What is the proposed Trust Minimum Tax?

A proposed 30 percent floor on net trust income from 1 July 2028. It caps the income-streaming advantage of discretionary trusts by ensuring at least 30 percent effective tax on net trust income regardless of who the trustee streams to.

When does the floor apply?

From 1 July 2028 (proposed). A restructure relief window runs from 1 July 2027 to 30 June 2030; gains realised inside the window are exempt from the floor, giving trustees a transition path to exit the structure if they choose.

Does the floor apply to fixed or unit trusts?

No. The proposed floor specifically targets discretionary trusts (where the trustee has discretion over distributions). Fixed and unit trusts with pre-set entitlements are out of scope.

Are existing trusts grandfathered from the minimum tax?

No. The floor applies to all discretionary trusts from the start date, with no grandfathering. The restructure relief window is the only transition concession provided.

Trust minimum tax (2028): how the proposed 30% floor changes discretionary trust property

The proposed Trust Minimum Tax is the 2025 Budget's answer to a long-standing structural feature of Australian tax: a discretionary trust can stream income to whichever beneficiary is on the lowest marginal rate that year, dramatically reducing the family group's tax bill. From 1 July 2028 the proposal caps that advantage with a 30% floor on net trust income. For property held in a trust, the change is material.

The mechanic

Under current law, a discretionary trust's trustee makes a resolution before 30 June each year to distribute trust income to specified beneficiaries. Each beneficiary then pays tax on their distributed share at their personal marginal rate. There is no minimum.

From 1 July 2028 the proposal sits a floor on top. The trust group pays the higher of:

Beneficiary tax - the sum of marginal-rate tax each beneficiary pays on their distributed share, as today.
30% of net trust income - a floor calculated at the trust level on the trust's net taxable income, before any distribution.

If the floor is higher, the trust pays the difference. This operates as a top-up assessment on the trustee, not a reassessment of the beneficiaries.

Worked example: a $50k trust net income

A trust earns $50k net taxable income from a residential property. The trustee distributes:

$25k to spouse 1 (on $30k other income → marginal rate 30%)
$25k to spouse 2 (on $200k other income → marginal rate 45%)

Beneficiary tax:

Spouse 1: $25k × 30% = $7,500
Spouse 2: $25k × 45% = $11,250
Total beneficiary tax: $18,750

30% floor: $50k × 30% = $15,000.

Beneficiary tax ($18,750) is higher than the floor ($15,000), so the floor doesn't bite. The trust pays nothing extra.

When the floor bites: streaming to a low-rate beneficiary

Same $50k trust income. The trustee instead streams the whole amount to an adult child studying full-time with no other income.

Beneficiary tax: $50k taxed at progressive rates - approximately $5,420 (tax-free threshold + 16% bracket only).

30% floor: $50k × 30% = $15,000.

The floor ($15,000) is higher than beneficiary tax ($5,420). The trust pays the difference: $9,580 top-up assessment.

That's the design point. The trust paid $5,420 + $9,580 = $15,000 effectively - the same 30% the trust would have paid if no streaming was attempted.

What it changes for property in a discretionary trust

For trust-held investment property, the floor changes the calculus in two ways:

Annual rental income (positive years): If the trust streams to low-rate beneficiaries (retired parents, studying children, parental-leave spouse), the floor caps the saving at 30% from 2028-29. Most active high-streaming strategies were producing effective rates well below 30%; they now don't.
Capital gain at sale: If the gain is streamed to low-rate beneficiaries, the same floor applies. Combined with the 30% CGT minimum tax floor on the post-2027 portion, the streaming benefit on capital gains is essentially eliminated.

For trusts already streaming to high-rate beneficiaries (top bracket adults), the floor is a no-op - beneficiary tax already exceeds 30%.

The restructure-relief window

The proposal includes a window from 1 July 2027 to 30 June 2030 during which discretionary trusts can be restructured (e.g. assets transferred to a company, to joint personal, or to another structure) without triggering the normal CGT and stamp duty consequences. This is explicitly designed to give trusts an exit path before the floor starts biting from 1 July 2028.

The relief covers federal CGT but not state stamp duty in most jurisdictions - check with state revenue offices. NSW, Victoria and Queensland have signalled they'll align stamp duty relief with the federal window, but final positions vary.

Should you exit a discretionary trust?

Three factors:

Beneficiary mix. If you stream mostly to high-rate beneficiaries today, the floor isn't a problem. Stay put.
Hold horizon for the property. Short remaining hold (< 5 years) means the floor doesn't bite for many years - exit cost dominates. Long hold means the floor compounds; restructure looks more attractive.
Alternative structure cost. Restructure relief covers federal CGT but not state stamp duty (mostly). A $1.5M trust property restructured to joint personal in NSW could attract ~$70k+ in stamp duty even with federal CGT relief.

For most existing trust-held single-property investors, staying in the trust and accepting the 30% floor will still beat the cost of moving. For complex trusts with multiple beneficiaries and meaningful low-rate streaming, the restructure window is worth a hard look in 2027.

Caveats

The Trust Minimum Tax is proposed as of late 2026. The rate, the start date, and the scope of the restructure relief may all shift in the final legislation. Federal Treasury has signalled a consultation process before introducing the Bill.