The New 30% Tax on Discretionary Trusts – What We Know So Far

If you have a discretionary trust, it’s worth booking time in now to discuss how the minimum tax may affect you, and whether exiting a discretionary trust structure may be the right course of action for you or your business.

The New 30% Tax on Discretionary Trusts – What We Know So Far

In the 2026–27 Federal Budget, the Government announced that it would introduce a 30% minimum tax on discretionary trusts from 1 July 2028. Here are the highlights of what we know so far.

What’s changing?

From 1 July 2028, the trustee of a discretionary trust will pay a minimum 30% tax on the taxable income of the trust (unless higher rates apply).

Individuals and other non-corporate beneficiaries will receive a non-refundable tax offset for the tax payable by the trustee, which will reduce the beneficiary’s income tax payable. Corporate beneficiaries will not have access to this tax offset to reduce their income tax liability.

Trustees will be required to calculate, report and pay the minimum tax, as well as notify beneficiaries of their entitlements and associated minimum tax offset.

What’s not changing?

The underlying basis on which trusts are taxed will remain unchanged. The trustee of a discretionary trust will continue to determine the share of trust income that beneficiaries are entitled to each year, while beneficiaries will continue to be responsible for including trust distributions in their income tax returns. Beneficiaries will also continue to be assessed on their share of trust’s taxable (net) income, in proportion to their entitlement to the income of the trust.

Example

Trust A is a discretionary trust subject to the minimum tax. In 2028-29, Trust A has $200,000 of taxable income, which it distributes to one beneficiary (Individual A).

The trustee is liable for the 30% minimum tax on that $200,000 of taxable income, i.e. $60,000.Individual A will be assessed on all of Trust A’s taxable income ($200,000) in their personal tax return, and will receive a non-refundable tax offset of $60,000, representing the minimum tax payable by the trustee.

Are there exclusions?

Importantly, the minimum tax will only apply to discretionary trusts, as they provide greater tax planning opportunities than other types of trusts. This means the following types of trusts will be excluded from the minimum tax:

fixed trusts
widely held trusts
complying superannuation funds
special disability trusts
deceased estates
charitable trusts.

Some types of income, such as primary production income, will also be excluded from the minimum tax.The Government has flagged that some other exclusions will require more detailed consideration. These exclusions relate to testamentary trusts, certain income relating to vulnerable minors, and amounts to which non-resident withholding tax applies.

What if I want to move away from a discretionary trust structure?

The Government has stated that it will provide expanded rollover relief to assist businesses and others to restructure out of discretionary trusts to other types of entities, for example, a company or a fixed trust, without capital gains and other immediate income tax consequences applying. The relief will be available for a period of three years, commencing from 1 July 2027 (which is also the date that the new, reformed CGT rules will come into effect).

Seek early advice

At the moment, the introduction of a minimum tax for discretionary trusts is not yet law, with the new rules subject to consultation.

However, if you have a discretionary trust, it’s worth booking time in now to discuss how the minimum tax may affect you, and whether exiting a discretionary trust structure may be the right course of action for you or your business.