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By Simon Terry LLB BCom CA, Director, Porters CA. As at 23 September 2026.

For many family businesses, the answer may still be yes. A discretionary trust retains useful for succession, asset protection and deciding who receives income. It is still worth checking whether those benefits outweigh the tax and administration costs for your particular group with any change in structure triggering a large volume of legal, tax (State and Federal) and administrative activity.

Two changes make that review timely. New capital gains tax rules are already law and apply to gains accruing from 1 July 2027 (so first tax in the year ending 30 June 2028). A separate 30% minimum tax on certain discretionary trust income is proposed from 1 July 2028 for which legislation remains in draft. Primary production income is excluded under the current draft.

A review matters most for three groups:

• trusts that distribute income to adult family members on lower tax rates
• trusts that distribute to a bucket company
• trusts whose assets or succession plans would make a restructure costly, such as a trust holding business premises, farmland, dutiable property including land and goodwill or shares in a trading company.

Our view is to consider your numbers and trust deeds now, while delaying any restructure decision against the final legislation, transfer duty and your personal future and family succession plans. Keeping a trust, changing how it is used and restructuring are all possibilities. The right choice depends on what the trust earns, owns and distributes.

Where things stand at 23 September 2026

Date	What happens	Status
3 to 18 September 2026	Public consultation on the draft trust legislation	Closed
30 June 2027	Eligible assets of individuals and trusts are treated as sold and reacquired for CGT, with the gain deferred until a later sale	Law
1 July 2027	The 50% CGT discount for individuals and trusts is replaced by cost base indexation for gains accruing from this date	Law
1 July 2027	Proposed rollover opens for moving assets out of discretionary trusts	Draft
1 July 2028	Proposed 30% minimum tax on discretionary trust income starts	Draft
2028–29 income year	One-off window to elect fixed beneficiary entitlements instead	Draft
30 June 2030	Proposed rollover closes	Draft

What is the proposed 30% minimum tax on discretionary trusts?

It is a proposed tax of at least 30% on a discretionary trust’s income, paid by the trustee, from 1 July 2028. The Government announced it in the 2026–27 Budget on 12 May 2026, and Treasury released draft legislation on 3 September 2026.

Most family trusts are discretionary trusts, so this is the change most family business owners will notice. Taxable primary production income is excluded from the minimum tax under the draft. Fixed trusts and deceased estates are among the trusts the draft does not cover.

What happens now that consultation has closed?

Consultation closed on 18 September 2026. Treasury will consider the submissions and then prepare a bill for Parliament. At the time of writing a bill has not been introduced, so the detail can still change. We’d like to say we remain hopeful, but recent history has us expecting a poor outcome.

The points drawing the most comment from advisers and law firms are the ones most likely to move:

• company beneficiaries (bucket companies), which get no credit for the trustee’s tax under the draft
• how strict the fixed entitlement election is, discussed below
• stamp duty, which the Commonwealth draft does not address and on which the WA government has shown minimal interest in amending
• terms the draft uses but does not define, including “material discretionary elements”
• matters left to later legislation, including how the tax is collected and how it interacts with the CGT rules.

This is why we recommend preparing now and deciding later. Work done now on records, deeds and modelling is useful whatever the final law says. A restructure based on the draft is risky at best and one completed before 1 July 2027 cannot use the proposed rollover at all.

How does the trust tax credit for beneficiaries work?

The trustee would pay tax at 30%. This compares to current arrangements where a trustee rarely pays tax and distributes untaxed income to beneficiaries to include in their tax returns for tax assessment and liability.

Individual beneficiaries entitled to the trust’s income receive a credit for the minimum tax the trustee has paid. The credit is non-refundable. A beneficiary whose own tax rate is below 30% cannot get the difference back, so income distributed to them is effectively taxed at 30% or more.

That is the purpose of the measure. Distributing trust income to a family member on a low tax rate, such as an adult child at university, will save far less tax than it does now. A beneficiary already on the top marginal rate is largely unaffected, because the credit is used against tax they would pay anyway.

Does the minimum tax apply to bucket companies?

Yes, and this is where the draft is hardest on family groups. Treasury’s explanatory material says company beneficiaries “will not be entitled to this tax offset and will continue to be assessed” on the trust income they are entitled to. In practice, the same income can bear the trustee’s minimum tax and then company tax.

Many family groups send surplus trust income to a bucket company every year. If yours does, that arrangement needs to be modelled again before 1 July 2028. It is also the part of the draft that has drawn the most criticism, so it may change.

How are farming trusts affected?

Less than most, on the current draft. Taxable primary production income is excluded from the minimum tax, so a trust carrying on a farming business can continue to distribute its farming income much as it does now. The proposed rollover also allows assets used in a primary production business to stay in the trust while other assets are moved out.

That does not mean a farming trust can ignore the changes:

• income that is not primary production income, such as investment income, may still be caught
• the 2027 CGT changes apply to farmland and other trust assets in the same way as to any other trust
• succession remains the larger question for most farming families, and the structure needs to suit the next generation as well as the current tax position.

Our Regional Business and Farming page covers the farm tax matters we work on from our Albany regional office.

How do the 2027 CGT changes fit in?

They are already law and they start a year earlier. For gains accruing from 1 July 2027, the 50% CGT discount for individuals and trusts is replaced by indexation of the cost base.

Eligible assets held by individuals and trusts are treated as sold just before 1 July 2027 and reacquired. The gain up to that point is not taxed then. Under sections 112-165 and 112-170 of the Act, it is deferred and worked out when the asset is later sold, using its market value just before 1 July 2027 or an alternative apportioning method the Minister may determine. The choice of method does not have to be made until you lodge your tax return for the year the asset is sold.

The law does not require every asset to be valued by 30 June 2027. It is sensible to check your cost base records now and decide which assets warrant a valuation made at the time, for example business premises, farmland or shares in a private company where a later valuation would be hard to support.

We explain the CGT changes in more detail in a separate article.

Is there tax relief if we restructure out of the trust?

Under the draft, yes, but it is not a general permission to move a single asset. The proposed rollover runs from 1 July 2027 to 30 June 2030 and generally requires all of the trust’s assets to be transferred within that window. The main exceptions are assets used in a primary production business, assets needed to pay the trust’s liabilities and winding-up costs, items that cannot be transferred, and assets that cost $1,000 or less.

If the required assets have not all been transferred by 30 June 2030, the relief is lost for every asset, including those already moved. For a family trust, every individual with an interest in the receiving entity must have been a beneficiary and a member of the family group before the transfer. The receiving entity can be a company, individuals, a partnership or a trust that is not itself subject to the minimum tax.

Some groups may not need to wait for it. The existing small business restructure roll-over is available now to businesses with aggregated turnover under $10 million. For a family trust, the trustee must have made a family trust election, everyone who benefits before and after the transfer must belong to the family group, and it must be a genuine restructure of an ongoing business.

Neither rollover deals with stamp duty. In Western Australia, transfer duty on land, goodwill, vehicles and other dutiable property are state taxes to be worked out separately. For a trust that holds property, duty can be the largest single cost of a restructure.

The administrative burden of a restructure is sizeable. Every asset, contract, liability, bank account, employee, registration, accounting package, bank loan and more needs to be moved across to a new entity. It can be done and we are here to assist, but we note it can be a long process to complete.

Which family groups should look at this first?

The most exposed groups tend to look like this hypothetical composite. A South Perth family runs its business through a discretionary trust. Each year the trustee distributes to both parents and to two adult children who are studying, and the balance goes to a bucket company. The company has lent money back to the trust to buy equipment. The business premises sit in a second trust.

That one structure is affected in four ways:

• distributions to the adult children lose most of their tax benefit under the minimum tax
• the bucket company receives no credit for the trustee’s tax under the draft
• the company’s loan back to the trust, and any distributions the trust still owes the company, have to be dealt with in any restructure, usually with Division 7A in the background
• the premises may warrant a valuation made at the time, and moving them to another entity brings WA duty into play.

Distributions to adult children are not in themselves a section 100A problem. The ATO’s concern, set out in TR 2022/4, is an arrangement where a beneficiary is made entitled to income but someone else, such as the parents, receives the benefit, and the other statutory conditions are met. Ordinary family or commercial dealings are excluded. A review is a good time to check that distributions are paid and used the way the resolutions say.

Can I avoid the minimum tax by fixing each beneficiary’s share?

Under the draft, yes, but it is a permanent trade. An existing discretionary trust can elect to become an “excluded election trust”. The trustee nominates the beneficiaries and a fixed percentage for each, and must make them presently entitled in those percentages every year. The trust is then outside the minimum tax.

The election can look attractive on today’s numbers. If the fixed split suits the family’s current incomes, some of the benefit of distributing across the family is kept. The difficulty is that the split is fixed while the family keeps changing.

The main conditions and risks under the draft:

• It is a one-off choice. The election is available only to trusts in existence on 1 July 2028 and must be made in the 2028–29 income year.
• The nominated percentage for each beneficiary must also apply to trust capital, and the nominations must cover 100% of both income and capital.
• The nomination can only be varied on a beneficiary’s death, or on a relationship breakdown between two nominated beneficiaries dealt with by court order or binding financial agreement. Grandchildren born later cannot be added without reducing someone else’s share.
• If the trustee does not make the beneficiaries entitled as nominated, the election is revoked automatically. For that year the trustee is taxed on all of the trust’s net income at the top marginal rate plus Medicare levy, and the minimum tax applies from then on. Commentators have noted the draft has no correction mechanism for an honest mistake.
• A nominated company that is wound up, deregistered or ceases to be eligible also triggers revocation.
• A trustee can revoke the election, but once revoked it cannot be made again.
• Commentators have asked whether fixing entitlements could be treated as a resettlement for state duty purposes. The draft does not say and in effect it is not for the Federal Government to advise State Government and the Courts on definitions that are outside of their scope.

The revocation rule could be a particular problem for capital gains given cancellation triggers 47% tax in the year of revocation. Where a capital gain, or an amount under the small business CGT concessions, would be better distributed to beneficiaries other than those nominated, regaining that flexibility would mean ending the election in an earlier year, accepting top-rate tax on all the trust’s income for that year, and then dealing with the capital gain the following year as a minimum tax trust. We would like to think our clients plan their CGT events well in advance, but circumstances and opportunities often arise that need to be dealt with at the time.

Fixed entitlements to income and capital also raise questions outside tax. Before electing, a family should get separate legal advice on asset protection and family law.

In our view, the election will suit a small number of settled families, for example a couple with adult children, stable incomes and no plans to add beneficiaries, or a trust holding passive investments. For a trading business with succession ahead, the loss of flexibility is likely to cost more than the tax it saves. The decision does not need to be made until 2028–29, and the rules may change before then so we are treating it as interesting, problematic and hypothetical until we know more.

Should we restructure now or wait?

In our view, most family groups should not restructure on the draft alone. The legislation has not been introduced, the proposed rollover does not open until 1 July 2027, and the treatment of company beneficiaries may change. Restructuring now means paying duty and advisers’ fees under rules that are not settled. We approach restructuring selectively, not routinely.

Leaving everything until the last minute is also a mistake:

• where an asset warrants a valuation made at the time, valuers are likely to be busy in the first half of 2027
• for a restructure after 1 July 2027, how the gain deferred under the CGT transition is treated depends on the rollover used, and should be confirmed before you rely on it
• trust deeds, old distribution resolutions and loan agreements take time to find and correct
• the proposed rollover requires all relevant assets to be moved by 30 June 2030, which takes planning, finance approvals and duty assessments.

What should I do before 30 June 2027?

1. List every entity in the group and the assets each one holds.
2. Check the cost base records for each asset and decide which ones warrant a valuation made at the time.
3. Find your trust deeds. Check who controls the trust, what powers the trustee has, and whether a family trust election has been made.
4. Work out the balances owed between the trust, the bucket company and family members, including any Division 7A loans.
5. Have the tax modelled under current law and under the draft, using what the trust actually distributes each year.
6. Consider whether a fixed entitlement election could ever suit your family, so it can be compared with a restructure when the time comes.
7. Make the decision once the final legislation is introduced.

What a Porters CA review covers

We review family groups’ structures as part of our business advice work. A review covers:

• a map of the entities in the group and how income and money move between them
• the tax position under current law and under the draft minimum tax
• the assets affected by the 2027 CGT changes and the records or valuations each one needs
• the trust deed, distribution history and any Division 7A balances
• the options, including keeping the trust as it is, changing how it is used, a fixed entitlement election or a restructure, with the duty and succession implications of each.

To arrange a review, contact us or call Simon Terry in South Perth on (08) 6436 0900 or Jodi Bradley in Albany on (08) 9842 2511.

 

About the author. Simon Terry LLB BCom CA is a Director of Porters CA, a Chartered Accounting firm with offices in South Perth and Albany, Western Australia. He is a registered tax agent and advises business owners and family groups on tax and structuring.

This article is general information based on the law as at 23 September 2026. You should seek advice specific to your circumstances.