Family Trust Tax Changes in Australia: The 30% Minimum Tax
In Australia, the main family trust tax change is a proposed 30% minimum tax on discretionary trust income from 1 July 2028, paid by the trustee. Individual beneficiaries get a matching 30% offset, so anyone already taxed at 30% or more pays the same as now, while low-income beneficiaries and bucket companies pay more. It is not law: draft legislation was released in September 2026.
If your business runs through a family trust and the trustee distributes to family members or a bucket company each June, the family trust tax changes in Australia are about one thing: a proposed 30% minimum tax that the trustee pays on trust income from 1 July 2028. For distributions to adults already in the 30% bracket, it changes almost nothing. For distributions to a student, a non-working spouse or a company, it changes the arithmetic completely.
Nothing changes for the 2026-27 or 2027-28 years. The proposed roll-over, which relieves income tax and capital gains tax on moving the trust’s assets into a company or fixed trust, runs only from 1 July 2027 to 30 June 2030. A restructure done before 1 July 2027 in reaction to the announcement falls outside it.
The minimum tax is a proposal. Treasury released exposure draft legislation on 3 September 2026 and consultation closed on 18 September. As at 12 October 2026 no bill is before Parliament, and the details below can still change. The dates are in where the law stands.
How the 30% minimum tax works
Under the draft law, the trustee pays tax of at least 30% on the trust’s net income for income years starting on or after 1 July 2028. Beneficiaries who are individuals still include their share in their own returns, and each claims a tax offset of 30% of that share, matching what the trustee paid. Company beneficiaries get no offset.
Today, the trustee of a family trust usually pays nothing. The beneficiaries are taxed on their shares at their own rates, and only income no beneficiary is entitled to is taxed in the trustee’s hands, at 47%. How family trusts are taxed now is the baseline the minimum tax is built on. It puts a floor under that system rather than replacing it.
The 30% works as a top-up. Where the trustee already pays tax at 30% or more on some income, the minimum tax adds nothing to it. Where the trustee pays less, it tops the rate up to 30%. Income left unallocated, already taxed at 47%, is untouched.
Franked dividends work through the trustee too. The trustee uses the franking credits to pay the minimum tax, and any franking credits left over are refunded to the trustee.
The offset is non-refundable, and that single word decides who pays more. If a beneficiary’s own tax on their share is 30% or more, the offset covers the trustee’s tax and they pay the rest as now. If their own tax is lower, the offset wipes out their tax on the share and the excess is lost.
Who pays more, and by how much
The minimum tax costs money only where trust income is currently taxed below 30%. For individuals, that means the part of a beneficiary’s taxable income up to $45,000, because the 30% bracket starts at $45,001. For companies, it means every dollar, because companies get no offset.
The figures below use the 2026-27 resident tax rates, the latest the ATO has published, before the Medicare levy and offsets. The rates for 2028-29 are not yet set.
The same $40,000 sent to a beneficiary already earning $150,000 lands entirely in the 37% bracket. Today that beneficiary pays $14,800 on it. Under the minimum tax the trustee pays $12,000, the beneficiary’s offset covers $12,000 of their $14,800, and they pay the remaining $2,800. The total is $14,800 either way.
Bucket companies
A company beneficiary gets no offset and is still taxed on its full share. If the trustee distributes $100,000 to a bucket company, the trustee pays $30,000 and the company then pays company tax on the whole $100,000: $25,000 if it is a base rate entity, $30,000 if not. That is $55,000 to $60,000 in tax before any dividend reaches a shareholder, against $25,000 to $30,000 today. The Budget’s trust minimum tax explainer states the purpose plainly: the design means the minimum tax “cannot be avoided by cycling income through a ‘bucket’ company”. For families who set up a bucket company to cap tax on trust income at the company rate, this is the largest change in the package.
Children
Ordinary distributions to children under 18 are not excluded. The draft carves out only a minor’s share where the child has a disability, receives a carer allowance, disability support pension or double orphan pension, or where the income comes from compensation, a super death benefit or property transferred after a family breakdown. Most other trust income going to a minor is already taxed at the under-18 penalty rates, which at 2025-26 rates take 45% of the whole amount once it passes $1,307, so the minimum tax changes little there.
Treasury’s own estimate is that around 350,000 active small businesses operated through a discretionary trust in 2022-23, and that around 140,000 of them are not expected to pay more tax or need to restructure in any given year.
Which trusts and income are outside it
The minimum tax applies to discretionary trusts, which is what most family trusts are: the trustee decides each year who gets what. Trusts where beneficiaries have fixed entitlements are outside it, along with several kinds of trust that have their own tax regimes.
These trusts are excluded:
- fixed trusts, under a new and broader definition: a trust with no material discretionary elements in its beneficiaries’ entitlements
- widely held trusts and managed investment trusts
- complying super funds, including self-managed super funds
- special disability trusts
- deceased estates
- charitable trusts and other tax-exempt trusts
- bare trusts, such as solicitor and accountant trust accounts
Inside a discretionary trust, some income is excluded as well:
- primary production income
- the minors’ income described above
- distributions to registered charities and deductible gift recipients
- distributions to other tax-exempt bodies such as sporting clubs, up to a cap that has not been set
- amounts subject to non-resident withholding tax
- income of a testamentary trust set up under a will for genuine testamentary purposes
The testamentary trust exclusion has two limits. Income from property added to the trust after Budget night, 12 May 2026, that did not come from the deceased estate is caught. A testamentary trust set up on or after 1 July 2028 stays excluded only if its beneficiaries are individuals or tax-exempt bodies.
Whether a unit trust counts as fixed under the new definition will turn on its deed, so the deed is the first document to read.
The three paths: pay, elect or restructure
From 2028-29, a trustee whose trust is caught has three options: keep the trust as it is and pay the minimum tax, make a one-off election that fixes who gets what, or move the assets into a company or fixed trust under the roll-over. The election and the roll-over are mutually exclusive.
- Full discretion over distributions each year
- No cost on shares to beneficiaries taxed at 30% or more
- Costs more on low-income and company beneficiaries
- Made once, in 2028-29 only
- Fixed shares to nominated beneficiaries every year
- No restructure, and Treasury expects no stamp duty
- Departing from the shares means a 47% year
- Roll-over from 1 July 2027 to 30 June 2030
- Relief from income tax, including CGT
- All the trust's assets move to a company or fixed trust
- Done in 2027-28, no minimum tax at all
Keep the trust and pay it
The trustee keeps full discretion over who receives income each year. Shares going to beneficiaries already taxed at 30% or more cost nothing extra. What changes is the value of distributing to lower-income family members or a company, as the examples above show.
Make the election
The draft calls it an excluded election trust election, and it is a way out of the minimum tax without moving any assets. The conditions are strict:
- the trust must exist on 1 July 2028, and the election can be made only in the 2028-29 income year, once
- the trustee notifies the ATO by the earlier of the 2028-29 trust return’s due date and the day it is lodged
- the trustee nominates beneficiaries and a fixed share for each, with income and capital in the same proportions and the shares adding to 100%
- nominated beneficiaries must be able to benefit under the deed as it stands on 1 July 2028, and can include companies and other trusts that existed then, but not super funds or partnerships
- every year, the trustee distributes exactly those shares to exactly those beneficiaries
- the nomination changes only if a nominated beneficiary dies or there is a family breakdown
Treasury’s fact sheet says the election “would not require a restructure and is not expected to result in state and territory stamp duties”. The cost is in revocation. Any distribution that departs from the nominated shares revokes the election automatically, and in that year the trustee is taxed on the trust’s income at the highest marginal rate plus Medicare levy, currently 47%, with the minimum tax applying in every year after.
Restructure with the roll-over
The roll-over relieves the income tax consequences, including capital gains tax, of moving assets out of a discretionary trust into a company or a fixed trust, between 1 July 2027 and 30 June 2030. It is built for a full restructure: all the assets required to be moved have to move within the window, with a partial exception for primary production assets. The new entity takes over the trust’s tax cost for each asset, and the people who own it afterwards have to line up with the people who could benefit from the trust before. With a restructure finished in 2027-28, the trustee never pays the minimum tax.
The roll-over covers federal income tax only. Stamp duty on transferring assets is a state matter outside it. A company or fixed trust also has its own annual return and running costs, which belong in the comparison with what the minimum tax would cost. What a trust tax return costs is part of that sum on the trust side.
No path is right by default. It turns on who the beneficiaries are and what they earn, how stable the split between them is, what assets the trust holds, and what the deed allows.
Where the law stands
The minimum tax was announced in the 2026-27 Budget and has reached exposure draft stage. Treasury’s exposure draft legislation covers four draft bills: the minimum tax itself, the rate, the roll-over and the election.
A 30% minimum tax on discretionary trusts from 1 July 2028, with a three-year roll-over from 1 July 2027.
Treasury asked for feedback on the design, including an option to elect out without restructuring.
Draft bills for the minimum tax, the rate, the roll-over and the new election, with explanatory materials.
Submissions on the draft bills closed.
No bill introduced. Rules on collection, notifying beneficiaries and administration are still to come in later legislation.
The ATO’s page on the minimum tax on discretionary trusts says “This measure is not yet law”. The draft can change before a bill is introduced and again in Parliament, and this page will be updated as it moves.
What to do now
Nothing has to change for the 2026-27 or 2027-28 trust years. Distributions for those years are taxed under the current rules, and the roll-over window does not open until 1 July 2027.
The useful work now is knowing the numbers before the decision arrives:
- who receives distributions each year, and each beneficiary’s marginal rate
- how much goes to a bucket company
- whether any of the trust’s income is primary production income
- what the deed allows, including who can benefit and whether a fixed split is possible
- what assets the trust holds, since those are what a restructure would move
With those in hand, the cost of each path can be worked out for your trust rather than for an example. Tax advice is where that sum gets done, before the final law and the roll-over window set the timetable.
Quick answers
Is the 30% minimum tax on trusts law yet?
No. It was announced in the 2026-27 Budget, Treasury released exposure draft legislation on 3 September 2026, and consultation closed on 18 September. As at 12 October 2026 no bill has been introduced to Parliament, and the ATO's own page says the measure is not yet law.
When does the trust minimum tax start?
For trust income years starting on or after 1 July 2028, so 2028-29 is the first year affected. The roll-over for restructuring would run for three years from 1 July 2027, and the election to fix distributions would be made in 2028-29.
Will family trust beneficiaries be taxed twice?
Not individual beneficiaries. They claim a tax offset equal to 30% of their share, which matches what the trustee paid on it. The offset is non-refundable, so a beneficiary whose own tax on the share is less than 30% loses the difference.
What happens to bucket companies under the minimum tax?
A company beneficiary gets no offset and is still taxed on its full share. Trust income sent to a bucket company bears the trustee's 30% and then company tax of 25% or 30% on top, before any dividend is paid. Treasury says the design is meant to stop the minimum tax being avoided through bucket companies.
Can a family trust avoid the minimum tax without restructuring?
The draft offers an election, made once in 2028-29, where the trustee nominates beneficiaries and a fixed share for each, then distributes exactly those shares every year. Any departure revokes the election automatically: the trustee is taxed at the top marginal rate plus Medicare levy for that year, and the minimum tax applies from then on.