Australia’s Treasury has opened consultation on the 2026–27 Federal Budget measure imposing a 30% minimum tax on discretionary trust income, alongside a beneficiary tax offset and three years of rollover relief from 1 July 2027, with submissions due by 31 July 2026.
Australia has opened a consultation on the implementation of a proposed 30% minimum tax for discretionary trusts on 8 July 2026. The proposed 30% minimum tax for discretionary trusts is scheduled to take effect from 1 July 2028.
The proposal, announced in the 2026–27 Federal Budget, forms part of the government’s broader tax reform agenda aimed at improving the fairness and long-term sustainability of the tax system.
The reform aims to improve the tax system’s progressivity by preventing high-wealth individuals from using income splitting to access lower tax rates unavailable to standard wage earners. To facilitate this transition, the government plans to offer expanded rollover relief for three years starting in 2027, allowing businesses to restructure into different entities without immediate capital gains tax consequences.
The key provisions are:
30% minimum tax: Effective 1 July 2028, trustees of discretionary trusts will pay a minimum 30% tax on the trust’s taxable income. This measure aims to curb “income splitting” and align the tax rates of discretionary trusts with the typical tax rates paid by workers.
Beneficiary tax credits: Beneficiaries must still report trust distributions on their individual tax returns. However, eligible non-corporate beneficiaries (like individuals) will receive a non-refundable “minimum tax offset” equal to the tax paid by the trustee. This offsets their personal income tax liability, though it cannot be refunded, carried forward, or used to offset the Medicare levy. Corporate beneficiaries are ineligible to claim this offset.
Discretionary scope and exclusions: The tax applies exclusively to discretionary trusts. It explicitly excludes fixed trusts, widely held trusts, charitable trusts, complying superannuation funds, and deceased estates. Furthermore, the proposal exempts specific income categories, such as primary production income, certain income intended for vulnerable minors, and distributions subject to foreign resident withholding tax. The government is actively seeking feedback on how to appropriately handle distributions made to income tax-exempt entities.
Rollover relief: To facilitate restructuring before the commencement of the new regime, the government proposes expanded tax rollover relief for 3 years beginning on 1 July 2027. This relief is intended to allow trustees to transition to alternative business or investment structures without triggering immediate tax consequences
The consultation is set to conclude on 31 July 2026.
