Key Highlights

  • Asset protection, succession planning and risk management remain reasons to retain them.
  • Trustees could pay the minimum tax, restructure or elect fixed distributions.
  • State stamp duty remains a separate consideration when restructuring.
  • The proposed rollover relief window runs from July 2027 to June 2030.

Labor's proposed 30 per cent minimum tax on discretionary trusts has prompted a blunt question in accounting circles: will 1 July 2028 mark the end of the family trust? Some advisers say no. They argue that asset protection, succession planning and risk management, not tax alone, are why many families use trusts, and those reasons will not disappear if the bills pass. With a Senate committee reporting tomorrow, here is the case they make.

The argument for survival

Practitioners Dianne Hanna and Lee-Ann Hayes, of Accurium and TaxBanter, argue that the discretionary trust structure will survive the minimum tax.

Their reasoning is that trusts have long been used to hold Assets apart from the people running a business, to manage how Wealth passes between generations, and to manage risk. Those functions are not directly affected by a change in how trust income is taxed.

On their analysis, from 1 July 2028 trustees would broadly face three options: pay the minimum tax, restructure into another entity, or elect into fixed distributions.

Why asset protection matters

A discretionary trust gives the Trustee discretion over who receives income and capital. Because beneficiaries generally have no fixed entitlement, assets held in the trust may be harder for a beneficiary's creditors to reach, depending on how the trust is set up and the circumstances. This is a long-standing feature of how trusts are used in Australia, though outcomes always turn on the facts.

That is why advisers expect some families to stay put even if the tax cost rises. For a Business owner exposed to litigation or trading risk, keeping assets in a trust may be worth more than the tax saved by moving them.

Succession is the other factor. The Family Business Association's chief executive, Catherine Sayer, has said only 27 per cent of respondents to its 2026 Family Business Barometer had a succession plan. Restructuring in a hurry could complicate those arrangements further.

The three paths and their trade-offs

Paying the minimum tax keeps the structure intact. Under the bill as introduced, the trustee would pay 30 per cent on Taxable Income with no threshold, and beneficiaries would receive a non-refundable offset. Beneficiaries with higher incomes may be able to use the full credit; those on lower incomes may lose part of it.

Restructuring means moving the business or assets into a company or another entity. Rollover relief is proposed from 1 July 2027 to 30 June 2030 to ease the federal tax cost. But Stakeholders have warned that state stamp duty is a separate matter, and the Explanatory Memorandum's statement on resettlement "does not bind state and territory Revenue authorities".

Electing into fixed distributions changes the trust's character. One risk flagged in commentary on the bill is that if a trust's fixed-entitlement election ends, that year's Net Income would be taxed at 47 per cent.

Restructuring into a company carries its own complications. After the High Court's decision in Bendel, the ATO has said unpaid present entitlements are not Division 7A loans under s 109D, but that dealings with those funds may engage Subdivision EA or s 100A.

Hypothetical example: the cost of moving

Hypothetical example: a family trust holds a $1 million commercial property and the family is weighing a restructure. Treasury's Impact Analysis assumes an average restructure costs about $11,000. Stakeholders have estimated stamp duty on a $1 million transfer at between $36,590 and $55,000.

Adding the two gives an indicative one-off cost of $47,590 to $66,000. Now assume, purely for illustration, that staying in the trust and paying the minimum tax would cost the family an extra $5,000 a year through unused offsets.

On those assumptions, it would take roughly 9.5 to 13.2 years of extra tax to equal the one-off cost of moving. Many families might decide the trust is worth keeping, particularly once asset protection is valued. Real figures will vary widely and depend on the final law.

Change fatigue, and rules still to be written

Hanna and Hayes also point to the pace of change. LawPath data shows Prime Minister Anthony Albanese announced 4.1 small business rules a year, the most of any prime minister from 1996 to 2026. Hanna said the pace of change may push some advisers out of the profession.

That pressure comes on top of compliance cost estimates that remain contested. Treasury's Impact Analysis puts ongoing costs at about $48 million a year, while CPA Australia estimates $221 million to $595 million a year.

The Tax Institute's Julie Abdalla urged senators not to pass Schedules 1 to 3 until deferred regulations and instruments are published. Consultation ran for 12 business days on the exposure draft and 10 business days for Senate submissions.

A Corporate Tax Association-led alliance of 27 associations, including COSBOA, the Business Council of Australia, the Australian Banking Association and the Australian Institute of Company Directors, wants minimum consultation periods and an independent Office of Impact Analysis Commissioner.

The minimum tax is in bills, not law. The House passed Tax Reform No. 3, the Minimum Tax on Discretionary Trusts rates bill and Tax Reform No. 4 on 29 October, after the bills were referred to the Senate committee on 15 October.

The government is reported to be targeting Senate passage in the third week of November, though that has not been officially confirmed. Labor needs the Greens, and no agreement has been announced. The final shape of the rules, and so the choice facing trustees, could still change.

What to watch

Friday 13 November 2026: the Senate Economics Legislation Committee is due to report. Watch for any recommendation to extend the rollover and election periods if instruments are late, as The Tax Institute has requested.

Third week of November: the reported target for a Senate vote.

December: the Mid-Year Economic and Fiscal Outlook.

1 July 2027: rollover relief would open for three years, to 30 June 2030.

1 July 2028: the minimum tax would start, if passed as introduced.