Budget 2026: What Family Trust Holders Need to Know About the Proposed 30% Minimum Tax

One of the most significant announcements in the 2026 Federal Budget — and for many small business owners, one of the most concerning — was the proposed introduction of a 30% minimum tax on discretionary trusts. If you operate a business through a family trust, or hold investments in one, this announcement has direct implications for how your income will be taxed from 2028 onwards.

Here is what was announced, what it means, and — importantly — why the right response right now is to understand the proposal, not to act on it.

What was announced?

From 1 July 2028, the Government proposes that trustees of discretionary trusts will pay a minimum tax of 30% on the taxable income of the trust. Non-corporate beneficiaries — that is, individual people — will receive non-refundable tax credits for the tax paid by the trustee. This means the income is not taxed twice: you receive a credit that reduces your personal tax liability to reflect the amount the trust already paid.

The intent is to ensure that income distributed through discretionary trusts attracts at least a 30% tax rate, rather than being distributed to lower-income beneficiaries who might otherwise pay significantly less. It is, in essence, a floor on the effective tax rate for discretionary trust income.

What types of trusts are not affected?

Not all trusts are captured by this measure. The minimum tax will not apply to fixed trusts, widely held trusts, complying superannuation funds, special disability trusts, deceased estates, or charitable trusts. Certain types of income are also excluded from the minimum tax, including primary production income, certain income relating to vulnerable minors, amounts subject to non-resident withholding tax, and income from assets of discretionary testamentary trusts that existed before the Budget announcement.

What about restructuring?

The Government has also announced a three-year rollover relief period for those who wish to restructure out of a discretionary trust into another entity type — such as a company or a fixed trust. This window is expected to open from 1 July 2027, running through to 30 June 2030. It is designed to give business owners time to consider their options without triggering immediate capital gains tax consequences on the restructure itself.

Why you should wait before making any decisions

This is a Budget announcement — not legislation. The proposal still needs to go through Parliament, be drafted into law, and receive Royal Assent before it has any legal effect. That process takes time, and the details can change.

Budget announcements sometimes look quite different by the time they become law. The boundaries of what is and is not captured, the exact mechanics of the non-refundable credits, the scope of the rollover relief, and any exemptions may all shift during the consultation and drafting process.

Making structural decisions — changing your trust deed, shifting assets, or restructuring your business — based solely on a Budget announcement carries real risk. You could incur costs and tax consequences based on rules that are subsequently modified.

The appropriate response at this stage is to be informed, note the proposed implementation date of 1 July 2028, and begin having preliminary conversations with your accountant about how this might affect your situation. Any concrete planning decisions should wait until the legislation is released and the final parameters are clear.

Get in touch with us to understand how this proposal might affect your arrangements — but hold off on any restructuring decisions until the legislation is released and the rules are confirmed.