Government Offers Alternative to Discretionary Trust Restructuring
The government's exposure draft for the new 30% minimum tax on discretionary trusts adds a second way out for trustees: a fixed-distribution election, alongside the restructure rollover already flagged in the Budget. Consultation closes 18 September 2026.
30%
Minimum trustee tax rate
1 Jul 2028
Measure starts
18 Sep 2026
Consultation closes
3 yrs
Rollover window (Jul '27–Jun '30)
In brief: From 1 July 2028, discretionary trusts pay a minimum 30% tax on distributed income. Draft legislation now lets trustees instead elect fixed distributions to pre-nominated beneficiaries to stay exempt — no restructure, no expected stamp duty — though beneficiaries can only change on death or family breakdown.
What is changing?
From 1 July 2028, a 30% minimum tax applies at the trustee level to income distributed by discretionary trusts, announced in the 2026–27 Budget (12 May 2026) and forecast to raise $4.5 billion over five years. Fixed trusts, widely held trusts, super funds and charities are excluded. Individual beneficiaries get a non-refundable offset for tax the trustee already paid; corporate beneficiaries get none, and commentary puts the combined rate on bucket-company distributions as high as 51–62.9%.
Key change
Trustees can now elect to make fixed distributions to pre-nominated beneficiaries and stay exempt from the minimum tax without restructuring:
Nomination — beneficiaries (individuals, companies or trusts) are nominated in advance, with no cap on numbers.
Changes — nominated beneficiaries can only be added or changed on death or family breakdown.
Duration — the election runs indefinitely until revoked, or automatically if distributions become inconsistent with it.
Breach — breaking it means the top marginal rate plus Medicare levy that year, then the 30% minimum tax after.
This responds to concern that the existing "fixed trust" definition was too narrow — the draft also codifies an expanded definition across the tax law.
Election or rollover?
Restructure rollover
1 Jul 2027 – 30 Jun 2030. Moves assets out of the trust into another structure.
Commonwealth relief is offered, but state stamp duty may still apply, and it needs a genuine commercial case.
Fixed-distribution election
No restructure, no expected stamp duty — but it locks the trust into its current beneficiaries. Best suited to trusts that already distribute to a stable, known group.
Key dates
12 May 2026
Measure announced in the Budget.
3 Sep 2026
Exposure draft released, including the election.
18 Sep 2026
Consultation closes.
1 Jul 2027 – 30 Jun 2030
Restructure rollover window.
1 Jul 2028
30% minimum tax commences.
What should trustees do now?
Review your distribution pattern.
If income has consistently gone to the same small group over 3–5 years, the election may fit with little change.
Model the corporate beneficiary exposure.
If you distribute to a bucket company, compare the minimum tax outcome against the election and the rollover.
Weigh lock-in against flexibility.
The election limits changing beneficiaries to death or family breakdown — a real trade-off if you rely on year-to-year flexibility.
Disclaimer: general information only, not tax advice. Every trust's situation is different — speak with us about your specific circumstances.
Not sure whether the election or the rollover suits your trust?
Our team can map both pathways against your trust's actual distribution history and help you decide.