Highlights

  • The draft would apply a 30% minimum tax to certain discretionary trusts from July 2028.
  • Six important classification and eligibility matters could be set through legislative instruments.
  • Trustees may face difficult restructuring or election decisions before every boundary is settled.
  • The proposal remains draft law and may change before Parliament considers a bill.

For trustees, the biggest uncertainty in Australia’s proposed trust tax may not be the 30% rate. It may be the rules that are still missing. Draft legislation released in September sketches the new minimum-tax regime, but several decisions about who falls inside it could be made later through ministerial instruments. That creates a planning problem: families and small businesses may need to choose a pathway before every boundary is fixed.

The Draft Sets the Framework, Not Every Boundary

The proposed minimum tax is not yet law. The exposure draft targets certain discretionary trusts from 1 July 2028, while a three-year restructuring relief window is proposed from 1 July 2027. It also offers an alternative election under which a trust could make fixed distributions to pre-nominated beneficiaries rather than restructure. Charitable trusts, special disability trusts, super funds, deceased estates and discretionary testamentary trusts are among the proposed exclusions.

Why the Ministerial Powers Matter

Accountants have highlighted six substantive matters that the draft leaves to legislative instruments. These include powers affecting which trusts are excluded, what discretionary elements prevent a trust being treated as fixed, and aspects of eligibility for elections and roll-over relief. Legislative instruments still face parliamentary oversight and can be disallowed, but they are not enacted through the same full bill process. For trustees, the practical concern is certainty: a classification rule can determine whether the 30% floor applies at all.

The Election Could Be a One-Way Door

The alternative election may avoid a restructure, but the source material describes it as highly restrictive. Once a trust chooses the pathway, revocation may prevent the election from being made again, while changes to nominated beneficiaries are limited. A trust using the election would also lose access to the proposed roll-over relief. That makes early decisions potentially difficult to unwind if later instruments alter eligibility tests.

A Non-Refundable Offset Adds Another Calculation

The draft also uses a non-refundable minimum-tax offset for beneficiaries. That matters where a beneficiary’s ordinary tax liability is lower than the minimum tax already paid. Any unusable offset may not produce a cash refund, which can make distributions to lower-income beneficiaries less efficient than the headline 30% mechanism suggests.

What Trustees Should Watch Next

The next meaningful milestone is the introduction of a bill. Trustees should watch whether key tests move into primary legislation, whether draft instruments are released before a parliamentary vote, and whether the election mechanics change. Until then, restructuring decisions based solely on the exposure draft carry legislative risk.

Planning Risk Before the Rules Settle

Trustees should also separate decisions that are reversible from those that are not. Updating records, identifying beneficiaries and modelling tax outcomes can be done now without committing to a structure. Executing a restructure or making a restrictive election is different. Advisers will need to compare income-tax effects with state duties, asset-protection objectives, succession plans and administration costs. A rule designed to create a minimum tax can therefore influence much more than the annual tax bill. The closer a decision is to being irreversible, the stronger the case for waiting for final legislation and instruments where timing permits.