2026 Federal Budget
New minimum trust tax
From 1 July 2028, discretionary trusts will face a minimum 30% tax rate on distributed income in many cases.
Beneficiaries, other than corporate beneficiaries, will receive non-refundable credits for the tax payable by the trustee of the Trust.
Purpose
The Government says the measure targets:
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income splitting,
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low-tax adult beneficiaries,
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accumulation of wealth through family trust structures.
Likely effect
This significantly reduces traditional trust distribution planning strategies, including:
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distributing income to adult children on low marginal rates,
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streaming income through multiple beneficiaries,
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reducing top marginal tax exposure via family groups.
Restructure relief
A 3-year rollover relief period from 1 July 2027 will allow some restructuring without immediate CGT or duty consequences.
Exemptions
The changes do not generally apply to:
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Fixed trusts
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Testamentary trusts (at least certain existing ones)
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Superannuation funds
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Charitable trusts
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Special disability trusts
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Widely held trusts
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Primary production income