Overview

On 3 September 2026, the Government released draft legislation and a media release for the 30% minimum tax on discretionary trusts, which was announced in the May 2026 Federal Budget and is proposed to apply from 1 July 2028.
 
The draft legislation builds on the consultation paper released in July and introduces an alternative to restructuring a discretionary trust to a fixed trust or company structure.

What's the key issue?

The July 2026 consultation paper indicated that rollover relief would be available to assist taxpayers wishing to restructure out of a discretionary trust into another structure, such as a company or fixed trust.
 
As discussed in our FirstTech strategy article, Proposed minimum tax on discretionary trusts – key considerations for advisers, while the proposed rollover relief may help address federal tax consequences arising from a restructure, including capital gains tax (CGT), it may not eliminate State and Territory taxes such as stamp duty.
 
This concern may arise where a discretionary trust is converted to a fixed trust or where assets are transferred into a new structure such as a unit trust or a company, depending on the relevant State or Territory legislation.

Alternative to restructuring

The exposure draft takes into account stakeholder feedback received in response to the July consultation paper and introduces an alternative to restructuring.
 
Under the proposed election option, eligible discretionary trusts may elect to make fixed distributions to pre-nominated beneficiaries and thereby avoid the minimum tax regime without undertaking a formal restructure.
 
Importantly, because no restructuring is required, the election is not expected to trigger State or Territory stamp duty.

How does the Election option work?
 
As an alternative to restructuring, discretionary trusts that are in existence at 1 July 2028 will be able to elect into a new tax regime. Trusts that make the election and comply with the relevant requirements will not be subject to the proposed 30% minimum tax.

Key features include:

• The discretionary trust must be in existence at 1 July 2028.
• The trustee of the discretionary trust must make an Excluded Election Trust (EET) election to only make fixed distributions to eligible pre-nominated beneficiaries.
• Nominated beneficiaries can be individuals, eligible companies and eligible trust entities.
• Nominated beneficiaries can only be added or changed later where a nominated beneficiary passes away or there is a family breakdown.
• The election can be revoked by the trustee or automatically revoked if the trustee makes distributions inconsistent with the election. Upon revocation, the trustee will be subject to the highest marginal tax rate plus Medicare levy in that income year (ie 47%), with the minimum trust tax applying to subsequent income years.
• The election can be made in the 2028-29 financial year, and once made, will continue to apply until revoked.

In effect, the election allows a discretionary trust to operate in a manner similar to a fixed trust for tax purposes, without requiring a formal restructure.

For more information see the FirstTech Newsflash

The Centrelink rates and thresholds for 20 September 2026 have been released.

The FirstTech Centrelink quick reference guide for 20 September 2026 is available here

The Minister also announced deeming rates will increase to 1.75% and 3.75% from 20 Sept 2026.

The  Treasury Laws Amendment (Tax Reform No. 2) Bill 2026 passed both Houses on 19 August 2026 and awaits royal assent.

The Bill includes amendments to the negative gearing rules effective  from 2027-28, to ensure that where a person acquires an ownership interest in a residential dwelling from their spouse, former spouse or co-owner due to inheritance or relationship breakdown, and that ownership interest was capable of being negatively geared, the person is entitled to the same treatment for the new ownership interest. That is, the person will be able to continue negatively gearing the property.