Minimum Tax on Discretionary Trusts: What Property Investors Need to Know

The Federal Government plans a 30% minimum tax on discretionary trusts from 1 July 2028. The trustee would pay at least 30% on the trust’s taxable income, and individual beneficiaries would get a non-refundable credit for that tax. It is not law yet: the bill was introduced on 14 October 2026 and is still before Parliament, so property investors who hold assets in a family trust have time to get advice before anything changes.

Key takeaways

• The proposed minimum tax is 30% of a discretionary trust’s taxable income, paid by the trustee, starting 1 July 2028.
• The ATO says the measure is not yet law. The House of Representatives agreed to the bill’s third reading on 29 October 2026 and it has been referred to a Senate committee.
• Individuals and other non-corporate beneficiaries would receive a non-refundable credit for the trustee’s tax. Corporate beneficiaries, often called bucket companies, would not.
• Fixed trusts, widely held trusts, complying super funds, special disability trusts, deceased estates and charitable trusts are excluded.
• Three years of rollover relief from 1 July 2027 is proposed for trusts that want to restructure into a company or a fixed trust, with relief from income tax including capital gains tax.

Key dates at a glance

We compiled this timeline from the ATO, the Budget 2026 to 27 tax explainer and the Parliament of Australia bill page, all opened on 10 November 2026.

• 12 May 2026: Measure announced in the 2026 to 27 Federal Budget.
• 14 October 2026: Income Tax Rates Amendment (Minimum Tax on Discretionary Trusts) Bill 2026 introduced in the House of Representatives, alongside the Treasury Laws Amendment (Tax Reform No. 3) Bill 2026.
• 15 October 2026: Bill referred to the Senate Economics Legislation Committee.
• 29 October 2026: Third reading agreed to in the House of Representatives.
• 1 January 2027: The Australian Small Business and Family Enterprise Ombudsman is to start helping small businesses understand their options.
• 1 July 2027: Proposed three year restructure rollover opens.
• 1 July 2028: Proposed start of the 30% minimum tax.

If you want to see how your current holdings perform before talking to your accountant, our cash flow investment calculator sets out income and costs property by property.

What is the minimum tax on discretionary trusts?

A discretionary trust, often called a family trust, lets the trustee decide each year which beneficiaries receive the trust’s income. Today, beneficiaries pay tax on their share at their own marginal rates, and the trustee pays tax on income that is not distributed or on behalf of some beneficiaries.

Under the proposal, the trustee would also pay 30% tax on the trust’s taxable income, unless higher rates already apply. The trustee would still decide who is entitled to the income, and beneficiaries would still include their distributions in their own tax returns. The Budget tax explainer says individuals and other non-corporate beneficiaries would receive non-refundable credits for the tax the trustee pays, so that the total tax on that income is not lower than 30%.

Trustees would have to calculate, report and pay the minimum tax and tell beneficiaries their entitlements and credits. The Government says the collection mechanism will be settled after consultation.

Who does it apply to, and who is excluded?

The measure targets discretionary trusts. According to the Budget tax explainer, it will not apply to:

• Fixed trusts and widely held trusts.
• Complying superannuation funds.
• Special disability trusts.
• Deceased estates.
• Charitable trusts.

Some types of income are also excluded, including primary production income, certain income relating to vulnerable minors, amounts subject to non-resident withholding tax, and income from assets of testamentary trusts that existed at the announcement.

The Government estimates that around half of discretionary trusts would not be affected in any given year, and that more than 95% of individual taxfilers would not be affected in any given year.

How could it affect property held in a family trust?

Many investors hold residential or commercial property in a family trust for asset protection or estate planning. The proposal does not change those reasons, but it changes the tax arithmetic on the trust’s income. Points to understand:

• Where income already goes to beneficiaries on 30% or more. The explainer says that where a trust already distributes to non-corporate beneficiaries with a tax rate of 30% or higher, there will be no overall increase in tax paid.
• Where income is split to lower income family members. This is the case the measure is aimed at. The trustee’s 30% would be paid first, and a beneficiary on a lower rate receives a non-refundable credit, so the excess is not returned.
• Where income goes to a bucket company. Corporate beneficiaries would not receive credits for the trustee’s tax. The Government says this is to stop the minimum tax being avoided by cycling income through a company.
• Franked income. Trustees receiving franked dividends would be required to use those franking credits to pay the minimum tax. How excess franking credits are handled is still under consultation.

The proposal applies to the trust’s taxable income. How that interacts with each investor’s mix of rental income, deductions and capital gains depends on the trust deed and the final law, which is why this is a conversation for your accountant rather than something to act on from an article. Our guide to how income tax, land tax and CGT interact explains the settings in force today.

What is the restructure rollover?

Moving a property out of a trust normally has tax and duty consequences. The Government proposes a time limited rollover, available for three years from 1 July 2027, to help trusts restructure into other arrangements such as a company or a fixed trust. The Budget tax explainer says it will provide expanded relief from income tax consequences, including capital gains tax.

Two points are worth noting:

• The rollover relates to federal income tax. State taxes such as stamp duty on a transfer are set by each state, so check the position with your state revenue office or adviser before assuming a transfer is cost free.
• The ATO page also describes an alternative for discretionary trusts in existence at 1 July 2028: electing into a new regime that makes fixed distributions to pre-nominated beneficiaries, so the minimum tax does not apply.

The details of both options are still subject to consultation.

Is the minimum tax on discretionary trusts law yet?

No. The ATO’s page, last updated 3 November 2026, says the measure is not yet law. The Parliament of Australia bill page shows the Income Tax Rates Amendment (Minimum Tax on Discretionary Trusts) Bill 2026 was introduced on 14 October 2026, referred to the Senate Economics Legislation Committee on 15 October 2026, and had its third reading agreed to in the House of Representatives on 29 October 2026. It still needs to pass the Senate.

Separately, the negative gearing changes announced in the same Budget have already been legislated and start on 1 July 2027. Our negative gearing 2027 guide covers those, and our 2026 Federal Budget guide covers the wider package.

What should property investors with a family trust do now?

General information only. This is not tax advice.

1. List what each trust holds. Note each property, how its income has been distributed in recent years, and whether any distributions go to a company.
2. Check your trust deed. Your adviser will need it to work out how the proposal and any rollover could apply.
3. Book a review with your accountant before 1 July 2027. That is when the proposed rollover window opens, and it gives time to compare staying, restructuring or electing into fixed distributions.
4. Watch the bill. Senate amendments could change the details. Work from the law in force today until the bill passes.
5. Think about structure before the next purchase. If you are buying in the next year or two, ask your adviser which ownership structure suits your plans under both the current and proposed rules. Our article on structuring property ownership sets out the questions to raise.

Citadel Agency is a licensed buyers agency (licence 092247L). We do not give tax advice, so settle your ownership structure with your accountant before you buy. If you are planning your next purchase, book a free strategy call with our team.

Frequently asked questions

What is the minimum tax on discretionary trusts?

A proposed 30% minimum tax on the taxable income of discretionary trusts, paid by the trustee, from 1 July 2028. Individual and other non-corporate beneficiaries would receive a non-refundable credit for the tax paid by the trustee.

When does the 30% trust tax start?

The Government proposes a start date of 1 July 2028. The ATO says the measure is not yet law, and the bill still needs to pass the Senate.

Does the minimum tax apply to fixed trusts or super funds?

No. The Budget tax explainer says it will not apply to fixed trusts, widely held trusts, complying superannuation funds, special disability trusts, deceased estates or charitable trusts.

Can I move my investment property out of a family trust without CGT?

The Government proposes rollover relief for three years from 1 July 2027 to help trusts restructure into a company or fixed trust, with relief from income tax including capital gains tax. Details are still under consultation, and state duties are separate, so speak to your adviser first.

What happens to distributions to a bucket company?

Under the proposal, corporate beneficiaries would be assessed on their trust entitlements without receiving credits for the tax paid by the trustee.

Sources

• ATO: Tax reform, introducing a minimum tax on discretionary trusts (last updated 3 November 2026)
• Budget 2026 to 27 Tax Explainer: Minimum tax on discretionary trusts
• Parliament of Australia: Income Tax Rates Amendment (Minimum Tax on Discretionary Trusts) Bill 2026

General information only. It does not take into account your objectives, financial situation or needs. Speak to a qualified professional before acting.

General information only. It does not take your objectives, financial situation or needs into account and is not financial, tax, credit or legal advice.