Last updated: July 2026
2026-27 Budget · Tax
30% minimum tax on discretionary trusts from 1 July 2028 (proposed)
This measure was announced in the 2026-27 Budget as government policy but, unlike the negative gearing and CGT changes on this site, it has not been introduced or passed as legislation. Nothing below is current law – treat it as a proposal that could still change before any bill reaches Parliament.
The 2026-27 Federal Budget proposes a 30% minimum tax on the taxable income of discretionary trusts, beginning 1 July 2028 – but this is announced policy, not enacted law. If it proceeds as described, the trustee would pay the tax and non-corporate beneficiaries would receive non-refundable credits that offset their personal tax liabilities. Treasury estimates the measure would raise $4.5 billion over the five years from 2025-26 if legislated.
Why the Government wants to introduce it
The number of discretionary trusts in Australia has doubled since 2001-02, growing faster than the number of companies (up 70% over the same period). Australia now has over one million trusts in total, of which around 840,000 (80%) are discretionary trusts. In 2022-23 they distributed $142.4 billion in income to other entities. The wealthiest 10% of households hold around 90% of the value of all private trust wealth.
Statement 4 of Budget Paper No. 1 argues the flexibility of discretionary trusts – the ability to choose which beneficiary receives income each year – has been used to direct income toward family members on lower marginal tax rates, undermining the progressivity of the system. The proposed 30% minimum tax is designed to set a floor that more closely aligns the tax burden on trust income with the tax burden on wages.
How the proposed credit system would work
This is the mechanism the Government has described in the Budget papers. It is not law, and the detail could change once (or if) a bill is drafted and introduced to Parliament.
Step 1. The trustee would calculate the trust's taxable income and pay 30% as the minimum tax.
Step 2. Beneficiaries would declare their share of trust income in their personal tax returns at their marginal rate, as they do today.
Step 3. Non-corporate beneficiaries would receive a non-refundable credit for their share of the trustee's 30% tax. The credit would reduce their current-year personal tax liability so the income isn't taxed twice.
Net effect. If the beneficiary's marginal rate is above 30%, additional tax would be payable. If it's exactly 30%, the credit would wash out. If it would have been below 30%, the floor would still apply – this is the stated reason for the proposal.
Proposed exemptions and exclusions
These are the carve-outs the Government has flagged for the proposed trust minimum tax. As with the rest of this measure, none of this is locked in until legislation is drafted and passed.
- Fixed trusts, including fixed testamentary trusts.
- Widely held trusts, complying superannuation funds, special disability trusts.
- Deceased estates and charitable trusts.
- Primary production income of farms.
- Certain income for vulnerable minors.
- Amounts subject to non-resident withholding tax.
- Income from assets of testamentary trusts existing at announcement.
Proposed rollover relief: three years to restructure
The Government has also proposed that, from 1 July 2027 to 30 June 2030, expanded rollover relief would let small businesses and others restructure out of discretionary trusts and into companies or fixed trusts without triggering CGT or other tax consequences, with the Australian Small Business and Family Enterprise Ombudsman helping small businesses understand their options from 1 January 2027. This relief is part of the same unlegislated trust-tax package described above, not a confirmed, separately-enacted measure.
What it could mean for property held in a discretionary trust
If the proposal becomes law as described, net rental income held by a discretionary trust would be subject to the 30% minimum at the trust level from 1 July 2028. Separately – and this part is already enacted – the negative gearing and CGT reforms (effective 1 July 2027) explicitly apply to capital gains realised by individuals, trusts and partnerships, so trust-held property is already in scope of those two reforms regardless of what happens with the proposed trust minimum tax. Investors considering whether to hold residential property in a trust going forward should model the confirmed negative gearing and CGT position now, and treat the trust minimum tax as a watch item rather than a certainty.
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Frequently asked questions
Is the discretionary trust minimum tax law yet?
No. It is announced Budget policy only. Unlike the negative gearing and CGT changes – which passed Parliament as the Treasury Laws Amendment (Tax Reform No. 1) Act 2026, assented 26 June 2026 – no bill implementing the discretionary trust minimum tax had been introduced or passed as at July 2026. Treat everything on this page as a proposal that could change before it becomes law.
When would the discretionary trust minimum tax start, if it proceeds?
The Government has proposed 1 July 2028. If legislated, the trustee would be responsible for paying the 30% minimum tax on the trust's taxable income. The change was announced in the 2026-27 Budget but, even on the Government's own timeline, would not commence until two years later.
Who would actually pay the new tax, if it's legislated?
The Government has proposed the trustee pays – because the trustee controls distributions. Beneficiaries would still declare trust distributions in their tax returns, but non-corporate beneficiaries would receive non-refundable credits for the tax paid by the trustee, which could offset their current-year tax liabilities. None of this applies today.
What trusts would be exempt, under the proposal?
As proposed: fixed trusts, widely held trusts, complying superannuation funds, special disability trusts, deceased estates and charitable trusts would all be excluded. Within discretionary trusts, primary production income of farms, certain income for vulnerable minors, income subject to non-resident withholding tax, and income from testamentary trust assets existing at announcement would also be exempt. These are Budget-announced intentions, not legislated criteria.
Can I restructure out of a discretionary trust ahead of this?
The Government has proposed expanded rollover relief for three years from 1 July 2027 to help small businesses and other taxpayers move from discretionary trusts into companies or fixed trusts, covering income tax consequences including capital gains tax. Like the trust minimum tax itself, this relief is announced policy, not yet legislation – get current advice from a tax adviser before restructuring.
How much revenue would it raise, if it goes ahead?
Treasury estimates $4.5 billion in receipts over the five years from 2025-26 if the measure is legislated as proposed – revenue that would help fund the WATO, the $1,000 instant deduction and ongoing services.
Source: Budget Paper No. 1, Statement 4 (pages 159-162), Australian Treasury, 12 May 2026. This measure was announced Budget policy only as at July 2026 – it had not been introduced or passed as legislation. Check for updates before relying on it.
Disclaimer: This information is general in nature and does not constitute financial, legal, or tax advice. Calculations are estimates only and may not reflect your exact circumstances. Eligibility criteria and dollar amounts may change without notice. Always verify with the relevant government authority, your mortgage broker, or a licensed financial adviser before making decisions.