Trust tax changes · Melbourne and Victoria
Family trust tax changes: what the 2026 Budget means for your trust.
From 1 July 2028 the Government proposes a 30% minimum tax on the income of discretionary trusts, paid by the trustee. For families who hold a business, investment property or shares through a family trust there are four ways to respond: keep the trust and elect fixed shares, roll the assets into a company, wind the trust up, or leave it alone. Each has its own deadline, its own conditions and consequences the Bill says nothing about, including Victorian stamp duty and land tax.
Lawyer-led structuring
Deeds, constitutions and transfer documents prepared by a solicitor, not generated from a kit.
Alongside your accountant
The tax modelling stays with your adviser; the legal structure is built to match it.
Fixed fee, quoted first
Quoted before any work starts, with duty, searches and ASIC costs itemised separately.
Property and duty in-house
Victorian duty, land tax and the property transfers handled by the same firm.
The 30% minimum tax on discretionary trusts is before Parliament and is not yet law. The Treasury Laws Amendment (Tax Reform No. 3) Bill 2026 and the Income Tax Rates Amendment (Minimum Tax on Discretionary Trusts) Bill 2026 were introduced on 14 October 2026. As introduced, the tax would apply from 1 July 2028 and the restructure roll-over would run from 1 July 2027 to 30 June 2030. The detail may change before enactment. Last reviewed 27 October 2026.
The proposal
A 30% minimum tax on discretionary trusts from 1 July 2028.
Under proposed sections 101AA to 101AG of the Income Tax Assessment Act 1936, the trustee of a "minimum tax trust" would be assessed on the trust's net income at a rate of at least 30%. Where tax is already payable by the trustee at a lower rate, the new rules top it up; where none is payable, the trustee pays the full 30%. A beneficiary who is an individual would receive a non-refundable offset for the tax the trustee has paid on their share, so the same dollar is not taxed twice, but a beneficiary that is a company would receive no offset at all. Franking credits on dividends received by the trust would be used by the trustee against the minimum tax rather than flowing through to beneficiaries.
In practice the measure removes the result that discretionary trusts were built to deliver: income directed each year to whichever family member pays the least tax. The trustee's discretion remains, but the floor under the rate does not move.
Scope
Which trusts are caught, and which are not.
A minimum tax trust is any trust that is not one of the following: a fixed trust under a new codified definition, the estate of a deceased person while it is being administered, a complying superannuation entity including a self managed fund, a special disability trust, or a kind of trust the Minister later excludes by legislative instrument. An ordinary family discretionary trust is caught.
Some income is carved out even where the trust is caught: taxable primary production income, the shares of certain minors (those on disability or carer support, or beneficiaries of compensation and family breakdown trusts, not minors generally), amounts to which registered charities, deductible gift recipients and other exempt entities are presently entitled, amounts subject to non-resident withholding, and the income of a testamentary trust established for genuine testamentary purposes. The testamentary carve-out has its own integrity rules: property added after Budget night on 12 May 2026 does not qualify, and trusts established on or after 1 July 2028 qualify only where the beneficiaries are individuals or exempt entities.
Whether a given trust is a fixed trust is the question that matters most, and it is answered by the rights the deed actually creates, not by the name on the cover.
The options
Four responses, each with its own conditions.
01
Keep the trust and elect fixed shares.
A trust in existence at 1 July 2028 could elect to become an "excluded election trust" by nominating beneficiaries and fixing each one's share of income and capital. The trust stays, the duty question largely goes away, and so does the trustee's discretion. One inconsistent distribution and the election is gone.
Read about the election02
Roll the assets into a company.
Between 1 July 2027 and 30 June 2030 a trust could move all of its assets into a company (or an individual, partnership or fixed trust) without the transfer itself triggering income tax, provided the company is owned by the right people and set up without "material discretionary elements" for the four years that follow. The roll-over does not touch Victorian duty or land tax.
Read about converting to a company03
Wind the trust up.
Where the trust has done its job, vesting it and distributing the assets may be simpler than either path. Vesting has its own capital gains and duty consequences, and the roll-over may or may not be available for distributions to individuals.
Read about winding up04
Leave it alone.
Some trusts are not worth moving: farming trusts, trusts with charitable beneficiaries, trusts earning little, and trusts whose beneficiaries already pay tax at or above 30%. The minimum tax is a floor, not an extra layer, and for many families the offset means the net change is small. That is a conclusion to reach on the numbers, not by default.
Compare trust and companyKey dates
The dates that decide which option is open.
30 June 2027
Proposed deemed disposal date for the separate change that replaces the 50% CGT discount with indexation for individuals and trusts from 1 July 2027. Companies are not affected.
1 July 2027
The proposed roll-over window opens. A transfer before this date gets no roll-over.
1 July 2028
The minimum tax would apply to income years starting on or after this date. The election window opens.
30 June 2030
The roll-over window closes. Any required asset still in the trust after this date means the roll-over is lost for every asset.
Beyond the Bill
The consequences the legislation says nothing about.
The Bill is Commonwealth income tax law. A restructure in Victoria also runs into the Duties Act 2000 and the Land Tax Act 2005, into landlords whose consent is needed to assign a lease, into banks whose facilities and guarantees are written to the trustee, and into wills that leave "my interest in the family trust" to someone. None of that is addressed by the roll-over, and most of it takes longer than the tax steps.
How it works
Legal structuring, alongside your accountant.
The tax modelling for a decision like this sits with the accountant who knows the group's numbers. The legal work sits with us: reading the trust deed and the elections already made, designing the company and its constitution so it passes the roll-over tests, transferring the property, assigning the leases, dealing with the bank, vesting the trust, and bringing the wills into line. Most matters run as a three-way conversation from the first meeting, and the fee is agreed before any of it starts.
Where it goes wrong
The mistakes already being made.
Moving assets now
The roll-over has not started. A property or business moved out of a trust before 1 July 2027 is a taxable disposal and a dutiable transfer with nothing to shelter it.
Treating the bucket company as the answer
Under the Bill a corporate beneficiary gets no offset for the trustee's 30%, so distributing to a company stops working the way it used to.
Converting in part
The roll-over requires all relevant assets to leave the trust by the end of the window. Leaving one behind forfeits the roll-over on everything that went before.
Putting discretion back into the company
A constitution that lets directors choose which share class gets the dividend is the kind of "material discretionary element" that denies the roll-over for four years.
Electing and then slipping
A trust that elects fixed shares and then distributes differently, even once, loses the election and is taxed at the top marginal rate on the whole of that year's income. The Bill as introduced adds a Commissioner's discretion for inadvertent errors; it has to be asked for.
Forgetting the State
The transfer of Victorian land from a trustee to a company is dutiable unless an exemption applies, and the usual exemption for distributions to beneficiaries is written around transfers for no consideration.
FAQs
Common questions.
Still unsure? Call us on (03) 9008 7224 and speak to a lawyer, not a call centre.
Is the 30% minimum tax already law?
Do I need to convert my family trust to a company?
What should I do before 1 July 2027?
Does the roll-over mean a tax-free conversion?
Can I use both the election and the roll-over?
What does a review cover, and what does it not?
Trust tax changes
Related pages.
This page is general information about proposed Commonwealth legislation and current Victorian law. It is not legal or taxation advice and does not take your circumstances into account. The Bills may change before they are enacted, and some matters, including capital gains tax interactions, are to be dealt with in later legislation. Advice should be obtained before any election is made or any asset is transferred.
Page TT-01 · Trust tax changes · Last reviewed 27 October 2026
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