Labor Proposes 30 Percent Minimum Tax on Discretionary Trusts From Mid-2028 With Exemptions and Rollover Relief

Labor has proposed a 30 per cent minimum tax on discretionary trust distributions, with the change scheduled to take effect from mid-2028, Abc reported. The measure is expected to generate $4.47 billion in federal revenue in its first year and would apply to roughly 210,000 small businesses that currently operate through such structures.

The government released a consultation paper on the changes last week and said the process will remain open until the end of July 2026.

Primary producers, vulnerable people and beneficiaries of testamentary discretionary trusts created through wills would be exempt. Treasurer Jim Chalmers stated that more than 90 per cent of small businesses would not be affected. He described the proposed rollover relief, which would allow businesses to exit discretionary trusts without paying federal income tax or capital gains tax on asset transfers, as generous and said the government would implement the reforms to minimise cost and disruption.

Industry groups said the federal relief would have limited value without corresponding concessions from states on stamp duty. Geraldine Magarey of Chartered Accountants Australia and New Zealand said businesses need certainty on stamp duty impacts before deciding whether to restructure and noted that asset protection, succession and estate planning are the main reasons small businesses use trusts.

Skye Cappuccio of the Council of Small Business Organisations Australia said the rollover relief does not cover accounting and legal costs of restructuring.

Andrew McKellar of the Australian Chamber of Commerce and Industry said businesses face either staying as a trust and paying higher tax or moving to a company structure and paying higher tax, while state governments stand to gain a windfall from stamp duty on restructures.