Trust Tax Update: More Choices. Less Flexibility

When the Government announced the proposed 30% minimum tax on discretionary trusts in the Federal Budget, many business owners were left asking the same question:

"What does this mean for us?"

At the time, the answer was largely: wait and see.

Treasury has now released draft legislation and, while the proposal isn't law yet, we finally have a much clearer picture of where things are heading.

What Has Changed?

The headline remains the same.

From 1 July 2028, many discretionary trusts could be subject to a minimum 30% tax on trust income.

What has changed is the number of pathways available to families and business owners.

What initially appeared to be a choice between paying the tax or restructuring has evolved into four distinct options.

Option 1: Do Nothing

Continue operating through your discretionary trust and pay the minimum tax where it applies.

For some families, this may be the simplest and most practical outcome.

Option 2: Rollover

A three-year CGT rollover window is proposed from 1 July 2027 to 30 June 2030 to support moving assets from discretionary trusts into more fixed structures such as companies or fixed trusts.

For some groups, this may create long-term certainty.

For others, it may introduce asset protection, succession, duty and commercial considerations that outweigh the tax benefits.

Option 3: Keep the Trust and Elect

This is the most significant development.

Treasury has proposed a new Excluded Election Trust (EET) option.

In simple terms, a trust can avoid the minimum tax by committing to fixed percentages of income and capital being distributed to nominated beneficiaries into the future.

No restructure.

No CGT event.

But far less flexibility.

And that's the trade-off.

Option 4: Use This as a Catalyst

Not every response to these changes needs to be defensive.

For some business owners, this is an opportunity to step back and redesign their structure around where they want to be in 10 or 20 years' time.

The goal isn't simply to preserve yesterday's tax outcome. It's to build a platform that supports growth, succession, asset protection and long-term wealth creation, while retaining the flexibility and commercial advantages that matter most.

In our experience, the strongest structures are rarely designed around a single tax rule. They're designed around a strategy, then built to endure as the rules evolve.

Our Early Read

The rules aren't final, but the policy intent is becoming easier to read: flexibility remains available, it's just unlikely to be as tax effective as it has been in the past.

The EET option is perhaps the most interesting development. It provides an alternative to restructuring and, for some groups, could preserve much of their existing structure, including bucket company arrangements. The trade-off is reduced flexibility.

What Are We Doing At Nudge?

What we always do.

We'll explore every angle, test what others take for granted, and help you make confident decisions about the future.

Yes, the proposed trust changes are significant. But we see them as an opportunity, not a problem.

An opportunity to design the structure you'd choose if you were starting again today.

One that's built for growth. Built for succession. Built for the next chapter. Not just the next tax rule.

Over the next two years, we'll work alongside you to challenge assumptions, explore alternatives and create a structure that remains fit for purpose long after the legislation is settled.

No hedging. No maybe. Just a nudge in the right direction.