Treasury Releases Draft Legislation: Minimum 30% Tax for Discretionary Trusts

The Government has released the draft legislation supporting its 2026 Federal Budget 30% minimum tax applied to discretionary trusts.

Treasury has addressed several key concerns raised by advisers, small businesses and investors, but significant practical questions remain.

The exposure draft gives trustees three potential options to the proposed reforms:

1. Continue with existing discretionary trust structure and pay the minimum 30% tax or more with corporate. Read more about it on our blog: Minimum Tax on Discretionary Trusts: Treasury Releases Consultation Paper
2. Restructure into an alternative eligible entity
3. Make a tax election to trat the trust as fixed for tax purposes

Key takeaways

1. New fixed trust definition

The 30% minimum tax won’t apply to fixed trusts. Treasury has now provided their proposed definition of a ‘fixed trust’ for the purposes of the minimum tax:

The trust’s beneficiaries have fixed entitlements to all of the income and capital of the trust; or

There are no material discretionary elements affecting the entitlements or rights of the trust’s beneficiaries.

What constitutes a “material discretionary element” remains unclear and will likely require further guidance from Treasury. For many trusts, a detailed review of the trust deed may still be required before concluding whether the trust qualifies as a fixed trust.

As indicated in the explanatory materials the following trusts are excluded:

• Fixed trusts
• Estate of a deceased person
• Special disability trusts
• Complying superannuation entities
• Trust of a kind specified by legislative instrument (including charitable trusts.

Discretionary testamentary trusts are not excluded from the definition of a fixed trust, however draft legislation has defined ‘minimum tax income’.

The minimum tax will not apply to the share of the net income of the trust if it is income of the following types:

• Taxable primary production income
• A share of net income of the trust that corresponds to a minor’s proportionate share of income of the trust estate and that meets certain conditions
• A share of the net income of the trust that corresponds to a registered charity’s DGR’s or exempt entity’s proportionate share of income of the trust estate and that meets certain conditions
• Amounts where non-resident withholding tax applies; and
• Income of a testamentary trust that meets certain conditions

2. Election option

A surprising development from the exposure draft is the introduction of a tax election that allows discretionary trusts to opt out of the minimum tax regime. This involves electing to make fixed distributions to pre-nominated beneficiaries.

Items to note:

• Each nominated beneficiary must take the same share of both capital and income
• No limit on the number of beneficiaries that can be nominated
• Fixed entitlements are locked in

Election can be revoked or automatically revoked where the trustee makes distributions inconsistent with the election. If revoked, the 30% minimum tax will apply to the net income of the trust in future income years, and if distributions are made to un-nominated beneficiaries, 47% tax would apply in that year.

Consequences of fixing distributions for tax purposes is a significant reduction in future discretion. The nominated beneficiaries and their fixed entitlements are locked in, with limited changes permitted in certain circumstances such as death of a beneficiary or a family breakdown.

3. CGT rollover relief for restructures

Alongside the minimum tax legislation, Treasury has released draft measures designed to help affected taxpayers transition out of discretionary trust structures.

The Government is proposing expanded capital gains tax rollover relief for a three-year period commencing 1 July 2027, allowing qualifying trusts to restructure into alternative entities without triggering immediate tax consequences.

This may provide opportunities for some groups to move into a company or fixed trust structure before the minimum tax begins on 1 July 2028. However, eligibility requirements, commercial outcomes and potential state duty implications will need careful consideration.

What’s next?

Treasury’s release provides more clarity than the original Budget announcement. However, significant practical issues remain, particularly around fixed trust classification, restructuring and the treatment of corporate beneficiaries.

With consultation on the draft legislation open until 18 September, further refinements are still possible before the final legislation is introduced into Parliament.

For many family groups and small businesses, the next two years will be the critical planning window to assess whether existing structures remain fit for purpose. For some groups, the election regime may be attractive. Others may prefer to retain flexibility and accept the minimum tax, while some may consider restructuring into a company or fixed trust. The right answer will depend on tax outcomes, succession planning objectives, asset protection and state duty implications.

Need advice?

If you’d like to understand how the minimum 30% tax may affect your family group or business, get in touch with the Macro team. We are actively monitoring the consultation process and helping clients navigate the practical implications before the reforms commence on 1 July 2028.

 

Date: 11/09/2026
The Macro Group Limited AFSL: 485843 Tax Agent Number 24 76 5236.

The information in this article contains general information only. We have not taken into consideration any of your personal objectives, financial situation or needs. Before taking any action, you should consider whether the general advice contained in this communication is appropriate to you having regard to your circumstances and needs and seek appropriate professional advice if you think you need it. We recommend that you consult a licensed or authorised financial adviser if you require financial advice that takes into account your personal circumstances.