30% Trust Tax: What Trustees Need to Know 

The proposed 30% minimum tax on discretionary trusts has created uncertainty for many Australian families and business owners. However, the draft legislation also provides potential alternatives, including fixed trust elections and restructuring relief.

Before making any major decisions, it is important to understand how the proposed rules may apply to your circumstances and what options may be available.

For generations, discretionary trusts have been a cornerstone of Australian family wealth, business ownership, and investment planning. They have provided flexibility, supported succession planning, and helped families respond to changing circumstances and opportunities.

That is why the Federal Government’s proposed Minimum Tax on Discretionary Trusts has attracted so much attention. The exposure draft proposes a 30% minimum tax for many discretionary trusts from 1 July 2028, together with alternative pathways, including an election regime and transitional restructuring relief.

The headlines have understandably created uncertainty. However, the legislation is still in draft form. Even if it proceeds substantially as proposed, families and business owners will have options. At YML Group, we believe this is not a time for panic. It is a time to understand your position and plan ahead.

What is being proposed?

Under the draft rules, the trustee of an affected discretionary trust would generally pay a minimum 30% tax on trust income. Non-corporate beneficiaries may receive a non-refundable tax offset, while corporate beneficiaries would generally not receive that offset.

Importantly, not every trust would be affected. The draft excludes various structures and income categories, including fixed trusts, deceased estates, complying superannuation entities, special disability trusts, qualifying primary production income, and certain testamentary trust arrangements. It also proposes a broader definition of a fixed trust, which may place some existing arrangements outside the new regime.

Every family group is different. The potential impact will depend on the trust deed, the assets and income involved, the beneficiary structure, and the family’s long-term objectives.

Three potential pathways

Option 1: Continue with the existing structure

For some families, the impact may be limited. Certain income streams are excluded from the minimum tax calculation, and some existing arrangements may continue to deliver acceptable outcomes. The focus may simply be on understanding the future tax cost and managing it appropriately.

Option 2: Elect into a more fixed structure

The draft introduces an Excluded Election Trust regime. Eligible trusts existing on 1 July 2028 could nominate beneficiaries and fixed proportions of income and capital. If the conditions are met, the trust would not be subject to the minimum tax.

This may provide greater certainty without transferring assets or undertaking a large-scale restructure. The accompanying fact sheet indicates that the election is intended as an alternative to restructuring and is not expected to trigger state stamp duties.

Option 3: Restructure

The Government has also proposed a dedicated roll-over relief regime. Subject to eligibility requirements, affected discretionary trusts could transfer assets to alternative structures, such as companies or fixed trusts, during a three-year transition period from 1 July 2027 to 30 June 2030 without immediate income tax consequences.

For some families, this may be an opportunity to review structures established many years ago and determine whether they still support current business, investment, asset-protection, and succession objectives.

Every trust has a different purpose

Trusts are often discussed as though they are all the same. They are not. Some hold operating businesses. Others hold investment portfolios or property accumulated over decades. Some form part of complex succession arrangements involving several generations.

That is why no article, government announcement, or social media post can determine what your trust should do. The right approach starts with understanding:

• Your family and business objectives
• Your succession plans
• Your asset-protection requirements
• Your tax profile
• Your future growth strategy
• Your appetite for restructuring

Only then can the available pathways be assessed properly.

Why planning now matters

Trust advisory is not new to YML Group. We work with family groups, business owners, and investors through tax reform, succession events, restructures, and changing regulatory requirements. The proposed minimum trust tax is a significant development, but it is not an unsolvable problem.

The draft itself recognises that families need choices through elections, restructuring relief, and expanded fixed-trust rules. The families best positioned will not necessarily be those who react first. They will be those who understand their current structure, objectives, and available options before making a decision.

Our recommendation

Do not make major decisions based solely on headlines. Do not assume your structure is affected, and do not assume it is not. Use the period before the proposed commencement date to understand where you stand.

YML Group can help clients:

• Assess exposure to the proposed rules
• Review trust deeds and beneficiary classes
• Evaluate Excluded Election Trust opportunities
• Analyse restructuring pathways
• Consider family trust election interactions
• Model future tax outcomes
• Develop succession and governance strategies for the next generation

The rules may change, and the legislation may evolve. What will not change is the value of clear, considered advice.

How can YML help?

Talk to our YML Chartered Accountants team today to see how YML Group can help you assess the potential impact of the proposed rules, review your trust structure, and consider the available planning pathways. For more information,  view our website and contact us on (02) 8383 4400 or by using our Contact Us page on our website