The draft law on the 30% trust tax is out — is there now a way to keep my family trust out of it?

A family trust is usually set up for one reason, and it is not a tax rate in the abstract. It is that the decision gets made at the end of the year instead of the beginning — you look at what everyone in the family actually earned, then you decide who is presently entitled to what, and the resolution is signed before 30 June.

The 30% minimum tax announced in the May Budget is aimed squarely at that decision. Our earlier piece on the measure noted that there was no bill and no exposure draft of the law itself, and therefore no final answer on how it lands. On 3 September 2026 the exposure draft arrived — and it contains a door that the Budget announcement did not.

What was released on 3 September

The Treasurer released draft legislation to implement the core components of the minimum tax on discretionary trusts announced in the 2026–27 Budget. Treasury's consultation list shows it as open from 3 September 2026 to 18 September 2026, and the release says the Government will continue to finalise implementation in further tranches of legislation, including administrative and integrity arrangements as necessary.

The measure itself has not changed shape. The ATO's page on it, last updated 3 September 2026, still describes a 30% minimum tax on discretionary trusts from 1 July 2028, applied at the trustee level, with non-corporate beneficiaries who are presently entitled to a share of the net income of the trust able to claim a non-refundable income tax credit for the tax the trustee paid on that income. The same page still says, in those words, that this measure is not yet law.

What is new is implementation detail — and one option that changes the question a trust owner is actually facing.

The new option is an election, and what it costs is the discretion

The release describes a new option for discretionary trusts to be exempt from the minimum tax if they elect to make fixed distributions to pre-nominated beneficiaries, offered as an alternative to roll-over relief. Two things are said about it: the election would not require a restructure, and it is not expected to result in state and territory stamp duties.

Both of those matter, because the alternative is expensive. Moving assets out of a discretionary trust is a CGT event, and where the trust holds property it is generally a dutiable transaction as well. An election that leaves the trust and its assets exactly where they are avoids both of those costs.

What it does not leave alone is the reason the trust exists. Fixed distributions to pre-nominated beneficiaries is the opposite of the June decision: the shares are settled in advance, to people named in advance. For a trust that has distributed the same way to the same two working adults for a decade, that may cost nothing anyone would notice. For a trust that moves income around a family as circumstances change — a strong year in the business, an adult child who worked for six months and then went back to study, a spouse who returned to work mid-year — the flexibility is the whole feature, and the election trades it for the rate.

There is nothing to elect into yet. The option exists in a draft that is open for comment until 18 September 2026.

What else the draft sets out

The release confirms the exclusions the Government has said will apply: charitable trusts, special disability trusts and superannuation funds, along with primary production income and certain income relating to vulnerable minors. Deceased estates and all discretionary testamentary trusts established for genuine testamentary purposes are also excluded.

On distributions, the draft makes all distributions from trusts to registered charities and deductible gift recipients exempt. Distributions to other income tax-exempt entities such as sporting clubs are also exempt, up to a reasonable cap that the release says will be finalised following consultation.

Three further pieces are named. A new definition of fixed trusts, intended to keep commercial trust types without material discretionary elements — widely held trusts, managed investment trusts, bare trusts and employee share trusts — out of the minimum tax. The detail of the expanded roll-over relief, available for three years from 1 July 2027, for taxpayers who do want to restructure out of a discretionary trust into another arrangement. And refunds for franking credits that relate to income subject to the minimum tax, where those credits remain after the trustee has offset its own income tax liabilities.

On scale, the release states that less than 10 per cent of Australia's 2.7 million active small businesses will be affected by these reforms in any given year. It also notes that legislation dealing with the 2018 Budget measure on unpaid present entitlements will be progressed separately.

Two things commonly got wrong

The first: “the draft is out, so it is settled now.” An exposure draft is a consultation document. The release itself says implementation will be finalised in further tranches, the comment period runs only to 18 September, and the ATO's own page dated the same day still records the measure as not yet law. The start date is still 1 July 2028, which is two financial years away.

The second, and the costly one: “there is a way out now, so let us do something this month.” There is no election available to make, the roll-over does not open until 1 July 2027, and a transfer of assets out of a trust today is a real CGT bill and, with property, a real duty bill — paid now, against rules that can still move between a draft and an Act. The choice the draft creates is a genuine one, but it is a choice to make when the law is settled and with the trust's own numbers in front of you.

This is general information current as at 4 September 2026 and not advice about any particular trust. How this lands depends on the deed, who the beneficiaries genuinely are, what the trust holds and what it has actually distributed.

Two pieces of work are worth doing regardless of what the final law says, and both are useful whichever way it goes. Read the deed and establish who the beneficiaries actually are — an election framed around pre-nominated beneficiaries makes the real class in the deed matter, and a surprising number of deeds are not what their owners remember. Then map the last three years of distributions against each recipient's own marginal rate, because that is what tells you whether a 30% floor at the trustee level would change your family's total tax at all, or barely touch it. Our earlier piece on the announced measure explains why the word “non-refundable” is doing most of the work there. Meanwhile the annual resolutions and the trust income schedule apply exactly as they do now, and if the trust holds an investment property, the separate capital gains tax and negative gearing changes starting 1 July 2027 are already law. Companies, trusts and bookkeeping is one of our four service areas, and consultation on this draft is open to anyone until 18 September 2026.