Australian Tax Update | 28 October 2026

The Australian Government has announced significant changes to the taxation of discretionary trusts, commonly known as family trusts, in the 2026–27 Federal Budget.

The proposed reforms introduce a minimum 30% tax on discretionary trust income from 1 July 2028, potentially affecting family businesses, property investors and individuals who use trusts for income distribution and tax planning.

1. What Are the Key Changes?

Under the current system, income distributed by a discretionary trust is generally taxed at the individual beneficiary's applicable marginal tax rate.

The proposed changes introduce a minimum tax at the trustee level.

The reforms are progressing through the legislative process, and some implementation details may still change.

2. How Could This Affect Family Trusts?

The proposed minimum tax could reduce the tax benefits of distributing trust income to family members on lower marginal tax rates.

For example, a family trust distributing $100,000 of taxable income to an adult beneficiary may be subject to a minimum trustee-level tax of $30,000, before considering the beneficiary's final tax position and applicable credits.

The reforms do not mean that all beneficiaries will pay an additional 30% tax. Eligible individual beneficiaries will generally receive non-refundable credits for tax paid by the trustee.

3. Which Trusts May Be Exempt?

The Government has identified several exclusions, including fixed trusts, charitable trusts, special disability trusts, complying superannuation funds, deceased estates and genuine discretionary testamentary trusts.

Certain primary production income and qualifying distributions to charities are also intended to be exempt.

4. Restructuring Opportunities

To assist businesses and investors, the Government has proposed a three-year rollover relief period beginning 1 July 2027.

Eligible trusts may be able to restructure into companies or fixed trusts with relief from certain immediate income tax consequences.

The Government has also proposed an election allowing qualifying discretionary trusts to make fixed distributions to nominated beneficiaries as an alternative to restructuring.

Before making changes, trust owners should consider capital gains tax, stamp duty, asset protection, succession planning and existing finance arrangements.

5. What Should Trust Owners Do?

Family trust owners should review their current income distribution strategies, assess the potential impact of the proposed minimum tax and consider whether their existing structure remains appropriate for their business or investment objectives.

Professional advice is particularly important before transferring assets or changing trust arrangements.

How Suttie Financial Group Can Help

The 2026–27 Federal Budget changes may significantly impact the taxation and income distribution strategies of discretionary trusts. At Suttie Financial Group, our accounting, taxation, business advisory and mortgage broking services can help you understand the proposed reforms, review your existing trust structure, assess potential tax implications and explore suitable business and financing options to support your long-term financial goals.

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E: enquiries@respl.com.au