Australia proposes 30% minimum tax on discretionary trusts

Trustees would pay a top-up to 30%

The Treasury Laws Amendment (Tax Reform No. 3) Bill 2026 would insert the core minimum-tax rules into Australia's income-tax law. Its companion rates bill would add section 12AB to the Income Tax Rates Act 1986. The proposed rate is the shortfall between tax otherwise payable by the trustee on minimum-tax income and 30%; it is nil where that existing trustee rate is at least 30%. The measure would apply for income years starting on or after 1 July 2028.^[1][2][5][6]

The trustee would pay the minimum tax and non-corporate beneficiaries would receive non-refundable offsets for attributable trustee tax. Proposed exclusions cover fixed, charitable and special-disability trusts, superannuation funds, deceased estates and genuine discretionary testamentary trusts. Primary-production income, certain income relating to vulnerable minors, and qualifying distributions to charities, deductible-gift recipients and other exempt bodies also receive specified protection. The exact conditions remain subject to Parliament's consideration of the bills.^[1][3][4]

Two transition routes are proposed

Schedules 2 and 3 offer alternative routes for existing structures. Expanded roll-over relief would be available for three years from 1 July 2027 for taxpayers restructuring from a discretionary trust into another arrangement, such as a company or fixed trust. Existing trusts could instead elect in 2028–29 to nominate beneficiaries and distribution proportions. The election is intended to preserve the trust's discretionary powers and avoid a formal restructure, while groups should separately test any state or territory duty consequences.^[1][3][4]

The package extends beyond trust minimum tax

Schedule 4 addresses how the revised capital-gains rules operate for more complex arrangements, including trust structures. Schedule 5 defines a new residential dwelling and proposes exceptions from the negative-gearing limits for affordable and public housing, specialist-disability accommodation, retirement villages, residential aged care and build-to-rent projects. Schedule 6 provides transitional relief where the first year of payday super causes excess concessional contributions.^[1][3]

Businesses and family groups using Australian discretionary trusts should identify income potentially within the proposed minimum-tax base, test exclusions and compare the elective regime with restructuring relief. Cross-border groups should also map corporate-beneficiary and non-resident trustee interactions under existing Division 6 rules. Implementation planning should retain proposal status until both bills complete Parliament and receive Royal Assent.^[1][2][4][5]