Tax & Structuring Update
The proposed 30% minimum tax on discretionary trusts: what property investors should know
Treasury’s consultation has now closed, but the proposal remains draft legislation. For property investors using discretionary trusts, the focus should be on understanding the potential impact rather than reacting to the headline.
Treasury’s consultation on the proposed 30% minimum tax for certain discretionary trusts closed on 18 September 2026.
The exposure draft gives us considerably more detail than the original announcement. It confirms a number of exclusions and introduces an alternative pathway that may allow some existing discretionary trusts to avoid the minimum tax by committing to fixed distributions.
The most important point, however, is that this is still draft legislation.
The consultation period has finished, but the legislation may still change before it is introduced into Parliament, debated and potentially passed.
For property investors, preparation matters more than reaction. The right response is to understand how the proposed rules may interact with your existing ownership structure, taxation position and long-term investment strategy.
What is being proposed?
Under the exposure draft, a 30% minimum tax would apply to relevant income of certain discretionary trusts from 1 July 2028.
The tax would be payable by the trustee. Broadly, where the existing tax payable in relation to relevant trust income is below 30%, the proposed rules would apply a top-up so that the income is taxed at a minimum rate of 30%.
Non-corporate beneficiaries may be entitled to a non-refundable tax offset for tax paid by the trustee in relation to their share of the trust income.
This does not mean every trust distribution will automatically attract an additional 30% tax. The actual outcome will depend on the trust, the nature of its income, the beneficiaries involved and how the existing tax provisions apply.
Source: Australian Treasury – Minimum tax on discretionary trusts consultation
Which trusts are outside the proposal?
The exposure draft identifies several structures that would not be treated as minimum-tax trusts.
These include:
- Fixed trusts
- Special disability trusts
- Deceased estates
- Complying superannuation entities, including complying SMSFs
- Trusts prescribed through a future legislative instrument
Treasury’s explanatory material also indicates that bare trusts, managed investment trusts, attribution managed investment trusts and various widely held trusts are expected to fall outside the regime, largely because of the proposed expanded definition of a fixed trust.
This distinction is particularly important for property investors. A bare trust or security trust used in an SMSF borrowing arrangement is not the same as a family discretionary trust simply because both structures use the word “trust”.
Certain categories of income would also be excluded, including qualifying primary production income, specified income involving vulnerable minors, certain charitable and not-for-profit distributions, some non-resident withholding income and qualifying testamentary trust income.
Source: Treasury – Exposure draft explanatory materials: minimum tax
The new election option
One of the more significant developments in the exposure draft is an alternative pathway for certain discretionary trusts already in existence on 1 July 2028.
Under the proposed rules, an eligible trustee could elect for the trust to operate under an excluded election trust regime. The trustee would nominate the beneficiaries and the fixed proportions of income and capital to which each beneficiary would be entitled.
Those nominated proportions would need to account for 100% of the trust’s income and capital, and the same proportions would generally need to be followed while the election remained in force.
The potential advantage is that the trust may be able to avoid the proposed minimum tax without completing a full legal restructure, potentially reducing some of the complications associated with transferring assets into a new structure.
The trade-off is flexibility. Once the proportions are fixed, the trustee would have substantially less discretion over how income and capital are distributed.
Source: Treasury – Exposure draft explanatory materials: electable regime
Review your structure in the context of your investment strategy
If you currently hold property through a discretionary trust, speak with your accountant and legal adviser about the proposed rules. We can then help you assess the property, borrowing and portfolio implications as part of your broader investment strategy.
Official references
- Australian Bureau of Statistics: ABS Data Explorer
- Reserve Bank of Australia: RBA Statistics
- APRA: Bank Lending & Serviceability Data
- Cotality (formerly CoreLogic): Home Value Index
- SQM Research: Vacancy Rates & Market Data
- PropTrack: Property & Market Insights
