30% floor from 1 July 2028
The trustee pays a minimum 30% tax on the trust's taxable income. Non-corporate beneficiaries obtain a non-refundable offset for tax the trustee has already paid. Bucket companies receive no offset at all which is a clear and deliberate design choice to stop the benefit being converted into refundable franking credits and paid out. Treasury's own example: $100,000 to a bucket company gives rise to $60,000 in tax before declaring a dividend from the bucket company to a shareholder (with potential top up tax).
This is one step closer to the death knell of bucket companies. We were hoping this would not be pursued by the Government. We think the mischief this is attempting to solve could be remediated by a relatively simple integrity rule.
This, of itself, will compel many groups to restructure and, in turn, give rise to significant administrative costs for taxpayers.
Rollover relief: the exit window
The proposed rollover does appear to be pleasingly broad. It is based on the existing small business restructure rollover (Subdivision 328-G), however, it seeks to address the limitations of 328-G. There is proposed to be no turnover cap, no requirement to show a "genuine restructure," and it covers passive assets as well as active business assets.
The rollover would require “all, or essentially all”, of the trust’s assets to be transferred to the new structure.
There is proposed to be a three year rollover window (from 1 July 2027 to 30 June 2030).
The consultation paper is 17 pages and includes 17 discussion questions but makes no mention of stamp duty: this is, and will remain, a critical outstanding question for you and your clients.
We expect this to be very heavily utilised, particularly given the draconian approach to bucket companies.
We would also expect that many taxpayers may seek to use the opportunity of a broad rollover to restructure when it was already in the back of minds.
The outcome of whether or not duty relief is available will be a significant factor for many clients, particularly those holding dutiable property or those in States that apply duty to transfers of business restructures.
What counts as a discretionary trust?
This is the sleeper issue. The test is noted as any trust that isn't a "fixed trust", which may include trusts where the trustee simply retains flexible powers even if they're never used. Treasury is open to feedback on this point.
If a deed gives the trustee broad discretion which has never been exercised, deed reviews and potential variations may be required.
Testamentary trusts and vulnerable minors
Testamentary trusts are carved out provided the trust is for genuine testamentary purposes and only for income from deceased estate assets. Anything injected after Budget night (12 May 2026) unrelated to the deceased estate will be subject to the rules. Vulnerable minor exclusions largely mirror the existing Division 6AA carve-outs.
Testamentary trusts are even more appealing than they were before the introduction of this proposal, given the proposed treatment of discretionary trusts created during a lifetime (i.e., inter vivos trusts).
Collection and director liability
The minimum tax will be payable by the trustee and the paper flags several measures to make sure it is actually collected, particularly from corporate trustees that hold few assets of their own. These include giving the Commissioner a right of reimbursement from trust assets, making directors of corporate trustees jointly and severally liable for the minimum tax and introducing pay-as-you-go instalments at the trustee level.
Directors of corporate trustees should seek to understand this now rather than when a notice arrives: potential personal liability for the trust's tax debts is a meaningful change from the current position.
Bendel and Division 7A revisited
The High Court's Bendel decision found a corporate beneficiary's unpaid present entitlement is not a Division 7A loan. Treasury now wants to revive the 2018-19 Budget fix to bring UPEs back within Division 7A.
This was an opportunistic addition by the Government to flag that they will be seeking to unequivocally include UPEs into the scope of Division 7A.
We expect (read: hope) any legislative amendment to be prospective, not retrospective and therefore potential amendments/objections following Bendel remain live considerations.
Submission deadline
There are 17 discussion questions and submissions close 31 July 2026: just over three weeks. None of this is law yet. We are preparing our own submission.
The window is short but there is enough time to lodge a submission. Let us know if you would like to discuss.
