The Australian government introduced a proposed 30% minimum tax on discretionary trusts in the 2026–27 Budget, announced on 01/07/2026. As of 01/09/2026, this measure faces growing opposition from business groups and tax experts who warn of adverse effects on small enterprises and family wealth planning.

Understanding the Proposal

Discretionary trusts currently offer flexibility in distributing income to beneficiaries to minimise tax. The new rule would impose a 30% floor on taxable trust income, altering how trustees allocate distributions and potentially increasing overall liabilities.

Impacts on Trust Income, Distributions and Beneficiaries

Beneficiaries in lower tax brackets may face higher effective rates, leading to larger tax bills or reduced refunds. Trustees might need to reorganise distribution strategies to optimise outcomes under the revised framework, affecting cash flow for individuals and small business owners.

Comparison with Current Rules

Existing legislation allows income splitting without a minimum rate, providing significant tax planning advantages. The proposed change aligns more closely with flat corporate rates but removes much of the discretionary benefit.

Modelling Scenarios with Online Calculators

Australian taxpayers can use ATO-endorsed online tax calculators and specialist trust modelling tools to simulate 2026–27 and future income years. Enter projected trust income, beneficiary details and distribution amounts to estimate revised tax liabilities, potential refunds or additional payments.

Practical Steps for Reviewing Trust Structures

  • Analyse your current trust deed and historical distributions.
  • Consult a qualified tax advisor before 15/10/2026 consultation deadline.
  • Model multiple scenarios incorporating the 30% minimum.
  • Document all planning decisions for ATO compliance.

Key Developments and Deadlines

Public consultations remain open until 15/10/2026, with possible amendments expected by 30/11/2026. Monitor Treasury updates for refinements to the policy.

Compliance Risks and ATO Actions

The ATO continues its shadow economy crackdown, with recent enforcement highlighting penalties for trust misuse. Non-compliance could trigger audits, back taxes and fines.

Maximising Calculator Accuracy

Factor in related reforms such as CGT changes and loss treatment rules. Use precise figures, update software for 2026–27 rates and cross-check beneficiary marginal rates. Avoid rounding errors and verify all inputs against official ATO guidance.

By preparing early with accurate modelling, individuals and small business owners can mitigate risks and adapt trust arrangements effectively.