Key Highlights

  • Unit trusts used for property joint ventures and family businesses could find their tax status redrawn under the draft law for the government's 30% minimum tax on discretionary trusts.
  • The tax law treats fixed and non-fixed trusts differently in a range of places.
  • Practitioners have long found that test hard for many ordinary commercial unit trusts to meet, because trust deeds commonly include powers, such as powers to issue or redeem units, that can affect unitholders' interests.
  • According to Robyn Jacobson of the National Tax & Accountants' Association (NTAA), the draft would replace the "vested and indefeasible" test with a test based on whether the trust has "material discretionary elements".

Unit trusts used for property joint ventures and family businesses could find their tax status redrawn under the draft law for the government's 30% minimum tax on discretionary trusts. Buried in the exposure draft released on 3 September 2026 is a new test for what counts as a "fixed trust", and advisers are divided on its effect. With the first tranche of legislation expected in Parliament in the sitting from 12 October, unit holders have reason to pay attention.

Why 'fixed' Status Matters

The tax law treats fixed and non-fixed trusts differently in a range of places. The current definition, in section 272-65 of Schedule 2F to the Income Tax Assessment Act 1936, turns on whether beneficiaries have fixed entitlements to all of the trust's income and capital, which in turn depends on whether their interests are "vested and indefeasible".

Practitioners have long found that test hard for many ordinary commercial unit trusts to meet, because trust deeds commonly include powers, such as powers to issue or redeem units, that can affect unitholders' interests.

The stakes are now higher. The proposed minimum tax, which would apply from 1 July 2028, is aimed at discretionary trusts. Whether a unit trust counts as fixed could help decide whether it sits inside or outside the new regime, as well as how it is treated under other rules that rely on the same definition.

What the Exposure Draft Would Change

According to Robyn Jacobson of the National Tax & Accountants' Association (NTAA), the draft would replace the "vested and indefeasible" test with a test based on whether the trust has "material discretionary elements".

Importantly, she notes the new definition would apply across the entire income tax law, not just to the minimum tax. A change designed for one measure could therefore flow through to other provisions that currently depend on fixed trust status.

The draft package released by Treasury on 3 September comprised four bills: the minimum tax, imposition, roll-over and election bills. It is an exposure draft only. Consultation closed on 18 September and no bill had been introduced as at 11 October.

The Optimistic Reading

Pitcher Partners, in its analysis of the drafts on 3 September, said the new definition "expands the definition of a fixed trust to allow more commercial trust structures, including many unit trusts".

On that view, trusts with no material discretionary elements affecting beneficiaries' rights may qualify as fixed, even if they would struggle under the current test. Pitcher also noted that managed investment trusts, attribution managed investment trusts and widely held trusts are not intended to be captured by the minimum tax.

For a unit trust whose deed gives the trustee little real room to shift value between unitholders, that could mean more certainty than it has today.

The NTAA's Warning

Jacobson is less sanguine. The NTAA, which says it represents more than 45,000 practitioners, has argued the trust tax measures should not proceed in their current form. Her concern is that under the proposed test, the mere existence of a power to issue or redeem units could be enough to deny fixed trust status, even if the power has never been used.