–27 Federal Budget could change how some of these structures are taxed.

The Government has proposed a 30% minimum tax on the taxable income of discretionary trusts from 1 July 2028. 

How would the proposed rules work?

Under the proposal, the trustee would generally pay tax at a minimum rate of 30% on the trust’s taxable income. Where that income is distributed to an individual or certain other non-corporate beneficiaries, the beneficiary would generally receive a non-refundable tax offset for tax already paid by the trustee. 

The more difficult issue is where a trust distributes income to a company. Under the proposal, a corporate beneficiary would not receive a tax offset for the tax already paid by the trustee. That creates the potential for double taxation on some trust-to-company distributions, which could significantly reduce the flexibility that many family groups currently rely on. 

Will every trust be affected?

No. The Government has indicated that a number of trusts would be excluded, including:

• fixed trusts 
• widely held trusts 
• complying superannuation funds 
• charitable trusts 
• deceased estates 
• special disability trusts 
• and genuine testamentary trusts. 

Certain primary production income and income relating to vulnerable minors would also be excluded. The Government has also said that more than 90% of small businesses are not expected to be affected. That may be reassuring, but it does not mean every family group can ignore the proposal.

What could this mean for family businesses?

Groups that regularly distribute trust income to companies are likely to be watching this closely.

Those structures are often used to:

• manage cash flow 
• retain profits 
• fund business growth 
• and move taxable income around a family group. 

If the proposal goes ahead as currently designed, some of that flexibility could be reduced.

The Government has also proposed a three-year rollover period from 1 July 2027 to help some groups restructure into alternative structures, such as companies or fixed trusts, without triggering immediate income tax or CGT consequences. That sounds helpful, but restructuring is rarely simple. Stamp duty, financing, contracts, licences and other commercial issues can all come into play.

The rules are not final

This is the most important point. Treasury released a consultation paper in July 2026, and the legislation has not yet been introduced.

The final design could still change. That means now is not the time to rush into a restructure because of a headline. It is, however, a good time to understand whether your existing structure could be affected if the proposal does proceed.

Final thought

Discretionary trusts are not disappearing, and their non-tax benefits remain important. But if your group uses a discretionary trust and regularly distributes income to a company, this is a change worth watching closely.



Speak with your Aspen advisor about how the proposal could affect your current structure and whether any future planning may be needed.