A 30% Minimum Tax on Family Trusts: What the 2026 Budget Proposes

For decades, the family (discretionary) trust has been a cornerstone of how Australian families and business owners manage tax, protect assets and pass wealth between generations. One of the more significant measures in the 2026–27 Federal Budget would reshape part of that picture: a proposed 30% minimum tax on trust income. If you run a business through a trust, distribute to family members, or use a “bucket company”, this is a proposal worth understanding now. This guide from Trinity Accounting Practice explains it in plain English — and the good news is that there is a genuine planning window.

What’s proposed — in plain English

Under the proposal, the trustee of a discretionary trust would pay a minimum 30% tax on the trust’s taxable income — regardless of how that income is distributed to beneficiaries. Higher marginal rates would still apply above that floor where a beneficiary’s own rate is higher, but the income could no longer be taxed at less than 30%.

To avoid double taxation, non-corporate beneficiaries (individuals) would receive a non-refundable credit for the tax the trustee has already paid. The word “non-refundable” is doing a lot of work here: if a beneficiary’s own tax rate is below 30%, they cannot get the excess back as a refund. In effect, distributions that were previously taxed gently in the hands of low-income family members are lifted up to the 30% floor.

The practical consequence is that income-splitting to low-income family members loses much of its benefit. The proposed start date is 1 July 2028.

Why the “bucket company” matters here

A common strategy has been to distribute surplus trust income to a “bucket company” — a corporate beneficiary — so the income is capped at the company tax rate (often 25–30%) rather than a higher personal rate. Under this proposal, that edge largely disappears. Corporate beneficiaries would not receive the non-refundable credit, so the 30% floor effectively applies to those distributions too. For many family groups, the bucket company as a pure tax-deferral tool would no longer achieve what it once did.

A worked example

Take a trust distributing $175,000 across four recipients: a spouse with no other income, an adult child studying part-time, the working business owner, and a bucket company.

• Today: the low-income members (spouse and student) are taxed gently on their shares, the owner pays their marginal rate, and the bucket company caps its share at around 25%. Total tax across the group lands at roughly $40,000.
• Proposed: the low-income shares are lifted to the 30% floor, and the bucket company loses its advantage. Total tax across the group rises to roughly $56,000.

That is around $16,000 more tax per year on the same $175,000 of trust income — a meaningful annual difference for a family group that has relied on splitting income to lower-rate members.

Who’s caught — and who’s not

Importantly, the proposal includes a set of carve-outs. Based on what has been announced, the 30% minimum tax would not apply to:

• Primary production income — farming and agricultural trusts.
• Certain vulnerable minors.
• Testamentary trusts — income from assets held by a testamentary trust that already existed on Budget day (12 May 2026).
• Fixed and widely held trusts, charitable trusts, complying super funds, special disability trusts, and deceased estates.

If your structure falls into one of these categories, the impact may be limited — but the detail matters, and the legislation is not yet written.

Your three-year window

This is the part worth acting on calmly. While the measure is proposed to start on 1 July 2028, the Budget flagged rollover relief for three years from 1 July 2027 to help families restructure — for example, moving into a company or a fixed trust — without triggering the usual tax costs of unwinding a structure.

That gives a real planning runway, but it should be used thoughtfully. A trust does far more than save tax: it provides asset protection and flexibility for succession planning. Restructuring purely to chase a tax outcome can quietly give up protections that are hard to replace. The right answer depends on your family, your business and your goals — which is exactly why this is a conversation to start early rather than late.

How Trinity can help

At Trinity Accounting Practice we work with many family groups and business owners who operate through trusts, and we are following this proposal closely as it develops. If it proceeds, the three-year rollover window will be the time to review whether your structure still fits — weighing tax against the asset protection and succession benefits that often matter just as much. We help clients model the numbers and make a measured decision. For related reading, see our guide to the 2026–27 Federal Budget.

Talk to Trinity about your trust structure →

General advice only. This article contains general information current as at June 2026 and does not constitute tax, financial or legal advice. It does not take into account your personal circumstances, objectives or needs. Before acting on any information in this article, you should consider its appropriateness to your situation and seek professional advice from Trinity Accounting Practice or another qualified adviser. Liability limited by a scheme approved under Professional Standards Legislation.