The business runs through a family trust — will it be taxed at 30% from 1 July 2028?

Most family trusts get thought about once a year. Some time in June the accountant asks who is getting what, a resolution is signed before 30 June, and the trust goes back to being a name on a bank account until the next June.

The question arriving now is whether that annual conversation still works, because of something announced in the May Budget that a lot of trust owners have heard about second-hand and in a fairly alarming form.

What was actually announced

On 12 May 2026, as part of the 2026–27 Federal Budget, the Government announced it will introduce a 30% minimum tax on discretionary trusts from 1 July 2028. The ATO's page on the measure states plainly that it is not yet law.

Three features of the design matter more than the headline rate. The tax applies at the trustee level — the trust itself pays it, rather than it being collected through the beneficiaries. Non-corporate beneficiaries who are presently entitled to a share of the net income of the trust will be able to claim a non-refundable income tax credit for the tax the trustee has paid on that income. And the Government said it would introduce a time-limited restructure rollover alongside the measure, running for three years and available from 1 July 2027, to facilitate the transfer of assets out of discretionary trusts to entities that are not discretionary trusts.

The word doing the work is "non-refundable"

A credit for tax already paid sounds like it should make the whole thing wash out, and for some beneficiaries it does. If a beneficiary's own marginal rate on that income is above 30%, the credit covers part of what they owe and they top up the rest — broadly where they were before.

Non-refundable means something specific, though: a credit of that kind can reduce a tax bill to zero, but it does not turn into a refund once it gets there. So the beneficiary whose position changes is the one whose own rate on that slice of income sits below 30% — an adult child at university with little other income, a spouse who did not work that year, a beneficiary whose share falls inside the $18,200 tax-free threshold. Under the current rules that share is taxed at the beneficiary's rate. Under the announced design, 30% is paid at the trustee level first, and a credit that cannot be refunded does not hand the difference back.

That is the point of the measure rather than an accident of drafting, and it is why the effect is very uneven between trusts. A trust distributing to adults who all earn well above the threshold is in a different position from one distributing across a family precisely because the rates differ.

Where it actually stands, as at 30 August 2026

Treasury released a consultation paper, Minimum tax on discretionary trusts, on 8 July 2026. Submissions closed on 31 July 2026 and the consultation is now marked closed on the Treasury website.

Nothing has been introduced into Parliament since. The ATO's list of new legislation was last updated on 27 August 2026 and still carries the measure with nothing recorded against it in the developments column. There is no bill, no exposure draft of the law itself, and therefore no final answer on the questions that decide how it lands for any particular trust.

Two and a half years is a long runway by the standards of recent tax changes. It is also long enough for the detail to move.

Two things commonly got wrong

The first: "the trust will be taxed 30% on top of what the beneficiaries already pay." On the design as announced there is a credit for the trustee-level tax, so the same income is not simply taxed twice. The real cost is concentrated where beneficiaries sit below 30%, and it is worth working out which of those you actually have before assuming the worst.

The second, and the more expensive one: "then we should get the assets out of the trust now." The rollover the Government described does not open until 1 July 2027, and none of this is law yet. Transferring assets out of a discretionary trust today is a CGT event and, where property is involved, can attract state duty — real costs, paid now, on the basis of rules that have not been drafted. Restructuring ahead of a relief measure and ahead of its start date is how people end up paying for both.

This is general information current as at 30 August 2026, not advice about your own trust, which turns on the deed, the beneficiaries and what the trust actually holds.

What is worth doing this year is unglamorous. Know what the trust owns and who its beneficiaries genuinely are — a surprising number of deeds are not what their owners remember. Keep the annual resolutions on time and documented, because the existing rules on trust distributions and the separate trust income schedule apply regardless of what happens in 2028. And if the trust holds an investment property, note that a different set of changes to capital gains tax and negative gearing is already law and starts on 1 July 2027; our earlier pieces on those cover what applies to assets held before that date. Companies, trusts and bookkeeping is one of our four service areas, and the sensible time to look at a structure is when the law is settled — not on a headline.