Australia’s proposed trust tax reforms require action from business owners and high-income professionals using discretionary trusts. However, the timing needs to be clear: the proposed 30% minimum tax on discretionary trust income is intended to apply from 1 July 2028, while expanded rollover relief to support restructuring is proposed to begin from 1 July 2027.

The measure is not yet law. The details may change following consultation and the passage of legislation. Even so, the proposed reforms make now the right time to review your trust structure, distribution strategy and long-term business objectives.

What is changing for discretionary trusts?

Under the proposed rules, the trustee of an in-scope discretionary trust would pay tax at a minimum rate of 30% on the trust’s taxable income, unless a higher rate applies.

Adult individual beneficiaries and other non-corporate beneficiaries would still declare their share of trust income in their tax returns. They would receive a non-refundable tax credit for the tax paid by the trustee.

This means:

• Trust income would generally face a minimum effective tax rate of 30%.


• A beneficiary with a marginal tax rate above 30% may need to pay additional tax.


• A beneficiary with a marginal tax rate below 30% would not receive a refund for excess credits.


• Corporate beneficiaries would not receive the same tax credit.


• Trustees would need to calculate and report the relevant tax and credits.

The reform is aimed at reducing the tax benefit of distributing trust income to family members on lower marginal tax rates. It does not necessarily mean that every discretionary trust will pay more tax. The impact depends on the trust’s income, beneficiary mix, distribution history, use of corporate beneficiaries and the nature of the assets or business activities involved.

The proposed minimum tax would not apply to all trust types. The Government’s

identifies exclusions including fixed and widely held trusts, complying superannuation funds, special disability trusts, deceased estates and charitable trusts. Certain categories of income may also be excluded.

Who is likely to be affected most?

The proposed change is most relevant to business owners who use a family discretionary trust to distribute business or investment income among adult family members, particularly where some beneficiaries have low or no other taxable income.

For example, a trust may currently distribute income to a spouse, adult children or other relatives to access lower marginal tax rates. If those beneficiaries are taxed below 30%, the proposed trustee-level tax could remove much of the existing benefit.

The impact may also be significant where:

• Trust income is distributed to beneficiaries but retained or used by another person.


• A trust distributes income to a “bucket company” for tax deferral.


• The business has accumulated assets or substantial unrealised gains.


• The trust owns investment property, shares or other income-producing assets.


• The trust structure no longer matches the way the business operates.


• The owner is considering borrowing, refinancing, commercial property or business expansion.

A trust should not be changed solely because of a headline tax rate. Trusts can provide asset protection, succession planning and flexibility. The correct structure depends on commercial objectives, risk, financing, ownership, succession and tax outcomes.

Five ways to prepare or restructure

1. Review your distribution strategy and beneficiary mix

Start with a detailed review of how the trust has distributed income during the past several years.

Your review should identify:

• Which beneficiaries received distributions.


• Each beneficiary’s marginal tax rate and other income.


• Whether distributions were paid, loaned or retained.


• Whether beneficiaries have genuine economic entitlement.


• How income types, capital gains, dividends and franking credits were allocated.


• Whether the trust deed supports the intended distributions.

The proposed reform may make some distribution patterns less effective, particularly where income is directed to beneficiaries below the 30% tax threshold. In some cases, it may be more appropriate to pay remuneration to family members who genuinely work in the business rather than distribute income to them.

Any salary or wage arrangement must reflect real work, appropriate commercial rates and proper payroll compliance. It should not be used as a substitute for a genuine employment relationship.

A distribution review is also an opportunity to connect your tax strategy with broader business accounting and advisory support, including cash flow reporting, profitability analysis and compliance.

2. Consider company beneficiaries and corporate beneficiary structures

Some discretionary trusts use a corporate beneficiary to receive income at the company tax rate and defer tax for the underlying owners.

The proposed reforms specifically address this strategy. Corporate beneficiaries would not receive the non-refundable tax credit for the trustee-level tax. This may reduce the benefit of distributing trust income to a “bucket company” and could create additional tax and compliance complexity.

A company beneficiary may still have a commercial role in some circumstances. For example, a company can assist with retaining earnings, funding business growth or separating operating activities from investment ownership. However, the structure must be modelled under the proposed rules.

Your review should consider:

• The company’s tax rate and eligibility.


• Division 7A loan requirements.


• How retained profits will be accessed.


• The interaction between trust tax and company tax.


• Asset protection and ownership risks.


• Future dividends and franking credits.


• Administration and professional costs.

Do not assume that a company beneficiary will automatically produce a better tax result. A structure that appears efficient in one year may create funding, Division 7A or tax disadvantages later.

3. Evaluate family trust elections and streaming rules

Family trust elections and income streaming rules can materially affect the flexibility and risk profile of a trust.

A family trust election may help manage distributions within a defined family group, but distributions outside that group can trigger family trust distribution tax. The election can also create ongoing obligations that should be reviewed when family circumstances, beneficiaries or ownership arrangements change.

Streaming rules should also be examined. Trust deeds, resolutions and accounting records need to support the allocation of different classes of income, such as:

• Capital gains.


• Franked dividends.


• Foreign income.


• Interest and rental income.


• Business income.

The proposed minimum tax may change the value of streaming and income splitting, but it does not remove the need for accurate resolutions and records. Distribution decisions should be made before the relevant deadline and documented correctly.

A structured tax planning review can help identify whether your current elections and distribution processes remain appropriate.

4. Consider transitioning to a company structure where appropriate

For some established businesses, a company may provide a more suitable long-term operating structure.

Companies can generally retain profits more simply, support reinvestment and provide clearer mechanisms for introducing new equity. They may also provide more straightforward access to certain forms of debt or commercial finance.

The Government has proposed expanded rollover relief for taxpayers who choose to restructure out of a discretionary trust into arrangements such as a company or fixed trust. The relief is proposed to be available for three years from 1 July 2027, subject to the final legislation and eligibility requirements.

A company structure may be worth considering where:

• Profits are regularly retained in the business.


• The business needs additional working capital.


• New investors or shareholders may be introduced.


• The trust creates financing or administration difficulties.


• The business has outgrown its original structure.


• The owner wants a clearer separation between operating and investment activities.

A company is not automatically superior. It may reduce distribution flexibility, create additional reporting obligations and affect asset protection, succession and future sale outcomes. The decision should be based on a full tax, legal, commercial and financing assessment.

If you are planning to purchase equipment, refinance debt or fund expansion, Crunch Advisory’s lending team can help assess how a proposed structure may affect your finance options and application strategy.

5. Seek proactive advice before 30 June 2027

The 30 June 2027 deadline is important because the proposed rollover relief is intended to commence from 1 July 2027. It is not a deadline to make an uninformed restructure. It is a deadline that should prompt early investigation.

A trust structure review should allow enough time to:

1. Gather trust deeds, financial statements and prior tax returns.


2. Map current and proposed ownership.


3. Review beneficiaries and distribution history.


4. Model tax outcomes under different structures.


5. Consider asset protection and succession.


6. Assess finance and cash flow implications.


7. Obtain legal advice where required.


8. Implement changes correctly.

The proposed 30% trust minimum tax is intended to apply from 1 July 2028, but waiting until the 2027–28 tax return is prepared may leave limited time to respond. Early planning gives you more options and reduces the risk of making decisions under pressure.

What should you do now?

Do not terminate or restructure a discretionary trust based on a headline alone. First, determine whether your trust is in scope, how much income may be affected and whether its current commercial purpose remains valid.

Crunch Advisory helps business owners assess trust tax planning options alongside cash flow, business advisory, lending and long-term wealth objectives. For families building a broader financial plan, our personal coaching resources can also support decision-making beyond the immediate tax result.

Book a trust structure review with Crunch Advisory to understand your options before the proposed changes take effect. We can help you plan ahead, compare structures and implement a strategy based on your business: not react after the rules change.

Frequently asked questions

Are discretionary trusts being taxed at 30% from 2027?

Not according to the current Government proposal. The proposed 30% minimum tax on discretionary trust income is intended to apply from 1 July 2028. Expanded rollover relief to support restructuring is proposed to begin from 1 July 2027. The measure is not yet law.

How will the proposed 30% trust tax work?

The trustee would pay tax at a minimum rate of 30% on taxable income of an in-scope discretionary trust. Adult individual and other non-corporate beneficiaries would receive non-refundable credits for the trustee-level tax.

Will adult beneficiaries still pay tax on trust distributions?

Yes. Adult beneficiaries would still declare their trust income. The trustee-level tax credit would reduce their tax liability, but excess credits could not generally be refunded. Beneficiaries with marginal rates above 30% may pay additional tax.

Are corporate beneficiaries excluded from the proposed changes?

Corporate beneficiaries would not receive the same non-refundable tax credit. Existing corporate beneficiary arrangements should therefore be reviewed and modelled before further distributions are made.

Should I move my business from a trust to a company?

Not necessarily. A company may be appropriate where the business needs to retain profits, access finance or introduce equity, but the decision depends on tax, legal, commercial, asset protection and succession considerations.

When should I review my trust structure?

Review your structure well before 30 June 2027. This allows time to assess the proposed rollover relief, model alternatives and obtain legal or tax advice before implementing any changes.

Source: Australian Government, 2026–27 Budget ( Minimum tax on discretionary trusts)