Last updated: 12 May 2026
2026-27 Budget · Tax
30% minimum tax on discretionary trusts from 1 July 2028
The 2026-27 Federal Budget introduces a 30% minimum tax on the taxable income of discretionary trusts, beginning 1 July 2028. The trustee pays the tax; non-corporate beneficiaries receive non-refundable credits that offset their personal tax liabilities. Treasury estimates the measure will raise $4.5 billion over the forward estimates.
Why introduce it
The number of discretionary trusts in Australia has more than doubled in the last two decades, from around 370,000 in 2001-02 to about 840,000 in 2022-23. In 2022-23 they distributed $142.4 billion in income. The wealthiest 10% of households hold over 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 30% minimum tax sets a floor that more closely aligns the tax burden on trust income with the tax burden on wages.
How the credit system works
Step 1. The trustee calculates the trust's taxable income and pays 30% as the minimum tax.
Step 2. Beneficiaries declare their share of trust income in their personal tax returns at their marginal rate, as they do today.
Step 3. Non-corporate beneficiaries receive a non-refundable credit for their share of the trustee's 30% tax. The credit reduces 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 is payable. If it's exactly 30%, the credit washes out. If it would have been below 30%, the floor still applies – this is the reform's reason for being.
Exemptions and exclusions
- 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.
Rollover relief: three years to restructure
From 1 July 2027 to 30 June 2030, expanded rollover relief lets small businesses and others restructure out of discretionary trusts and into companies or fixed trusts without triggering CGT or other tax consequences. From 1 January 2027 the Australian Small Business and Family Enterprise Ombudsman will help small businesses understand their options.
What it means for property held in a discretionary trust
Net rental income held by a discretionary trust will be subject to the 30% minimum at the trust level from 1 July 2028. Note also that 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 in scope of both reforms. Investors considering whether to hold residential property in a trust going forward should model both the rental cash flow position and the exit capital gain under the new regime.
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Related reading
- CGT discount replaced with indexation and a 30% minimum tax
- Property investors: what the Budget means for your portfolio
Frequently asked questions
When does the discretionary trust minimum tax start?
1 July 2028. The trustee is responsible for paying the 30% minimum tax on the trust's taxable income. The change is announced in the 2026-27 Budget but does not commence until two years later.
Who actually pays the new tax?
The trustee – because the trustee controls distributions. Beneficiaries still declare trust distributions in their tax returns, but non-corporate beneficiaries receive non-refundable credits for the tax paid by the trustee, which can offset their current-year tax liabilities.
What trusts are exempt?
Fixed trusts, widely held trusts, complying superannuation funds, special disability trusts, deceased estates and charitable trusts are all 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 are also exempt.
Can I restructure out of a discretionary trust?
Yes – expanded rollover relief is available for three years from 1 July 2027 to assist small businesses and other taxpayers to move from discretionary trusts into companies or fixed trusts. The relief covers income tax consequences, including capital gains tax, on the restructure.
How much revenue will it raise?
Treasury estimates $4.5 billion in receipts over the forward estimates – revenue that helps fund the WATO, the $1,000 instant deduction and ongoing services.
Source: Budget Paper No. 1, Statement 4 (pages 159-163), Australian Treasury, 12 May 2026.
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.