Proposed Trust Tax Changes
- Nijo Antony
- 2 days ago
- 3 min read
Why Trusts Are Back in the Spotlight
The Federal Government’s proposed trust tax changes have placed discretionary trusts back under heavy scrutiny.
For many business owners, farming families, professionals and investors, the concern is not simply higher tax, but whether long-standing structures will still remain commercially effective.
Many clients are now asking:
Will family trusts still work?
Should we restructure now?
Will distributions become restricted?
Are bucket companies still effective?
At this stage, no final legislation has been released, and the details remain incomplete.
Importantly, the final rules may differ significantly from the initial Budget announcement.
However, the proposal is significant enough that families and business owners should begin to understand its potential implications now.
Why Families Use Trusts In The First Place
Family trusts have never been purely about tax.
For many business owners and investors, trusts are primarily used for:
Asset protection
Succession planning
Investment ownership
Business risk management
Intergenerational control
Long-term family flexibility
This is particularly common among:
Farming families
Medical professionals
Builders and tradies
Family investment groups
Privately owned businesses
Tax flexibility is often only one part of a much broader commercial structure.
What Is Proposed To Change?
Based on the current Budget announcement, from 1 July 2028:
A 30% minimum tax may apply to discretionary trusts
The trustee would generally pay the tax
Beneficiaries may receive non-refundable tax credits
Limited rollover relief may be available for certain restructures
Some exclusions are expected to apply
Current Budget material suggests the minimum tax may not apply to:
Primary production income
Certain testamentary trusts
Fixed trusts
However, the exact scope of those exclusions remains critically important and has not yet been finalised.
The detail will ultimately determine how significant these changes become for different families and business structures.
Practical Example - Farming Family
A cattle farming family operates through a discretionary trust structure.
The trust currently provides:
succession flexibility between children
protection of family assets
management of seasonal income fluctuations
flexibility around annual profit distributions
Under the proposed minimum tax framework:
Annual tax outcomes may change significantly
Distribution flexibility could become less effective
Bucket company strategies and retained profit planning may require closer management
However, the trust structure itself may still remain commercially appropriate because of:
land ownership protection
succession planning
intergenerational control
creditor protection
This is why trust reviews should never focus purely on annual tax savings.
Practical Example - Medical Practice
A specialist medical practice operates through a company structure, while surplus profits and investments sit within a family trust.
Historically:
Trust distributions may have improved overall family tax outcomes
Investments may have been separated from business trading risk
Retained profits may have been managed through bucket company arrangements
Under the proposed rules:
Distribution strategies may need substantial review
Future investment structures may change
Retained profit strategies may require tighter management
However, removing the trust structure entirely could also create:
Asset protection issues
Succession complications
Ownership rigidity
Increased exposure to trading risk
Again, the broader commercial purpose of the structure remains critically important.
What Clients Should Not Do
Clients should not:
Panic restructure
Assume trusts are suddenly obsolete
Trigger unnecessary CGT or stamp duty
Ignore legal and asset protection consequences
Assume every trust structure will be treated the same way
There is a major difference between the following and the detail matters enormously:
Discretionary trusts
Fixed trusts
Testamentary trusts
Primary production structures
What Clients Should Review Now
Most business owners and investors should begin reviewing:
Trust deeds
Beneficiary structures
Historical distribution patterns
Bucket company arrangements
Succession planning objectives
Long-term ownership structures
For some families, future restructuring may eventually make commercial sense.
For others, the existing structure may remain entirely appropriate despite different tax outcomes.
Final Thoughts
The proposed trust tax changes are significant, but they do not remove the broader commercial reasons trusts exist in the first place.
For many families and privately owned businesses, trusts will likely continue to play an important role in:
Asset protection
Succession planning
Family control
Investment ownership
Long-term commercial flexibility
The focus now should be on strategic review and forward planning, not rushed restructuring decisions driven by headlines.
If you want to chat about your situation or have any questions, we are here to help.
Nijo Antony
Director
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