In the 2026–27 Federal Budget, handed down on 12 May 2026, the Government announced a 30% minimum tax on discretionary trust income, due to start from 1 July 2028. For many families, it changes how distributions affect taxable income in Australia. It’s worth sitting down with a tax accountant in Laverton now rather than in a rush closer to the deadline. And if your trust holds property or shares, a CGT accountant can show you what changing your structure might actually cost.
What’s changing?
At the moment, a trust can share its income among family members, and each person pays tax at their own marginal rate. That’s why distributions to adult children at university or to a lower-earning partner have been so popular.
Under the proposal, the trustee would pay at least 30% on that income first. Beneficiaries on higher rates would then pay the rest through their own returns, plus the Medicare levy. The federal Budget factsheet says the aim is to bring trust income more in line with the tax paid on other income. Treasury estimates the measure will raise about $4.5 billion in 2029–30, its first year.
Who’s likely to feel it most?
If your beneficiaries already pay tax at 30% or more, things may not change much. The trustee just pays the first slice. Families who relied on spreading income to low earners will feel the biggest difference.
Here’s a simple example. Say a trust gives $60,000 to an adult child with no other income. Today, their tax-free threshold and lower rates would keep the bill fairly modest. Under a flat 30% minimum, the trustee would pay $18,000. That’s a big jump for a household budget.
Your options
There’s no one-size-fits-all answer, but most families will end up looking at a few main choices:
- Keep the trust as it is. It can still be useful for asset protection, estate planning and flexibility, even if the tax savings get smaller.
- Move income-producing assets into a company or another structure. This can make sense for some business owners, but it isn’t free.
- Wind the trust up completely if it no longer serves a clear purpose.
The catch is that moving assets can trigger capital gains tax and, depending on the state, stamp duty. In Victoria, transferring land usually means paying duty. That’s why it helps to have a CGT accountant work out the numbers before you decide anything. Industry commentary also suggests any restructure relief may only be available for a limited time, so it’s best not to leave it too late.
What not to do
The biggest mistake is reacting before the law is final. The measure was still going through Parliament as of October 2026, and the details could change. Other traps include:
- Looking only at this year’s tax bill instead of the next ten years
- Forgetting how distributions affect each person’s taxable income in Australia, including Centrelink, child support and HELP repayments
- Copying a friend’s approach when your family’s assets and goals are completely different
- Ignoring the trust deed, which may limit what the trustee is allowed to do
Planning your family trust tax options before 2028
The 30% minimum tax is a real change, but you’ve still got time to handle it calmly. Start by listing who receives distributions, what the trust owns and why you set it up in the first place. Then ask a tax accountant in Laverton to model how each option affects your family’s taxable income in Australia, both now and after July 2028. If moving assets is on the table, get a CGT accountant involved early so there are no surprises with capital gains or duty. A bit of homework now could save your family a lot of stress later on.
