Quick Summary
The key trust reforms including:
30% Minimum Tax on Discretionary Trusts
Income splitting strategies will become less effective
Bucket company arrangements will be significantly impacted
Three-year restructuring rollover relief
Capital Gains Tax reform commences 1 July 2027
Trust-held investment properties will be affected by negative gearing reforms
Future gains on pre-CGT assets become taxable from 1 July 2027
Asset valuations around 1 July 2027 may become critical
Trust deeds, beneficiary classes, distribution strategies and succession plans should be reviewed before 2028.
Key Dates
| Date | Event |
|---|---|
| 12 May 2026 | Budget announcement |
| 8 July 2026 | Treasury consultation paper released |
| 3 September 2026 | Exposure draft legislation released |
| 1 July 2027 | Capital Gains Tax reforms commence |
| 1 July 2027 | Future gains on pre-CGT assets become taxable |
| 1 July 2027 | Trust restructuring rollover relief commences |
| 1 July 2028 | Proposed commencement of 30% minimum trust tax |
Who This Impacts?
These reforms are particularly relevant to people with:
Family discretionary trusts
Property investment trusts
Share portfolio trusts
Business owners operating through trust structures
Trusts with corporate beneficiaries ("bucket companies")
Multi-generational family wealth structures
Trusts with significant unrealised capital gains
Trusts holding pre-CGT assets
1. 30% Minimum Tax on Discretionary Trusts
What is changing?
The Government has proposed a 30% minimum tax on discretionary trusts from 1 July 2028. The minimum tax would be paid by the trustee rather than individual beneficiaries.
Why is it changing?
The Government's position is that discretionary trusts allow income splitting that is not available to wage earners. The reform is intended to align trust taxation more closely with personal taxation.
Practical impact
Many trusts currently distribute income to:
Adult children
Retired parents
Low-income spouses
Other family beneficiaries
to reduce the overall tax paid by the family group. This strategy becomes significantly less valuable once a minimum 30% tax applies.
2. Corporate Beneficiaries ("Bucket Companies")
What is changing?
Many trust structures currently distribute unused profits to a company beneficiary to cap tax at company tax rates.
Under the proposed reforms:
Corporate beneficiaries generally do not receive the same tax credit treatment as individuals.
The reforms are specifically designed to limit reliance on bucket company structures.
Practical impact
Trusts using:
Bucket companies
Corporate beneficiaries
Profit retention strategies
should review their structure well before 1 July 2028.
3. Trust Restructuring Relief
What is changing?
A special restructuring rollover is proposed from 1 July 2027.
Purpose
This relief is intended to allow:
Asset transfers
Entity restructures
Changes in ownership structures
without triggering immediate tax consequences in many situations.
Why it matters?
Many trust clients are expected to use this window to:
Review trust structures
Simplify group entities
Move assets into more appropriate structures
Prepare for the 2028 trust reforms
4. Capital Gains Tax Reform
What is changing?
From 1 July 2027:
The 50% CGT discount is removed.
Cost base indexation is introduced.
A 30% minimum tax on capital gains applies.
Why trust clients should care
Many trusts hold:
Investment properties
Shares
Managed funds
Commercial property
Long-term investments
Historically, the 50% CGT discount was a key benefit of holding appreciating assets through trusts.
Future disposal strategies may need to be reconsidered.
5. Transitional CGT Rules
What is changing?
The Government has not fully grandfathered the CGT system.
Instead:
Gains accrued before 1 July 2027 generally receive old treatment.
Gains accrued after 1 July 2027 generally fall under the new rules.
Why it matters
Trusts holding assets with significant unrealised gains may need:
Property valuations
Business valuations
Share portfolio valuations
around 1 July 2027.
6. Pre-CGT Assets
What is changing?
Assets acquired before 20 September 1985 have historically been exempt from CGT.
From 1 July 2027:
Historical gains remain protected.
Future gains become taxable.
Most commonly affected assets
Family farms
Commercial properties
Long-held investment properties
Legacy family investments
7. Negative Gearing and Trust Property Investments
What is changing?
Negative gearing will generally remain available for:
Existing investment properties
New residential builds
However, for established residential properties purchased after Budget night, rental losses can no longer be offset against non-property income and will instead be quarantined.
Why it matters?
Trusts purchasing future residential properties may need to reassess:
Property acquisition strategies
Cash flow assumptions
New-build opportunities versus established dwellings
8. Succession and Estate Planning
The trust reforms have significant implications for:
Future generations receiving trust distributions
Family wealth transfer strategies
Trust succession planning
Asset protection structures
Trust deeds, appointor provisions, control arrangements and distribution policies should all be reviewed before the trust reforms commence.
Bottom Line
For trust clients, the three biggest issues are:
30% minimum tax on discretionary trusts from 1 July 2028.
Removal of the 50% CGT discount from 1 July 2027.
The opportunity to restructure trusts between 1 July 2027 and 30 June 2030.
For many trust structures, the period from 1 July 2027 to 30 June 2030 will be the most important planning window in decades, with significant decisions required around distributions, bucket companies, succession planning and long-term asset ownership.