The Federal Government has released further draft legislation for its proposed 30% minimum tax on certain discretionary trusts, commonly known as family trusts.

While the initial Budget announcement and subsequent amendment proposals are significant, there is one key point to remember: nothing has been legislated yet.

The latest update

The Government has released exposure draft Treasury Laws Amendment Bill 2026: Minimum tax on discretionary trusts for consultation until 18 September 2026, meaning the rules could still change before becoming law. Once final legislation is enacted, the new regime is proposed to commence from 01 July 2028.

If you operate a business or investments through a family trust, you don't need to make major changes just yet – but it is a good idea to understand the latest proposals for the minimum trust tax rules.

Why is the Government proposing these changes?

The Government has stated that the objective is to ensure certain trust income is taxed at a minimum rate of 30%. The proposed rules are aimed at some discretionary trusts and would change how trust income is taxed from 01 July 2028.

Many Australian family businesses use discretionary trusts because they provide flexibility in how income can be distributed to family members and other beneficiaries in a legitimate and tax-effective manner.

The proposed reforms may reduce some of that flexibility or increase the tax paid by certain trusts.

Will my trust be affected?

Not every trust will be affected.

Based on the current draft legislation, several types of trusts are expected to be excluded from the minimum tax trust rules, including:

• complying superannuation funds
• charitable trusts
• deceased estates
• many testamentary trusts
• certain fixed trusts
• some primary production income arrangements

However, many family trusts used by business owners and investors could potentially be impacted.

Because every trust structure is different, it is important to obtain advice before assuming your trust is or is not affected.

How would the proposed 30% minimum tax work?

Under the draft rules, if the relevant income of an affected trust is taxed at less than 30%, additional tax may be payable to bring the overall tax on that income up to 30%.

For some trusts, the impact may be relatively small.

For others, particularly those that regularly distribute income to beneficiaries who are taxed at lower tax rates, the impact could be much more significant.

The final outcome will depend on:

• the trust's income sources.
• who receives distributions.
• the tax position of beneficiaries.
• whether any exclusions apply.

What choices will trustees have?

If the legislation is passed in its current form, trustees will effectively have three broad options.

Option 1: Keep the trust as it is

The first option is to make no major structural changes and simply accept the new minimum tax rules. For some families and businesses, this may be the simplest solution.

Potential advantages

• The trust keeps its existing flexibility.
• Family and business arrangements can remain largely unchanged.
• No major restructuring is required.

Potential disadvantages

• Additional tax may be payable.
• Compliance and administration requirements may increase.
• Annual tax outcomes may become less favourable.

For some business owners, the cost of change may outweigh the additional tax.

Option 2: Lock in beneficiaries

The draft legislation introduces a new election that would allow some trusts to avoid the 30% minimum tax.

In simple terms, trustees would nominate who the beneficiaries are and what percentage of the trust income and capital each beneficiary is entitled to receive in the future.

This is called an Excluded Election Trust (EET) nomination and in effect, you specify who/what and how much of the income and capital of the trust the beneficiary is entitled to.

Once in place, the election cannot be changed unless a beneficiary dies, there is a family breakdown or the election is revoked. There is no provision for new children or a marriage.

Potential advantages

• The trust may avoid the proposed minimum tax.
• Assets may not need to be transferred to another structure.

Potential disadvantages

• Future flexibility may be greatly reduced.
• Changes to family circumstances may be difficult to accommodate.
• Mistakes or changes outside the permitted exceptions could have significant tax consequences.

This option may work well for some families where ownership and succession plans are already settled.

For others, permanently locking in beneficiaries may create more problems than it solves.

Option 3: Restructure to a different entity

The Government is also proposing temporary rollover relief to help trusts move into another structure without triggering the usual tax consequences that often arise during a restructure.

The proposed rollover period would run from 01 July 2027 until 30 June 2030, and potential alternative structures could include:

• Companies
• Fixed trusts
• Partnerships
• Other eligible entities

Potential advantages

• The trust may no longer be affected by the proposed minimum tax.
• The business structure may better suit long-term objectives.
• The rollover provisions may reduce upfront tax costs.

Potential disadvantages

• Restructuring can be complex.
• Legal and accounting costs may arise.
• Asset protection and succession planning outcomes may change.
• State taxes and stamp duty may still need to be considered.

A restructure should never be driven solely by tax. It is important to consider commercial, legal and family objectives as well.

What should business owners with a Family Trust do now?

Although the legislation is still in draft form, there are several sensible steps trustees can take now.

1. Review your trust structure

Understand which entities exist within your business group and how income is currently distributed.

2. Review your trust deed

The trust deed will become increasingly important if the proposed rules proceed.

3. Consider your long-term plans

Think about:

• future family involvement.
• succession planning.
• asset protection.
• retirement plans.
• expected changes in beneficiaries.

4. Avoid rushing into changes

The draft legislation is still being consulted on and may change before becoming law.

In most cases, trustees should avoid making major structural decisions until the final legislation is known.

What happens next?

The current timeline is:

• 18 September 2026: Consultation on the exposure draft closes.
• From 01 July 2027: Proposed commencement of the three-year restructuring rollover period.
• 01 July 2028: Proposed commencement of the 30% minimum tax.
• 2028–29 financial year: Proposed period for making the one-off fixed-entitlement election (EET nomination).
• 30 June 2029: Proposed final date for the election, subject to the detailed notification and lodgement requirements.
• 30 June 2030: Proposed end of the restructuring rollover period.

The legislation still needs to be finalised and passed by Parliament before any of these changes become law.

Advice. Clarity. Direction.

The proposed trust tax changes could have a significant impact on many family-owned businesses and investment structures. However, every family's circumstances are different.

For some trustees, retaining their existing structure may make sense. Others may consider fixing beneficiary entitlements or restructuring into a different entity.

The key is understanding your options before making a decision.

At The Peak Partnership, we're closely monitoring the proposed (and evolving) legislation, and we'll continue to release updates as further details emerge. We can help you understand how the rules may apply to your family's financial circumstances and evaluate the most appropriate strategy once the legislation is finalised.

If you'd like to know more, just reach out to one of our Accounting Advisers at The Peak Partnership.