The Albanese Government is today releasing draft legislation to implement the core components of the minimum tax on discretionary trusts announced in the 2026-27 Budget.
We’re delivering a fairer tax system and helping fund tax cuts for workers by better aligning the tax rate on trust income with tax rates paid by workers.
The draft legislation builds on the consultation paper released in July and includes expanded options to limit or eliminate restructuring costs for small businesses and others using discretionary trusts.
This includes a new option for discretionary trusts to be exempt from the minimum tax if they elect to make fixed distributions to pre‑nominated beneficiaries, as an alternative to roll‑over relief. The election would not require a restructure and is not expected to result in state and territory stamp duties.
The Government has been clear that a range of trust types will be excluded including charitable trusts, special disability trusts and superannuation funds, as well as primary production income and certain income relating to vulnerable minors. Deceased estates and all discretionary testamentary trusts established for genuine testamentary purposes will also be excluded.
The draft legislation also ensures that all distributions from trusts to registered charities and deductible gift recipients (DGRs) are also exempt. Distributions to other income tax‑exempt entities like sporting clubs will also be exempt, up to a reasonable cap to be finalised following consultation.
The draft legislation also sets out other implementation details including:
- A new definition of fixed trusts to help ensure a range of commercial trust types that do not have material discretionary elements are not captured by the minimum tax. This includes widely held trusts, managed investment trusts, bare trusts and employee share trusts.
- Details of the expanded roll‑over relief that will be available for three years from 1 July 2027 to assist taxpayers that wish to restructure out of a discretionary trust into other arrangements.
- Refunds for franking credits that relate to income subject to the minimum tax, which remain after the trustee has offset its income tax liabilities.
Less than 10 per cent of Australia’s 2.7 million active small businesses will be affected by these reforms in any given year.
Consistent with other significant tax reforms, the Government will continue to finalise implementation of these changes in further tranches of legislation, including administrative and integrity arrangements as necessary. Legislation to address implementation of the 2018 Budget measure on unpaid present entitlements that was announced but not enacted by the previous Government will be progressed separately.
The Government thanks the many stakeholders and community members who have already contributed to the consultation process and invites further feedback on this reform.
The exposure draft materials are available on the Treasury consultation hub
