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Australian discretionary trust tax policy changes

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What changed

2026-10-04 22:03 UTC → 2026-10-15 19:42 UTC · added ~~removed~~

The Australian Labor government is advancing a proposed taxation regime for discretionary trusts, scheduled to begin on 1 July 2028. The framework includes a 30 per cent minimum tax on certain income to prevent income-splitting, though primary production earnings within family business trusts remain exempt. To provide flexibility, the government has proposed an elective payment regime allowing fixed distributions to pre-nominated beneficiaries and a time-limited restructure rollover starting 1 July 2027. Recent draft regulations have introduced complexities regarding franking credits. Trustees of minimum tax trusts will be required to use these credits to offset their own tax liability at the trust level, rather than streaming them to beneficiaries. This shift has created immediate administrative pressure for accounting firms, which must now model potential outcomes by reviewing trust deeds and historical distributions. Concerns have ~~also emerged~~ intensified regarding the interaction between these federal reforms and state-level laws. CPA Australia has contacted state and territory treasurers to seek certainty on whether restructuring trusts will trigger additional state transfer duty liabilities. Legal experts suggest that for agricultural businesses, transfer duty on land or other dutiable assets could become a significant cost. CPA Australia estimates that professional advice costs for the approximately 850,000 discretionary trusts facing restructuring decisions could reach between $2 billion and $2.8 billion. Following the introduction of legislation by Treasurer Jim Chalmers, the Coalition and various business groups have criticized the proposal for its complexity. In response to fears regarding state-level costs, New South Wales Treasurer Daniel Mookhey pledged that a re-elected Labor government would shield businesses using the Excluded Election Trust arrangement from relevant state stamp duties to provide certainty. However, tax experts remain concerned that the short consultation period may leave specific issues, such as quarterly tax instalments and reporting liabilities, unaddressed.

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