The proposed measures, the bulk of which would come into effect from 1 July 2028, would:

• impose a 30% minimum tax on the net income of most discretionary trusts
• deny credits for that minimum tax to corporate beneficiaries
• introduce from 1 July 2027, a broad three-year roll-over relief regime to facilitate restructures from discretionary trusts to individuals, companies, and fixed trusts
• introduce an optional excluded election trust (EET) regime allowing certain existing discretionary trusts to avoid the minimum tax by effectively pre-nominating beneficiaries and fixed distribution percentages
• replace the existing income tax definition of fixed trust with a significantly broader principles-based definition, with fixed trusts also being excluded from the minimum tax regime
• introduce a number of exclusions for testamentary trusts, primary production income, charities, deductible gift recipients (DGRs), and certain other trust structures.

These measures represent one of the most significant reforms to discretionary trust taxation in decades and have the potential to materially alter the attractiveness and commercial viability of existing trust structures. The measures are broadly consistent with the exposure draft (ED) which SW had previously provided submissions on here.

Unfortunately, the draft legislation introduced does not appear to have made any material changes recommended as part of the feedback provided by SW or other stakeholders.

How does the tax operate?

From income years commencing on or after 1 July 2028, trustees of affected trusts, referred to in the legislation as minimum tax trusts, will be liable to pay tax at a minimum rate of 30% on ‘minimum tax income’. Several categories of income are excluded from minimum tax income, including:

• primary production income
• certain income relating to vulnerable minors
• income allocated to registered charities, tax exempt entities, and DGRs
• distributions to foreign beneficiaries subject to withholding-tax and conduit foreign income rules
• eligible testamentary trust income.

Corporate beneficiaries remain adversely affected

One of the most controversial features of the proposal has been retained, namely, that a corporate beneficiary of a minimum tax trust:

• remains assessable on trust income under ordinary rules
• does not receive any offset for the minimum tax paid by the trustee.

For minimum tax income, this would generally mean that such income distributed by a minimum tax trust to a company will bear tax at 60%.

New definition of fixed trust

The Bill repeals the existing fixed trust definition and replaces it with a broader principles-based test. Under the new regime, a trust may qualify as a fixed trust where either:

• beneficiaries have fixed entitlements
• there are no material discretionary elements capable of significantly affecting beneficiaries’ rights to trust income or capital.

Importantly, the following ordinary discretionary powers, commonly found in most trust deeds, will not necessarily prevent a trust from being treated as fixed:

• amendment powers
• issue and redemption powers
• administrative powers
• certain governance provisions.

Managed investment trusts

The ED legislation provides the Minister with the power, by legislative instrument, to determine that trust estates of a certain kind are not minimum tax trusts, including if the Minister is satisfied that each trust estate of that kind has widely held membership or is used for collective investment by pooling the contributions of members. We hope that this mechanism will be used to confirm that managed investment trusts (MIT) are fixed trusts, although this remains to be seen.

Testamentary trust concessions

Discretionary testamentary trusts established for genuine testamentary purposes are excluded from the proposed 30% minimum tax, as are deceased estates. This means eligible testamentary trust income continues to be taxed under the existing trust rules, including the ordinary adult tax rates available to minors on excepted trust income.

Transitional roll-over relief

Consistent with the exposure draft, a concession is provided to enable a restructure of trusts into a new vehicle. This dedicated roll-over regime is proposed to be available from 1 July 2027 to 30 June 2030.

The measure is intended to facilitate transfers of assets from discretionary trusts into:

• companies
• fixed trusts
• other eligible fixed structures.

Key conditions

The regime contains a number of requirements including:

• the requirement that all assets of the trust be transferred to the new vehicle, subject to certain limited exceptions, remains a major point of criticism, as the existence of dutiable property in a trust may significantly deter access to roll-over relief
• continuity requirements (broadly ensuring consistency of underlying ownership) must be satisfied
• residency requirements
• a requirement that no material discretionary elements exist within the resulting (transferee) structure for a prescribed period
• elections and notifications must be provided to the Commissioner.

Excluded election trusts (EETs) — alternative to restructuring

A second transitional measure is the introduction of an EET regime. Rather than restructuring, an eligible discretionary trust existing on 1 July 2028 may elect to become an EET. An EET will not be treated as a minimum tax trust subject to the 30% tax impost while the election remains effective.

An EET election can only be made for trusts that are in existence on 1 July 2028 and requires trustees to nominate:

• each beneficiary
• fixed percentages of income and non-income earnings.

The nomination generally cannot be later changed except in limited circumstances such as:

• death of a nominated beneficiary
• relationship breakdown.

Revocation consequences

If an EET fails to comply with the beneficiaries and proportions nominated in the EET election:

• the election is automatically revoked
• for the year income to which the revocation occurs, the beneficiaries are treated as not being presently entitled to the income of the trust, which means that the trustee would be assessed under section 99A at the top marginal rate plus Medicare levy
• in subsequent years, the trust would become subject to the minimum tax regime thereafter.

A trustee also has a once-only opportunity to voluntarily revoke an EET election.

SW comments

The proposed legislation represents a major change to the taxation of family groups and private investment structures. For many existing discretionary trusts, particularly those utilising company beneficiary arrangements, the following measures, in combination, may significantly increase effective tax costs:

• a trustee-level 30% minimum tax
• denial of offsets to corporate beneficiaries.

While the Government has provided both roll-over relief and the EET regime as transition mechanisms, each option contains technical requirements and potential commercial implications that should be carefully considered well before the proposed 1 July 2028 commencement date.

SW can model the impact of the minimum tax on your current structure, assess whether existing arrangements remain fit for purpose, and evaluate the three practical paths — rollover, EET election, or accepting the minimum tax — including the interaction with State duty.

Please contact your SW advisors to discuss how these proposed changes may affect you or your clients.

Contributors

Ned Galloway | Associate Director, Tax

The post Trust in the detail, part three: The minimum tax on trusts Bill appeared first on SW Accountants & Advisors.

Introduction

On 3 September 2026 the Government released exposure draft legislation (ED) implementing the core components of the 30% minimum tax regime (MTR) for discretionary trusts, with consultation closing on 18 September 2026. The package confirms a 1 July 2028 start date and introduces two response pathways for affected trusts:

• transitional rollover relief
• a new excluded election trust (EET) election.

Following our 31 July 2026 submission on the Consultation Paper, SW has lodged a second submission responding to Treasury’s exposure drafts on ‘Minimum Tax Trusts’. We welcome several features of the draft relative to earlier announcements; in particular a broader fixed trust definition, the carve-out for distributions to charities, not-for-profits and tax exempt, the refund model for excess franking credits, and the availability of offsets through chains of trusts. However, a number of issues and anomalies remain that, in our view, require further consideration before the measures are settled.

What SW has submitted

The fixed trust definition should turn on the exercise of powers, not their existence

Almost every professionally drafted trust instrument contains powers to amend the deed, to issue or redeem units, to characterise receipts as income or capital, or to create classes of interests. Under the proposed changes, the mere existence of such a power appears capable of denying fixed trust status. The result is that a very large population of trusts that are, in economic substance, entirely fixed, including the vast majority of single class unit trusts, would be treated as discretionary by default.

We have submitted that unexercised powers, subject as they are to fiduciary constraint, should be disregarded unless and until exercised in a way that materially alters defined entitlements, consistent with safe harbour 6 in PCG 2016/16.

MITs, widely held trusts & employee share trusts need to be expressly excluded

The Explanatory Memorandum and the Treasurer’s media release states that MITs, widely held trusts, and employee share trusts will fall outside the MTR. In our view that outcome is not clear on the text of the law. Absent express inclusion in the fixed trust definition, these trusts will need to review and amend their constitutions, an avoidable cost, with real practical difficulty for schemes regulated under the Corporations Act 2001 where member resolutions are required, and with potential State duty exposure. At a minimum, there should be a statutorily binding safe harbour along the lines of PCG 2016/16 that does not depend on the exercise of the Commissioner’s discretion.

The EET regime is a useful concept but needs more flexibility

We support the logic of the EET regime, which allows a trust to be notionally fixed for tax purposes without surrendering the asset protection that a discretionary structure offers. To be workable, we have submitted that:

• the grounds for varying an election be expanded beyond death and relationship breakdown, to include bankruptcy, legal disability, or incapacity of a nominated beneficiary
• the definition of eligible company be tested on the same ‘exercise, not existence’ basis as the fixed trust definition
• availability be extended to trusts established on or after 1 July 2028, or at least to 30 June 2030 to align with the proposed rollover window
• distributions of corpus that are not capital gains should not be constrained by the election
• automatic revocation of the EET not be triggered by an accumulation of income assessed under section 99A, by the application of section 100A, or by distributions to registered charities and tax exempt.

We have also flagged the trustee risk highlighted by Owies v JJE Nominees Pty Ltd, and the residual uncertainty as to whether making an election could attract duty in some states, a point that will need confirmation from each revenue authority if the regime is to be relied upon.

Rollover relief should not be defeated by dutiable property

The requirement that all trust assets be transferred means that a trust holding dutiable property is effectively forced to choose between a duty cost and the minimum tax. As a trust cannot both elect the EET regime and access the rollover, income from any retained assets remains within the MTR in any event. We see no policy or integrity basis for the duty impost and have submitted that the carve-outs be expanded.

Testamentary trusts, primary production & corporate beneficiaries

We have renewed three points from our earlier submission.

• The testamentary trust exclusion should operate by reference to distributions actually made to individuals and exempt entities, rather than requiring existing wills to be rewritten.
• The primary production exclusion should extend to income derived from the use of land or assets by a related entity carrying on a primary production business — a very common rural ownership structure.
• The double taxation of distributions to corporate beneficiaries, which produces an effective rate of 60%, rising to 69% on payment to a top-rate shareholder, remains sufficiently harsh that we have again urged the Government to reconsider it.

Consultation process

While we welcome Treasury’s adoption of several points raised in the first round of consultation, a consultation period of 11 working days is too short for reforms of this scope and depth, particularly where the bulk of the changes do not commence until 1 July 2028. We have recommended that more time be allowed for future tranches.

What this means for you

The regime will have significant consequences for private business and family groups using trusts, particularly those with corporate beneficiaries. It may also affect commercially fixed unit trusts, managed funds, primary production structures, testamentary trusts, and groups weighing a restructure ahead of 1 July 2028.

How SW can help

SW can model the impact of the minimum tax on your current structure, assess whether existing arrangements remain fit for purpose, and evaluate the three practical paths — rollover, EET election, or accepting the minimum tax — including the interaction with State duty.

Please contact your SW advisors to discuss how these proposed changes may affect you or your clients.

Contributors

Ned Galloway | Associate Director, Tax

The post Trust in the detail, part two: SW responds to the minimum tax trust exposure draft appeared first on SW Accountants & Advisors.

Introduction

In the 2026–27 Federal Budget, the Government announced a 30% minimum tax on discretionary trusts, with the stated policy objective to limit income splitting and better align the tax on trust income with the rates paid by wage and salary earners.

While we understand the policy goal of maintaining a genuine 30% floor on discretionary trust income, we hold significant concerns that key elements of the measure, as currently framed, are over-inclusive, administratively burdensome, and, in places, penal. Our submission proposes practical, targeted refinements that preserve the 30% floor while avoiding unfair outcomes.

Even if the significant variations to the proposed regime submitted to Treasury by SW are accepted, there would still be significant impacts on longstanding and accepted structures – in particular the inability for family groups to offset (pre-tax) discretionary trust distributions against losses at the beneficiary level, for example, losses in companies and trusts.

What SW has submitted

In response to the limited scope questions on which consultation was sought, a brief outline of the key points submitted by us are as follows:

A statutory definition of ‘discretionary trust’

The measure should not simply capture any trust that fails the existing ‘fixed trust’ test in Schedule 2F of the ITAA 1936. That bar is exacting and would produce a large number of ‘false positives’, drawing in unit trusts and other structures that are, in substance, fixed. SW submits there should be a purpose-built definition targeting trusts with a substantive power to redirect the economic enjoyment of income or capital between beneficiaries, with express carve-outs for managed investment trusts (MITs), attribution managed investment trusts (AMITs), and most unit trusts.

Carve-out for tax-exempt entities

A non-refundable 30% withholding on distributions to income tax-exempt entities (such as charities and ancillary funds) would, in effect, tax the exempt sector and reduce philanthropic funding by up to 30%. We submit that the offset should be refundable for exempt beneficiaries, or that such distributions be carved out entirely.

Remove the double tax on corporate beneficiaries

Denying company beneficiaries a credit for the trustee-level tax produces an effective rate of 60%, and up to 69.7% once distributed to individuals. SW proposes a ‘restricted franking account’ mechanism that delivers a non-refundable offset to the company and quarantines the credit so it can never be refunded to low-rate shareholders. This maintains the 30% floor without double taxation – and largely removes the need for complex rollover relief.

Workable rollover relief & state duty

If the penal treatment of corporate beneficiaries proceeds, rollover relief becomes critical. We warn that, without matching state duty concessions, restructures could trigger duties of up to 6.5%. We submit that relief should not require all assets to be transferred, and that the Commonwealth should secure aligned state duty relief or provide an income tax offset for duty paid.

Collection, lodgement & the Bendel decision

SW recommends aligning trust and individual lodgement dates, making the trustee and beneficiary jointly and severally liable (to avoid widespread deed amendments), refunding excess franking credits to the trustee, and confirms that no further Division 7A changes are needed following the High Court’s decision in Bendel.

Who is impacted

• Private business and family groups operating through discretionary trusts, particularly those with corporate beneficiaries.
• Unit trusts and other structures that are commercially ‘fixed’ but may fall within the current definition by default.
• Charities, ancillary funds, and other income tax-exempt beneficiaries of discretionary trusts.
• Property, investment, and testamentary trust structures, and those weighing restructures ahead of 1 July 2028.

How SW can help

SW is actively advising clients on the practical implications of the proposed regime. Our team can model the impact of the minimum tax on your current structure, assess whether existing arrangements remain fit for purpose, and evaluate restructuring options ahead of the 1 July 2028 commencement, including the interaction with state duty. We will continue to keep clients informed as the consultation progresses and draft legislation is released.

Please contact your SW advisor to discuss how these proposed changes may affect you or your clients.

Contributors

Ned Galloway | Associate Director, Tax

Related links

Treasury – Minimum tax on discretionary trusts: Consultation Paper (8 July 2026)

ATO – Tax reform: introducing a minimum tax on discretionary trusts

SW insight – Proposed testamentary trust rules: Understanding the 30% minimum tax exemption

This alert is general in nature and does not constitute advice. The measure is not yet law and remains subject to consultation. Liability limited by a scheme approved under Professional Standards Legislation.

The post Trust in the detail: SW calls for a fairer 30% minimum tax on discretionary trusts appeared first on SW Accountants & Advisors.

The Treasury has released a consultation paper ‘Giving fund reforms: distribution rate and smoothing’, as part of its broader strategy to double charitable giving by 2030.

While these reforms aim to boost philanthropy, there are concerns that raising the minimum distribution rate could undermine the long-term sustainability of Private Ancillary Funds (PAFs), also known as Giving Funds (the Funds). These Funds were originally established to provide long term charitable support.

Our feedback on Giving Fund reforms

In response to these concerns, we have submitted feedback on the 31 July 2025, on behalf of our clients to Treasury’s consultation process.

Heather Dyke, Associate Director, expresses that

“Philanthropy is very important for many of our private clients. Most of our large private clients have set up Private Ancillary Funds (to be known as Giving Funds) to provide much needed long-term funding to charities.”

We are actively involved in the consultation process and represent our clients’ interests, with our Directors also serving on the boards of several Giving Funds, offering valuable insight into their investment and giving strategies.

Background

The Government has previously committed to working with the philanthropic, for-purpose, and business sectors to develop a national giving strategy.

What are the changes?

Following the introduction of a new Deductible Gift Recipient (DGR) category for Community Foundations, the government announced it would also improve the support provided to charities through Funds by:

• aligning and increasing the minimum annual distribution rate for public and private funds
• allowing funds to smooth their minimum annual distributions over three years, and
• renaming Private Ancillary Funds in the tax law to Giving Funds to reflect their role in giving to charities.

Drawbacks of raising minimum distribution rate

The key message from our feedback is that a 5% minimum distribution rate should be maintained. A higher distribution rate may decrease the attractiveness of Giving Funds to donors and impact the long-term sustainability of perpetual funds.

As the minimum distribution rate is not a cap, our clients generally provide regular distributions to charities at the minimum rate and extra distributions for capital works, special projects or when natural disasters occur. If the minimum rate is increased, then smoothing becomes very important and could be overly complex to monitor.

Our full submission to the Giving Fund consultation can be found here.

How SW can help

SW supports private clients in establishing and managing Giving Funds that align with their long-term philanthropic goals. We provide strategic advice on fund structuring, compliance, and distribution planning to ensure sustainability and impact.

We are actively engaged in the consultation process and advocate on behalf of our clients to help shape policy outcomes that support enduring charitable giving.

For assistance in establishing or managing a Giving Fund please contact our private client specialists, Heather Dyke or Matthew Oakey.  

The post Feedback on Treasury’s Giving Fund reforms appeared first on SW Accountants & Advisors.