Australia to Impose 30 Percent Minimum Tax on Trust Income From 2028

The new rule replaces the current system, which remains in place until legislation passes, under which tax paid by more than 840,000 family trusts is determined by the marginal tax rates of their beneficiaries. The current arrangement allows income to be split among family members, such as between higher-earning parents and lower-earning children, to reduce the overall tax liability.

Government data cited in the budget shows that about 90 percent of private trust wealth is held by the wealthiest 10 percent of households. Some individuals and accountants have raised concerns about the practical effects. A doctor from the Northern Territory who received support from a bursary during high school said he worries the changes could reduce the ability of family trusts to direct funds toward education and family support.

He noted that trusts also help provide income for older female relatives, potentially reducing reliance on the aged care pension, and allow younger women in his family to access family wealth directly. An accountant at IQ Accountants said clients had expressed concern but that insufficient detail had been released on how the rules would operate.

The accountant added that trusts are used for purposes beyond tax minimization, including handling bankruptcy and divorce, planning succession, paying mortgages and funding children’s education.

Business groups stated that the new tax could affect investment and operations for family-owned businesses. The chief executive of the Business Council of Australia said the organization was disappointed by the decision, noting that many tradespeople rely on trust arrangements.

A tax consulting partner at HLB Mann Judd said the change was not unexpected but would lead to greater compliance requirements, hesitation to establish new trusts, and potential movement of finances toward company structures instead. The partner described the situation as one requiring businesses to wait and see how the rules are finalized.

A spokesperson for the Council of Small Business Organisations Australia reported that small business owners, accountants and advisers were still working through the measures and assessing potential unintended consequences. Some forms of trust, including charitable trusts, are exempt from the planned changes.

The opposition has vowed to repeal the tax changes if elected, describing the current government as the highest taxing in Australian history.