A one-page briefing on the transition rules for discretionary trusts, and the options open to beneficiaries.
From 1 July 2028, discretionary trusts face a 30% minimum tax at the trustee level, under draft law released by Treasury on 3 September 2026. Non-corporate beneficiaries get a credit for tax the trustee has already paid; distributions to a corporate “bucket company” beneficiary get no credit at all, so that income is effectively taxed twice. There is no automatic exemption for existing trusts every discretionary trust must actively choose a path before 1 July 2028.
The Transition Window — Key Dates
| 12 May 2026 | 2026–27 Budget announces a 30% minimum tax on discretionary trusts |
| 3 Sep 2026 | Draft law released — introduces the fixed trust and EET pathways |
| 1 Jul 2028 | Tax starts. Trust must exist on this date to elect EET (Excluded Election Trust) |
| 2028–29 | One-off window to make the EET election, if chosen |
| 30 Jun 2030 | Rollover relief to a company / individual closes |
Your Options as a Discretionary Trust or Beneficiary
| OPTION | WHAT IT MEANS | BEST SUITED TO |
| 1. Become a fixed trust | Restructure or amend the deed so entitlements are fixed, not discretionary — outside the minimum tax entirely. | Unit trusts; families ready to fix ownership shares now. |
| 2. Elect EET (one-off) | Excluded Election Trust: a one-off election that locks in a fixed nomination of beneficiaries and shares in 2028–29, while staying a discretionary trust in form. | Stable families, especially holding dutiable land. |
| 3. Roll over to a company / individual | Move trust assets out under CGT rollover relief (2027–2030). | Operating businesses; owners ready to hold assets personally. |
| 4. Do nothing — pay the tax | Trust continues as-is and pays 30%+ trustee-level tax from 1 Jul 2028. | Trusts with genuinely variable income, where fixing shares is wrong. |
What This Means for Beneficiaries
- Individual beneficiaries: distributions carry a non-refundable tax credit for trustee-level tax already paid — no double tax, but excess credit below your marginal rate is lost.
- Corporate “bucket company” beneficiaries: no credit — expect roughly 60% combined tax at the corporate level, and higher again once profits reach you personally.
- Testamentary trust beneficiaries: genuine testamentary trusts established before 1 July 2028 are largely exempt, provided the trust isn’t restructured purely to avoid the tax.
What To Do Now
- Ask GTB to model all four pathways for your trust — the right answer depends on your family’s structure, assets and income variability.
- If your trust holds dutiable land or property, discuss the EET election early — stamp duty treatment for restructures is still unconfirmed in most states.
- Review any will with a testamentary trust to ensure it still qualifies for the exemption if it takes effect on or after 1 July 2028.
This is general information only, current as at 24 September 2026, and does not constitute tax or financial advice. The measures described are draft law only and are not yet enacted — details may change before legislation is finalised. Please contact your GTB adviser to discuss how these changes affect your specific circumstances.
