Treasury put the draft legislation for the 30 per cent minimum tax on discretionary trusts out on 3 September 2026. Submissions close on 18 September 2026.
The rate and the start date have been public since the Budget. What is new in this package is a third option that was not on the table before, and it is the reason this draft matters to anyone who has spent the past year assuming the choice was pay the tax or restructure the group. You can now elect to keep the trust and avoid the minimum tax, without restructuring and without the stamp duty exposure a restructure usually brings. There is one condition attached that cancels it, and that condition is where most of the practical risk sits.
What the election actually does
A discretionary trust that is in existence at 1 July 2028 will be able to elect into a new regime. In exchange, the trustee agrees to make fixed distributions to beneficiaries nominated in advance, and the minimum tax does not apply as a result.
Three features of it are worth reading closely.
- Trustees can nominate individuals and entities that are capable of benefiting under the trust at 1 July 2028, including eligible companies and trusts. There is no limit on how many beneficiaries can be nominated.
- Treasury’s own example is a trust nominating an eligible company, so that future income is taxed only as income of that company.
- The election does not require a restructure, and Treasury states it is not expected to result in state and territory stamp duties.
For a family group whose distribution pattern has been stable for years, that is a materially cheaper answer than winding a trust up and moving assets into a company.
The condition that cancels it
The election stays in place until the trustee revokes it, or until it is revoked automatically. It is revoked automatically where the trustee makes distributions that are inconsistent with the election.
The consequence of revocation is set out in one sentence in Treasury’s explainer, and it is the sentence to take to the next family meeting. On revocation, the trustee is subject to the highest marginal tax rate plus the Medicare levy in that income year, and the minimum tax applies to subsequent income years.
Read that against the second limb. Nominated beneficiaries can only be added or changed later where a nominated beneficiary passes away, or where there is a family breakdown. Those are the two exits. A child finishing university and starting work is not one. A beneficiary moving overseas is not one. A new business partner is not one.
So the election is not a formality that sits in a file. It converts a discretionary trust into something that behaves like a fixed trust for as long as it runs, and the price of drifting back to old habits for a single year is the top marginal rate plus Medicare levy on the trust’s income for that year, followed by the minimum tax from then on.
That reframes the decision. The question is not whether the election is cheaper than restructuring, because on the face of it, it usually will be. The question is whether the group can commit to a distribution pattern it cannot vary for anything short of a death or a family breakdown.
Three doors, and the dates on each
| Option | What happens | Timing |
|---|---|---|
| Do nothing | The 30 per cent minimum tax applies to the trust | From 1 July 2028 |
| Elect | Fixed distributions to pre-nominated beneficiaries, minimum tax does not apply, no restructure, stamp duty not expected | Available to trusts in existence at 1 July 2028 |
| Restructure out | Roll-over relief from income tax consequences including capital gains tax, moving into a company or a fixed trust | Three years from 1 July 2027 |
The sequencing is the part people miss. Roll-over relief opens a full year before the tax starts. A group that decides in the 2027-28 year has the relief available and the tax not yet running. A group that waits until the tax bites in 2028-29 still has relief until 30 June 2030, but it is now paying while it reorganises.
Treasury also says the roll-over is designed for a full restructuring out of a discretionary trust, with a targeted exception for primary production assets, because primary production income is excluded from the minimum tax in any case. Partial moves are not what it was built for.
How many groups this is actually about
The public framing is that more than 95 per cent of individual taxfilers and more than 90 per cent of Australia’s 2.7 million active small businesses will not be affected in any given year. Both figures are Treasury’s.
The more useful number is in the same document. Around 350,000 active small businesses, fewer than 15 per cent of all active small businesses, operated through a discretionary trust structure in 2022-23. Of those, around 40 per cent, or 140,000, are not expected to pay additional tax or need to restructure in any given year.
Subtract one from the other and roughly 210,000 businesses are left holding a live decision. That subtraction is ours, not Treasury’s, and it is arithmetic on Treasury’s own two figures rather than a separate estimate. It is a different picture from 90 per cent unaffected, and it is the picture that matters if you are one of the businesses that uses a trust.
The quieter change in the same package
Fixed trusts and widely held trusts are outside the minimum tax. To make that work, the draft introduces a new definition of fixed trust, and Treasury says it applies more broadly for tax purposes. A trust can be treated as a fixed trust where there are no material discretionary elements. The stated purpose is to keep bare trusts, managed investment trusts and other widely held trusts out of scope.
A definition of fixed trust that applies more broadly than one measure is worth watching, because the existing concept carries weight in areas that have nothing to do with this tax. If you hold property through a bare trust arrangement, or you have ever had a franking credit or trust loss question turn on whether a trust was fixed, this is the part of the package to read rather than the headline.
Franking credits and charitable distributions
Two smaller points that answer questions we have already been asked.
On franking credits, once the trustee has offset its income tax liabilities, it will be able to obtain refunds for franking credits that remain and relate to income subject to the minimum tax. The treatment of company distributions flowing through trusts that do not relate to minimum-taxed income is unaffected.
On charitable giving, charitable trusts and all distributions from trusts to registered charities and deductible gift recipients are excluded. Distributions to other income tax-exempt entities such as sporting clubs are also excluded, up to a cap that has not been settled yet. Treasury estimates distributions from discretionary trusts to charities and deductible gift recipients accounted for less than 5 per cent of total charitable donations and bequests in 2024.
What is excluded
The exclusions carried through from the Budget announcement into this draft are charitable trusts, special disability trusts, complying superannuation entities, primary production income, certain income relating to vulnerable minors, deceased estates, and all discretionary testamentary trusts established for genuine testamentary purposes.
Testamentary trusts are the one worth flagging to families with estate planning in progress. The exclusion is written against trusts established for genuine testamentary purposes, which is a test, not a label.
What we are doing for clients between now and 1 July 2028
This is a draft. It is not law, and further tranches covering administrative and integrity arrangements are still to come. That is a reason to model, not a reason to wait, because the two dates that govern the decision are already fixed and the earlier one is 1 July 2027.
- List every trust in the group and mark which ones are inside the measure and which are already excluded. Primary production income and testamentary trusts take some groups out of the conversation entirely.
- For the trusts inside it, write down the last five years of distributions. That history is the honest test of whether the election is viable, because it shows how often the pattern actually changed.
- Check the deed. A deed drafted fifteen years ago may not accommodate a binding nomination of beneficiaries, and the deed has to work before the election is worth modelling.
- Model the election against restructuring on the same facts, including the stamp duty the restructure would trigger and the election is not expected to.
- If restructuring is the answer, plan it into the 2027-28 year rather than the 2028-29 year, so the relief is running and the tax is not.
If your group also has unpaid present entitlements owing to a corporate beneficiary, that is a separate question with its own timetable, and Treasury has confirmed the 2018 Budget measure on unpaid present entitlements will be progressed separately. We covered where that stands after the High Court decision in June here, in Chinese. The wider set of reforms landing between 2027 and 2028, and how they stack for mid-market family groups, is here, and the original Budget summary is here.
Submissions on the exposure draft close on 18 September 2026 and can be made through the Treasury consultation hub. Treasury has also published an address for questions about the materials.
Sources
- Treasury, Minimum tax on discretionary trusts, exposure draft legislation, consultation opened 3 September 2026, submissions close 18 September 2026.
- Treasury, Minimum tax on discretionary trusts, exposure draft legislation explainer, published with the 3 September 2026 consultation.
- The Hon Dr Jim Chalmers MP, Treasurer, Exposure draft legislation, Minimum tax on discretionary trusts, media release, 3 September 2026.
- Treasury, Capital Gains Tax and Discretionary Trusts Reform, Small business explainer, 18 June 2026.
All figures retrieved 11 September 2026. The figure of roughly 210,000 businesses is our subtraction of two Treasury figures and is labelled as such in the text. The exposure draft is not law and its terms may change before it is enacted. This article is general information and does not take your circumstances into account.
Wiselink Accountants works with family businesses and their owners in Melbourne and Brisbane, in English and Chinese. Lily Zhang is a CPA and registered tax agent, and the firm has been advising Australian small businesses since 2013.
