Closer to Certainty for Minimum Taxation of Trusts: Treasury Releases Draft Legislation

James Creevy, current as of: 4 September 2026.

After announcing the intended introduction of a minimum 30% tax on discretionary trusts as part of the 2026/27 Federal Budget in May 2026, and a subsequent consultation period during July, Treasury released exposure draft legislation on 3 September. The draft legislation has introduced a number of significant changes to the measures as they were first announced, including the introduction of an elective regime for discretionary trusts (referred to as minimum tax trusts), as an alternative to restructuring. 

Key Details

Key details of the draft legislation, as it is currently drafted, are as follows:

Default Regime

• From 1 July 2028, trustees of a minimum tax trust will be directly assessed and liable to pay a minimum 30% tax on the trust’s income.
• Trustees will be permitted to claim refunds for excess franking credits relating to minimum tax income after satisfying their primary tax liabilities. 
• Non-corporate beneficiaries who are presently entitled to a portion of the trust’s income will be entitled to receive a non-refundable 30% tax offset to mitigate double taxation (corporate beneficiaries are expressly excluded from receiving this offset).
• Fixed trusts (those without material discretionary elements), special disability trusts, testamentary trusts and complying superannuation funds are excluded if established before 1 July 2028. 
• Primary production income, income derived by vulnerable minors, withholding tax payments and distributions made to registered charities or deductible gift recipients are excluded.

Alternative Pathways

• A three-year restructuring rollover window will commence on 1 July 2027, whereby discretionary trusts can restructure into fixed entities and access capital gains tax and income tax rollover relief. Where restructuring is planned during the three-year rollover window, advisors should carefully consider potential duty consequences, which federal tax rollovers do not provide relief for.
• As an alternative pathway to restructuring, minimum tax trusts in existence on 1 July 2028 can elect to nominate fixed percentage entitlements to pre-nominated beneficiaries without altering the underlying trust deed or structure. In doing so they would fall outside the scope of the new minimum 30% tax as Excluded Election Trusts (EET). Nominated beneficiaries may include individuals as well as eligible companies and trusts, with no limit on the number of beneficiaries that can be nominated. Once made, nominations can only be altered where a nominated beneficiary passes away or there is a family breakdown.

EET Considerations

• Bucket Company: Because nominated beneficiaries may include individuals as well as eligible companies and trusts, companies distributed to in EETs would be taxed at their marginal rate only, rather than their marginal rate on top of the minimum 30% trust tax. This may preserve the role of bucket companies as a means of retaining trust distributions within a corporate tax environment. 
• Asset Protection: If a trust makes a nomination for pre-determined fixed distributions, beneficiaries may have a fixed present entitlement to trust assets or income, potentially reducing the trustee’s discretion and therefore the trust’s traditional asset protection benefits.
• Automatic Election Revocation: A distribution that is inconsistent with a nomination for predetermined fixed distributions automatically revokes the election, subjecting the trustee to the highest marginal tax rate plus Medicare levy in that year, with the minimum 30% tax applying in subsequent years. It is therefore important that should the legislation be introduced in its current form and where the fixed-distribution election is planned, robust distribution procedures will need to be adopted to prevent inadvertent distributions that would trigger automatic revocation and top marginal tax rate consequences. 
• Permanent Structural Choice: Because nominations will generally only be altered following the death of a nominated beneficiary or a family breakdown, advisors considering the appropriateness of such an election should keep in mind that the proposed initial nomination decision would need to be made with the same rigour as a permanent structural choice.

Impact

More than 95 per cent of individual tax-filers and more than 90 per cent of Australia’s 2.7 million active small businesses will not be affected by these changes in any given year. Out of approximately 350,000 active small businesses operating through discretionary trusts in 2022–23, around 40 per cent (140,000 entities) are not expected to pay additional tax or require restructuring. 

What Next? 

The exposure draft legislation is just that; a draft. It remains open to consultation (until 18 September 2026) and change. As such, whilst it potentially presents greater clarity than existed previously, trustees and their advisors remain in somewhat of a holding pattern. 

As the draft legislation advances toward its proposed 2028 implementation, advisory practices should integrate specific modelling and governance workflows. Advisors should consider modelling tax outcomes across beneficiaries, comparing the default 30% minimum trustee tax against the tax outcomes of restructuring or making an election for fixed, pre-determined distributions. 

Acis will continue to monitor the progression of the minimum 30% taxation of trusts. As always, the Acis team is here to support its clients as these changes are navigated. Feel free to get in touch if you would like to know more. 

Acis does not provide advice in relation to commercial law, taxation, duty, company law or any other matter. We do not purport to provide advice nor should you construe anything in any correspondence with us, or material provided by us, as advice of any kind.