As part of the 2026–27 Federal Budget, the Government announced on 12 May 2026 that it will introduce a 30% minimum tax on discretionary trusts from 1 July 2028. This measure is not yet law — exposure draft legislation was released for consultation, with submissions open until 18 September 2026.

The minimum tax applies at the trustee level. Where a non-corporate beneficiary is presently entitled to a share of the trust's net income, they'll be able to claim a non-refundable tax offset for the tax the trustee has already paid on that income, so it isn't taxed twice.

What's Excluded

A range of trusts sit outside the minimum tax altogether: charitable trusts, special disability trusts, complying superannuation entities, deceased estates, and discretionary testamentary trusts established for genuine testamentary purposes. Primary production income and certain income relating to vulnerable minors are also excluded.

Taken together, the Government expects more than 95% of individual taxfilers and more than 90% of Australia's 2.7 million active small businesses to be unaffected by these changes in any given year.

The Election Option

As an alternative to restructuring, trustees of discretionary trusts that exist at 1 July 2028 will be able to elect into a new regime instead of the minimum tax applying. Under this election, the trust commits to fixed distributions to pre-nominated beneficiaries — individuals, companies or other trusts, with no cap on how many can be nominated.

The election doesn't require a restructure and isn't expected to trigger state or territory stamp duty. Nominated beneficiaries can generally only be changed later if one passes away or there's a family breakdown. The election stays in place until the trustee revokes it, or it's automatically revoked because a distribution was made inconsistent with it — in which case the trustee is taxed at the top marginal rate plus the Medicare levy for that year, with the minimum tax applying from the following year.

Rollover Relief and Other Protections

Trustees who want to restructure out of a discretionary trust entirely — into a company or a fixed trust, for example — will have access to time-limited roll-over relief for three years from 1 July 2027, covering income tax consequences including capital gains tax.

Charitable trusts and distributions to registered charities and deductible gift recipients are excluded from the minimum tax entirely, extending to other income-tax-exempt entities such as sporting clubs up to a cap still being finalised. Once a trustee has offset its income tax liability, any remaining franking credits linked to income subject to the minimum tax can still be refunded.

Key Facts at a Glance

Figures are current as at the release of the exposure draft legislation and may change before the measure is finalised.

Sources & References

• Australian Taxation Office: Tax reform – introducing a minimum tax on discretionary trusts — last updated 3 September 2026
• The Treasury (Australian Government): Minimum tax on discretionary trusts — exposure draft legislation explainer