Running Your Business Through a Family Trust? Here's What's Changing
If your business income flows through a discretionary trust, you're in very good company. It's one of the most common structures for small and family-run businesses in Australia.
It's also about to be taxed differently.
The 2026-27 Federal Budget introduced a minimum 30% tax rate on discretionary trusts from 1 July 2028. There's a transition period built in, but the decisions involved are the kind you want to make early rather than in the final few months.
What's Actually Changing
From 1 July 2028, a minimum tax rate of 30% is set to apply to discretionary trusts.
In practical terms, that removes much of the benefit of distributing income to beneficiaries on lower marginal rates. For a lot of family businesses, that has been a core part of how the structure works.
The government has also built in a pathway out. From 1 July 2027, small businesses will have a three-year window to move away from a discretionary trust and into a company or a fixed trust.
The Small Business Carve-Out on Capital Gains
There was a second change in the same package worth knowing about.
When the Budget was handed down in May, the 50% capital gains tax discount was replaced with a lower concession linked to inflation. Small business and startup groups pushed back hard on it.
In June, the government responded. The 50% discount was reinstated for small businesses and startups, and the turnover threshold was lifted from $2 million to $10 million.
If your business sits under that threshold, this is worth understanding properly, particularly if a sale, a succession plan or an exit is anywhere on your horizon.
Why Two Years Isn't a Long Runway
Changing the structure of a business is not a quick administrative job.
Depending on your circumstances, it can involve:
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Valuing the business and its underlying assets
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Working out whether rollover relief is available to you
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Transferring contracts, leases, licences and registrations
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Updating banking, insurance and payroll arrangements
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Assessing the stamp duty and capital gains consequences
None of that happens in a fortnight. And the sooner you know which direction you're heading, the more options stay open to you.
Signs You Should Be Looking at This Now
Now is a sensible time to review your setup if:
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You distribute trust income across several family members each year
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Your trust holds appreciating assets such as property or business goodwill
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You're within a few years of selling or handing over the business
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Your trust deed hasn't been reviewed in more than five years
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You've never modelled what your tax position would look like as a company
What to Do Now
Understand your current position. Before you consider changing anything, it helps to see clearly what the trust is doing for you today and what it will cost you from 2028.
Model the alternatives. A company isn't automatically better. The right answer depends on your income levels, your asset base, who's involved and what you plan to do with the business.
Check your trust deed. Older deeds are often narrower than owners realise, and that can limit your options during the transition window.
Don't restructure on autopilot. Moving assets out of a trust can trigger tax consequences of its own. The transition provisions exist for a reason, and using them properly takes planning.
Want to Get Ahead of This?
The changes are still a couple of years away, but the planning window opens well before then.
If your business runs through a trust, this is worth a proper conversation rather than a quick calculation. If you'd like to talk through how this applies to your situation, reach out to our office.