Discretionary Trust Tax Reform: Is Your Family Business Structure Ready?
From 1 July 2028, trustees of discretionary trusts will pay a minimum 30% tax on the trust’s taxable income. Non-corporate beneficiaries will receive non-refundable credits for tax paid by the trustee meaning a family member on a marginal rate below 30% cannot claim the difference back.
The bigger design change is in the corporate beneficiary rules. Under the proposal, corporate beneficiaries will be assessed on trust income they are entitled to, but will not receive credits for tax paid by the trustee. If enacted in this form, this materially changes the bucket company strategy used by most well-advised small and family businesses for the past three decades.
Treasury estimates the change will raise approximately $4.5 billion over four years. That number tells you how much of the existing tax position of family business is being targeted.
What is excluded?
- Fixed trusts, fixed testamentary trusts, complying super funds, special disability trusts and deceased estates.
- Primary production income, certain income relating to vulnerable minors, and income from existing testamentary trust assets.
What planning window applies?
Three years of rollover relief is proposed from 1 July 2027, allowing restructuring out of discretionary trusts into a company or fixed trust without triggering CGT.
What should you do now?
Nothing reflexive. The measure is a proposal it has not yet passed Parliament. But every family business operating through a discretionary trust should be reviewing:
- Whether the structure still makes sense under the proposed regime.
- Whether the bucket company arrangement needs to be reconsidered.
- Whether restructuring within the rollover window is the right move.
- How the change interacts with succession, retirement and superannuation strategy.
These decisions cannot be made in isolation. As chartered accountants and financial planners, we look at the full picture tax, structure, super and succession together.
The 50% CGT discount is being replaced. Here is your 14-month planning .
If you hold an investment property, a share portfolio, or business interests outside the small business CGT concessions, the 2026–27 Federal Budget changes the maths on every one of them.
From 1 July 2027, the long-standing 50% CGT discount will be replaced. In its place: cost base indexation for assets held more than 12 months, plus a 30% minimum tax on the resulting gain.
In a low-inflation environment, indexation does not restore the value of the 50% discount. For most assets, the new regime delivers a materially higher tax bill on sale.
What stays the same?
- Gains accrued before 1 July 2027 retain the 50% CGT discount.
- Pre-CGT asset gains accrued before 1 July 2027 remain exempt.
- Main residence exemption preserved.
- Superannuation tax arrangements unchanged.
- Small business CGT concessions retained in full the 15-year exemption, the active asset reduction, the retirement exemption and the rollover relief all continue. For business owners selling a business, this remains the most powerful tax shield in the system.
Your planning window
Approximately 14 months. Assets sold before 1 July 2027 continue under existing rules entirely. From 1 July 2027 onwards, the new regime applies.
That does not mean you should be selling everything. It means each asset deserves a fresh look:
- What is the accrued gain to date?
- What is the indexed cost base under the new rules?
- Where would the proceeds be redeployed super, debt reduction, new investment, business reinvestment?
- How does it fit with your retirement timeline and succession plan?
Some assets are better sold in the next 14 months. Some are better held. Some are better restructured. The right answer is asset-specific and client-specific and it depends as much on the financial planning side as the tax side.
As chartered accountants and financial planners, we model both together.
Negative gearing is changing. What it means for ordinary Australian families.
For four decades, successive Australian governments of both political stripes actively encouraged middle-income earners to invest in residential property. Negative gearing was the policy tool. It let a teacher, a nurse, a tradie, a small business owner or a working couple borrow against an investment property and offset the rental loss against their wages.
It is how millions of ordinary Australians built a second asset for their retirement, and a measure of security for their children.
That settled policy framework is being changed.
What the Budget proposes
From 1 July 2027, losses on established residential properties acquired after Budget night will only be deductible against rental income or capital gains from residential property. Excess losses can be carried forward but cannot be offset against wages or other income.
Existing investors are protected
- Properties held before 7:30pm AEST on 12 May 2026 (including contracts entered into but not yet settled) are grandfathered indefinitely.
- Existing landlords keep existing arrangements until disposal.
- Eligible new builds remain fully negatively gearable.
- Properties held in super funds and widely-held trusts are excluded from the changes.
- Build-to-rent and government housing investments are also exempt.
What it means for working families
If you already own an investment property, your existing position is protected. But for the next generation of working Australians looking to do the same thing buy a second property to build wealth for their family the rules are now different. So is the decision between an established property and a new build.
Even existing investors face new questions:
- If you sell an established property, the replacement will sit under the new rules.
- The interaction with the proposed CGT changes from 1 July 2027 means your full property strategy may need a fresh look.
- How the property sits alongside your superannuation, retirement plan and estate plan now matters more than it did.
These reforms have not yet been legislated. Detail may change. But the direction is clear.
As chartered accountants and financial planners, we help clients think through these decisions in the context of their full financial picture not just one asset at a time.
Read the fine print: what the small business Budget measures actually deliver
The 2026–27 Federal Budget was presented as a strong package of support for small business. Permanent $20,000 instant asset write-off. Return of loss carry-back. $1,000 standard work-related expense deduction. R&D incentive reformed.
As chartered accountants, our job is to read the fine print on behalf of our clients. Here is what each measure actually delivers.
Permanent $20,000 instant asset write-off
Made permanent from 1 July 2026 for businesses with turnover under $10 million. The certainty is genuinely useful. But the $20,000 threshold has not moved with inflation for some time serious capital expenditure typically sits above this level and still flows into the small business depreciation pool.
Loss carry-back returns with a cap
Companies under $1 billion turnover can carry a tax loss back against tax paid in the prior two years from 1 July 2026. Two limits matter: it is for revenue losses only, and the refund is capped at the company’s franking account balance. For companies that have already distributed franked dividends, the franking cap materially reduces the practical value. Always model what carry-back would actually deliver before relying on it.
R&D incentive — more gates, not just an expansion
- Core R&D offset rate rises by 4.5 percentage points a genuine win for businesses still in the regime.
- Supporting R&D expenditure is no longer eligible only core R&D qualifies.
- Minimum expenditure threshold rises from $20,000 to $50,000. Below the new threshold, work must go through a registered Research Service Provider or Cooperative Research Centre.
- Refundability for firms under $50 million turnover is limited to firms under 10 years of age older small businesses lose the cash refund.
- Additional ATO compliance activity on R&D is signalled.
$1,000 standard deduction
From 1 July 2026, employees and sole traders can claim up to $1,000 in work-related expenses without receipts. Average benefit estimated at $205 per worker. Draft legislation is already out for consultation the only Budget measure that close to law.
The honest read
The small business support is welcome but largely incremental. The structural reforms to trusts, CGT and negative gearing are substantially larger in their economic impact. A balanced view requires reading both sides of the package together and a balanced strategy requires advice that does the same.
Three reforms. One conversation. Why this Budget needs holistic advice.
The 2026–27 Federal Budget proposes three structural reforms at the same time:
- A 30% minimum tax on discretionary trust income from 1 July 2028.
- Replacement of the 50% CGT discount with indexation and a 30% minimum tax from 1 July 2027.
- Restriction of negative gearing on established residential property from 1 July 2027.
Each of these is significant on its own. Together, they redraw the tax landscape for small business owners, family business operators, and middle-income property investors. And they cannot be sensibly addressed by looking at any one in isolation.
Why?
A decision to restructure a trust has CGT consequences. The right CGT decision depends on where the proceeds will be redeployed personal name, company, investment portfolio, super. The right super strategy depends on your Division 296 exposure and your retirement timeline. The right retirement timeline depends on your business succession plan. The right succession plan depends on your estate position and your asset protection.
Every thread connects to every other thread.
Why we do it the way we do
ATB Partners operates as chartered accountants and financial planners under one roof, with one integrated client team. That means when a Budget like this lands, our clients get advice that weighs tax, structure, super, estate, succession and exit timing together. Not in separate meetings with separate advisers, who each see only their slice of the picture.
What this means for clients right now
The structural reforms do not take effect for 12 to 24 months. That is the right amount of time to plan properly, not to react quickly. We are encouraging all our clients to contact us to discuss whether any proactive planning or restructuring should be reviewed in light of the Budget.
For business owners and investors not currently working with ATB, we welcome enquiries from anyone who would like a strategic review of their position ahead of the planning windows.
Periods of legislative change create both risk and opportunity. Those who review their position early are generally in a stronger position than those who wait until reforms are fully implemented.
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