Trust vs company · Structuring
Family trust vs company after the 2026 Budget: which structure holds up.
For thirty years the family trust won this comparison on two counts: income could be streamed to the lowest-taxed member each year, and a capital gain carried a 50% discount. The 2026 Budget proposes to take both away. What is left is a closer contest, decided by what the structure holds, who it is for, and what happens in Victoria when assets move.
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 Budget
Two measures, pointing at the trust.
The proposed minimum tax puts a 30% floor under discretionary trust income from 1 July 2028, paid by the trustee, with an offset for individual beneficiaries and none for corporate ones. Separately, from 1 July 2027 the 50% CGT discount for individuals and trusts would be replaced by indexation of the cost base, with assets deemed disposed of and reacquired on 30 June 2027 so that gains accrued before then keep the discount. Companies are outside both measures: they never had the discount, and they already pay tax at a flat rate.
Side by side
How the two structures compare after the changes.
| Family trust | Company | |
|---|---|---|
| Tax on income | A floor of 30% at the trustee level from 2028, with an offset for individuals; streaming to low-income members no longer reduces the total below the floor | Flat company rate on retained profits; tax at the shareholder's rate on dividends, with franking |
| Capital gains | Indexation only from July 2027; no 50% discount on gains accruing after June 2027 | Indexation treatment unchanged by the measure; no discount, as before |
| Distributing to family | Trustee's discretion each year (the floor applies regardless); or fixed shares under the election | Dividends by share class, in fixed proportions; a discretion over who is paid is the thing the roll-over test prohibits for four years |
| Franking | Credits used by the trustee against the minimum tax; they do not flow to beneficiaries | Credits attach to dividends and flow to shareholders |
| Retaining profits | Retained income is taxed at the trustee's rate | Profits can be retained at the company rate and reinvested |
| Loans to family | Generally outside Division 7A unless a company is involved | Loans to shareholders and associates fall within Division 7A |
| Asset protection | Beneficiaries have no fixed interest for a creditor to reach | Shares are an asset of the shareholder and can be reached |
| Succession | The appointor controls the trust; the deed and the will together | Control passes with the shares; a shareholders agreement and the will |
| Stamp duty in Victoria | Duty on the way in; limited exemptions on the way out to beneficiaries | Duty on land transferred in; landholder duty on share dealings above the threshold |
| Land tax in Victoria | Trust surcharge rates | General rates, grouped with related companies; no principal place of residence exemption |
| Family law | A trust the spouse controls is routinely treated as property of the marriage | Shares are property of the marriage in the same way |
| Winding down | Vesting with CGT and duty consequences | Deregistration after a members' voluntary winding up; capital returned as a dividend or capital distribution |
Keep the trust
When the trust is still the right vehicle.
Primary production income is outside the minimum tax, so a farming trust loses little. A testamentary trust established under a will keeps its exclusion. A trust whose beneficiaries already pay tax at 30% or more sees the floor make no difference. A trust that already distributes in fixed proportions can elect and carry on. And a trust holding a single asset with a large pre-2027 gain may be better held until the deferred discount is realised than moved.
Move to a company
When the company is the better answer.
A trading business that retains and reinvests profit; a group that already relies on a bucket company and is about to lose the offset; a family with more than one generation that wants ownership written in shares rather than left to an appointor; and an investment portfolio where the discount no longer carries the decision. A company is also easier to bring investors or a buyer into, and easier to sell.
In between
Most groups end up with both.
A company owned by individuals within the family group is the ordinary outcome of a roll-over. A company owned by a trust that keeps its discretion is not, because the discretion sits above the company and the continuity test looks through. A fixed trust above a company can work and is the structure to test where the family wants a holding layer. The right combination turns on the assets, the ages of the family, where the land is, and what the accountant's modelling says.
FAQs
Common questions.
Still unsure? Call us on (03) 9008 7224 and speak to a lawyer, not a call centre.
Is a company always better now?
Does a company pay less tax on rent and dividends?
What happens to the home if the trust holds it?
Can I keep the trust and just stop distributing to the bucket company?
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-03 · Trust tax changes · Last reviewed 27 October 2026
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