September 15, 2026

The 30% Minimum Tax on Family Trusts: What’s Changed in the Draft Rules (And What to Do Next)

Article Summary:

On 3 September 2026, the Government released draft rules for a new 30% minimum tax on discretionary (family) trusts, first announced in the 2026-27 Federal Budget. These are proposed changes, not yet law — submissions close 18 September 2026, and the tax is proposed to start from 1 July 2028. This article walks through what’s actually changing, the new election option, why bucket companies face a particularly steep cost, and what the planning window looks like for your trust.

What’s Actually Changing

The core idea hasn’t changed since the Budget announcement: from 1 July 2028, trustees of affected trusts will pay a 30% minimum tax on the trust’s income, and beneficiaries will generally get a credit for their share of that tax (though not a refund).

What’s new is a set of changes that make the rules considerably more workable than the original proposal. The draft settles much of how the regime will operate, though some practical details — including exactly how and when the tax will be collected — are still to be worked out. The direction is much clearer now, which means there are things worth thinking about ahead of time, even with two years before the measure actually starts.

Four Changes That Make the Draft Rules More Workable

1. A new election option

Existing trusts may be able to elect into the rules without going through a full restructure, by locking in how income and capital will be split among beneficiaries. This gives family groups a middle path — keeping the trust structure while trading some future flexibility for certainty on tax treatment.

2. Franking credit refunds

Trustees can now use franking credits (the tax credit attached to company dividends) to help pay the minimum tax, with any leftover amount refunded rather than wasted. This is a meaningful improvement on the original proposal, where credits could otherwise have gone to waste.

3. Expanded rollover relief

A three-year window — 1 July 2027 to 30 June 2030 — will allow assets to move out of a discretionary trust into a company, fixed trust or individual, without triggering the minimum tax. This gives family groups genuine time to restructure if that’s the right call, rather than a rushed transition right before the rules start.

4. Clearer exclusions

Fixed trusts, special disability trusts, super funds, deceased estates, primary production income, and donations to charities all remain outside these rules. If your trust or income falls into one of these categories, the minimum tax isn’t something you need to plan around.

Bucket Companies Face a Steep Cost

This is the detail worth paying closest attention to if your trust distributes to a company beneficiary (commonly called a “bucket company”). Because the 30% tax paid by the trust can’t be passed on as a credit to a company beneficiary, distributing profits this way could mean an effective tax rate of around 55-60% before the company even pays a dividend to its shareholders.

For a family business in North Queensland running profits through a bucket company — a trades business in Townsville, say, or a cane farming operation using a company beneficiary to manage tax on a strong season — that’s a very different outcome to what the structure currently delivers. This makes the new election, or restructuring early using the rollover relief window, worth genuine consideration for any trust using this arrangement.

If Restructuring is the Right Call

For business owners who decide a company structure makes more sense going forward, the rollover relief window means restructuring doesn’t have to trigger an immediate CGT (Capital Gains Tax) bill — provided it happens within the 1 July 2027 to 30 June 2030 window. It’s not automatic, though: eligibility requirements, the practical mechanics of the move, and state duty implications (which aren’t covered by this federal measure) all need checking against your specific situation.

In Short: What to Do With Your Planning Window

Nothing needs to happen today. But if you run a family or business trust — particularly one that distributes to a company — now is a good time to start thinking about your options, given the election and rollover relief windows both have real dates attached. Submissions on the draft rules close 18 September 2026, so the detail may still shift before it’s locked in.

Whether you’re weighing up the new election, considering a restructure, or simply want to understand how the exclusions apply to your trust, this is a conversation worth having well before 1 July 2028 rather than in the run-up to it.

Staying Ahead of the Detail

This is still draft legislation, so some detail may still change before it’s introduced into Parliament. Updates will follow as the situation develops — in the meantime, getting your questions answered now means you’re ready to act as soon as the final rules land.

Want to Talk Through What This Means for Your Trust?

Whether it’s the new election, the rollover relief window, or simply understanding where your trust sits under the exclusions, our Strategic Accounting and Business Advisory teams can talk you through your options. Get in touch with your Cosca adviser or reach out to your nearest office across North Queensland and South East Queensland.

FAQs

Does the 30% minimum tax apply to my trust this financial year?

No. It’s proposed to start from 1 July 2028, and the rules are still in draft form, with submissions open until 18 September 2026

What happens if my trust distributes to a bucket company?

Because the trust’s 30% tax can’t be passed on as a credit to a company beneficiary, the effective tax rate before the company pays a dividend could sit around 55-60%. This is worth reviewing with your adviser well ahead of 2028.

Can I use the new election instead of restructuring?

Potentially. The election lets existing trusts opt into the rules by locking in how income and capital are split among beneficiaries, without a full restructure — though it does trade away some future flexibility.

What if I want to move my trust’s assets into a company?

The draft rules propose a three-year rollover relief window, from 1 July 2027 to 30 June 2030, allowing assets to move out of a discretionary trust into a company, fixed trust or individual without triggering the minimum tax.

Is my trust automatically excluded from these rules?

It may be. Fixed trusts, special disability trusts, super funds, deceased estates, primary production income, and charitable donations are all proposed to remain outside the regime.

What can I do right now, given the rules aren’t final?

Nothing urgent — but it’s a good time to understand how the rules could affect your trust and start the conversation with your adviser, since the election and rollover windows both have fixed dates attached.