Trust reforms

The Government will introduce a 30% minimum tax on discretionary trusts.

From 1 July 2028, trustees will pay a minimum tax of 30% on the taxable income of discretionary trusts. Beneficiaries will still need to declare the income in their tax returns, but beneficiaries, other than corporate beneficiaries, will receive non-refundable credits for the tax payable by the trustee, which can be used to offset current year income tax liabilities.

The Treasurer said in a media release that these reforms won’t change or limit the use of trusts for legitimate reasons, but will more closely align the tax rates for trusts with the rates paid by workers and families who earn a living from wages.

The minimum tax will not apply to other types of trusts that don’t offer the same flexibility as discretionary trusts, such as fixed and widely held trusts (including fixed testamentary trusts), complying superannuation funds, special disability trusts, deceased estates and charitable trusts. Some types of income such as primary production income, certain income relating to vulnerable minors, amounts to which non-resident withholding tax applies, and income from assets of discretionary testamentary trusts existing at announcement will also be excluded.

The Government will provide expanded rollover relief for three years from 1 July 2027 to support small businesses and others that wish to restructure out of discretionary trusts into another entity type, such as a company or a fixed trust.

This measure is estimated to increase receipts by $4.5 billion over the five years from 2025-26.