Australia is entering an unusually significant period of tax reform. Some measures are now law. Others remain subject to implementation work and consultation.
For advisers and their clients, the issue is no longer simply what has been announced. The more important questions are what has actually been enacted, when each measure begins and whether action is required now.
The reforms span capital gains tax, residential negative gearing and the Government's proposed minimum tax for discretionary trusts. Each operates on a different timetable, and each can affect existing structures in materially different ways.
That makes preparation important. It does not necessarily make immediate restructuring appropriate.
The road to 2028.
The reforms do not commence at the same time. Understanding the sequence is critical before significant investment or restructuring decisions are made.
Residential property transition point
Residential property held before 7:30pm AEST on 12 May 2026 is generally protected from the new negative gearing restrictions.
CGT and negative gearing reforms enacted
The legislative framework was enacted ahead of its principal commencement from 1 July 2027.
CGT transition point
Consider what valuation and supporting evidence may be required for assets held across the transition.
CGT and negative gearing changes commence
The new CGT framework begins and residential negative gearing becomes generally limited to eligible new residential property.
Structure review window
Private groups should model the proposed trust rules, review corporate beneficiaries and quantify realistic restructuring alternatives.
Proposed discretionary trust minimum tax
The Government intends the 30% trustee-level minimum tax to commence, subject to final implementation.
The CGT and negative gearing measures are enacted. Implementation of the discretionary trust minimum-tax regime continues to be worked through.
A 30% minimum tax changes the planning equation.
From 1 July 2028, the Government intends trustees of discretionary trusts to pay a minimum tax of 30 per cent on taxable income, subject to exclusions and the final implementation framework.
Beneficiaries other than corporate beneficiaries are expected to receive non-refundable credits for tax payable by the trustee. Corporate beneficiaries are not expected to receive the same credit.
That distinction matters for private groups that have historically distributed trust income to corporate beneficiaries, often referred to as bucket companies.
How the proposed minimum tax may operate
Under the current policy model, the trustee would be responsible for ensuring that taxable income of the discretionary trust is subject to a minimum tax rate of 30 per cent.
Non-corporate beneficiaries are expected to receive a non-refundable credit for the trustee-level tax. Corporate beneficiaries are not expected to receive an equivalent credit.
The Medicare levy remains a separate consideration for individuals and may therefore continue to affect the ultimate effective rate.
Corporate beneficiaries and the 69.71% example
Corporate beneficiaries have historically been used by many private groups to retain trust income within a company at the applicable corporate tax rate.
The webinar considered an illustrative example in which $100 of trust profit ultimately passed through the trustee, a corporate beneficiary and then an individual shareholder.
Under the assumptions used in that worked example, the combined tax imposed across the trustee, company and ultimate shareholder produced an illustrative effective rate of 69.71 per cent.
This is not a universal tax rate. Actual outcomes depend on the beneficiary, applicable company tax rate, franking position, distributions, shareholder tax profile and the final legislation.
Lower-income beneficiary implications
A non-refundable tax credit can produce unusual outcomes where the beneficiary's underlying tax liability is less than the amount already paid by the trustee.
The webinar highlighted the potential impact at lower income levels common among small-business and family-group distributions.
This means modelling should consider not only the headline tax rate, but the beneficiary's actual taxable income and whether the credit can be fully utilised.
Planning before 1 July 2028
Existing corporate-beneficiary arrangements should be identified and modelled before the proposed commencement.
Where commercially appropriate, private groups may also consider whether existing corporate-beneficiary strategies remain useful before 30 June 2028.
Any planning should be documented with the commercial rationale and client approval, and should not be undertaken merely to accelerate tax outcomes without regard to the broader structure.
Enacted law and proposed policy are not the same thing.
One reason the current environment is difficult for clients is that the major measures are progressing at different stages.
The capital gains and negative gearing reforms are enacted, with their principal commencement from 1 July 2027.
The discretionary trust minimum tax has an announced commencement from 1 July 2028, but implementation matters continue to be worked through.
Client communications should therefore distinguish clearly between current law, announced Government policy and details that may still change.
30 June 2027 becomes an important evidence date.
From 1 July 2027, the CGT treatment of relevant future gains changes materially.
Assets already held across the transition require a mechanism for distinguishing gains accruing before commencement from gains arising afterwards.
For private companies, trusts, business goodwill, property and other assets that can be difficult to value, reliable evidence may become important years later when a disposal eventually occurs.
Valuation and cost-base methods
The webinar discussed the ATO's detailed cost-base methodology and the alternative of obtaining independent valuation evidence where appropriate.
The correct approach will depend on the asset, available records and the statutory method ultimately relied upon.
The key practical issue is ensuring that enough evidence exists to support the position when the asset is eventually disposed of.
Should every asset be valued at 30 June 2027?
Not necessarily.
An independent valuation may be appropriate for certain difficult-to-value assets, but other statutory methods may be available.
The better planning question is what evidence should be retained before and around the transition date so that the future calculation can be supported.
Why the fixed valuation date matters
A fixed transition date creates market-timing issues. Asset values may be unusually high or low around that date, particularly for volatile securities and private assets.
Documentation of the methodology, assumptions and supporting information will therefore be important where valuation evidence is ultimately relied upon.
Negative gearing becomes more targeted.
From 1 July 2027, negative gearing for residential property will generally be limited to eligible new builds.
Residential properties held before 7:30pm AEST on 12 May 2026 are protected by transitional arrangements.
Investors acquiring established residential property after that point can no longer assume that excess rental deductions will offset unrelated income such as salary or business income.
This places greater emphasis on purchase price, financing, holding costs, rent and after-tax cash flow.
Changing structure is rarely just a tax exercise.
A higher projected tax burden does not automatically mean a discretionary trust should be unwound or replaced with a company.
Moving an established operation between entities can affect tax, state duties, finance, contracts, payroll, employment, banking, insurance and commercial arrangements.
For an operating business, the practical process can begin to resemble a business sale.
Duty and tax costs
Transfers of property, business assets and entity interests can create capital gains tax and state transfer-duty exposure.
In some jurisdictions, headline transfer-duty rates can be around five per cent or more depending on the asset, value and transaction.
The position should therefore be modelled before any restructure is recommended or documented.
Operational consequences
A restructure can require contracts to be novated or re-executed, bank accounts changed, finance renegotiated, payroll transferred and licences or registrations updated.
Insurance, supplier arrangements, customer contracts and employee documentation may also need review.
These implementation costs can be just as important as the headline tax outcome.
Typical advisory and implementation costs
The webinar discussed formal structure reviews for smaller businesses commonly being priced in the low thousands, with more complex advisory work priced materially higher.
Where a restructure proceeds, professional fees and external implementation costs can become significant, particularly where legal documents, contracts, finance and entity changes are required.
Clear scope and pricing before work begins can prevent clients from underestimating the cost and complexity of implementation.
Rollover relief
Government announcements contemplate expanded rollover relief over a transitional period for taxpayers seeking to restructure out of discretionary trusts.
Whether that relief ultimately applies will depend on the final legislation and the facts of the particular restructure.
Tax remains only one part of the structure.
Discretionary trusts continue to have legitimate non-tax purposes, including asset protection, succession flexibility, family wealth management and separation of business and personal assets.
Companies may be well suited to trading operations where clearer separation of operating risk and retained earnings is desirable.
A commercially sensible private-group structure may involve a trading company, holding company and discretionary trust. Other clients will require different arrangements.
Structure advice should therefore consider commercial risk, asset protection, succession, financing, Corporations Act obligations and tax together.
Plan for today's law. Keep tomorrow flexible.
Prepare for the announced framework.
Confirm current structures, identify affected entities, preserve relevant records and model the likely position if the measures operate as presently intended.
Preserve the ability to change course.
Avoid irreversible transactions where the commercial rationale is weak or implementation details remain uncertain. Reassess as further material becomes available.
Preparation can begin without rushing the decision.
Confirm the actual ownership structure of trusts, companies, corporate beneficiaries and investments.
Identify assets expected to remain held across 1 July 2027 and consider the evidence likely to support future CGT calculations.
Review discretionary trust and corporate-beneficiary arrangements before the proposed 1 July 2028 commencement.
Model realistic alternatives rather than assuming that a company will automatically produce a better outcome.
Quantify CGT, transfer duty, financing and operational costs before undertaking a major restructure.
Establish a Plan A and Plan B so decisions can be revisited as the legislative position develops.
Clear advice matters more when the rules are moving.
Preliminary advice provided during legislative uncertainty should state clearly what is known, what remains unsettled and what assumptions have been made.
A diagram showing the relationship between trusts, companies, shareholders and beneficiaries can also be valuable. Many clients know the names of their entities but not necessarily how they legally connect.
Business Structure Review framework
A preliminary structure-review letter can help define the current position before detailed modelling begins.
It should document the client's existing structure, known objectives, assumptions and the specific matters being considered.
The letter should also distinguish between preliminary observations and formal advice that will be provided once further legislative material becomes available.
Scope and reliance disclaimers
Advice should specify the client for whom it is prepared, the purpose of the advice and the information relied upon.
Unknown facts, assumptions and unresolved legislative matters should be stated upfront rather than buried in the conclusion.
This helps provide useful guidance without representing an uncertain future position as settled.
Structure diagrams
A simple structure diagram can identify trustees, beneficiaries, shareholders, holding companies, trading entities and investments at a glance.
This can expose misunderstandings before modelling or recommendations begin and provides a useful visual basis for future discussions with the client.
Team preparation
Junior and client-facing staff should understand the distinction between measures that are enacted, measures that are proposed and issues still under consultation.
A short internal issues register can help ensure common questions are answered consistently while complex or advice-specific matters are escalated appropriately.
The next two years require planning, not panic.
These reforms are significant, particularly for private groups that have relied on discretionary trusts and corporate beneficiaries as part of their longer-term arrangements.
But the existence of a tax change does not, by itself, make restructuring the correct response.
The stronger approach is to establish the current position, understand the critical dates, quantify likely outcomes and preserve enough flexibility to respond as the legislative framework becomes clearer.
