If you own a medical or dental practice, there's a fair chance the business, or the service entity that sits beside it, runs through a family trust. The same goes for plenty of legal and insurance practices. So the Government's proposed 30% minimum tax on discretionary trusts is worth understanding.

This piece sets out what's proposed, where it's up to, the arguments for and against, and what I'm watching. It won't tell you whether to restructure or make an election. That depends on your circumstances, and the rules aren't settled.

The proposal is a 30% floor on trust income

A discretionary trust lets the trustee decide each year which family members or entities receive the trust's income, and how much each one gets.

As at 14 October 2026, here's what the Government announced in the 2026–27 Budget on 12 May 2026 and set out in Treasury's exposure draft on 3 September 2026:

• The trustee would pay a minimum 30% tax on the trust's taxable income, for income years starting on or after 1 July 2028.
• Individual beneficiaries would get a credit for that tax, but the credit is non-refundable. If your own tax rate is below 30%, you don't get the difference back.
• Company beneficiaries would get no credit at all. Many family groups distribute part of their trust income to a company set up to receive it, often called a "bucket company", because the company tax rate can be lower than a family member's personal rate. The proposal is designed to close that route.
• Rollover relief would let trusts move assets into a company or fixed trust without income tax or capital gains tax consequences, for three years from 1 July 2027. It doesn't cover state stamp duty.
• An opt-out election would let some existing trusts avoid the minimum tax by committing to fixed distributions to beneficiaries nominated in advance.
• Exclusions cover charitable trusts, special disability trusts, super funds, deceased estates, certain testamentary trusts, primary production income and certain income of vulnerable minors.

In plain words, "streaming" is the practice of sending different kinds of income to different beneficiaries, and choosing each year who gets what. The proposal doesn't ban that. It sets a 30% floor under the result.

Here's an illustrative example. Say a dental practice's service trust has $300,000 of profit, and it's distributed across a spouse with little other income, two adult children at university and a bucket company. Under the proposal, the trustee would pay 30% on the lot first. The family members on low incomes couldn't get the excess back, and the company would get no credit.

It's proposed, not law

On 14 October 2026, the Government introduced the Treasury Laws Amendment (Tax Reform No. 3) Bill 2026 into the House of Representatives. It still has to pass both Houses of Parliament before it becomes law. Treasury released a consultation paper on 8 July 2026 and exposure draft legislation on 3 September, with consultation closing on 18 September. It is proposed, not law, and may change as it moves through Parliament. If it does, I'll add a dated update note to this post.

The case for the change

• Fairness between similar earners. Treasury's analysis, published in the Budget tax explainer, found that in 2022–23 families with discretionary trusts paid an average tax rate about 4 percentage points lower than families on similar incomes without one.
• Alignment with workers' rates. The Government frames 30% as matching the marginal rate a wage earner pays on income between $45,001 and $135,000, as at the 2026–27 Budget.
• Revenue. Budget Paper No. 2 estimates the measure would raise $4.5 billion over the five years from 2025–26 (12 May 2026), and says it will help fund new tax cuts for workers.
• A long-running concern. The Budget explainer lists tax reviews going back to 1975 that raised income splitting through trusts as an integrity issue. The Tax Institute's submission (18 September 2026) also said reform in this area was "long overdue", while arguing it would be better to rewrite the trust tax laws as a whole.

Here's the supporters' illustration. Treasury's Budget explainer (12 May 2026) gives an illustrative example: a family splitting $200,000 of trust investment income equally between four members with no other income pays about $24,008 in tax, an average rate of around 12%. Someone earning $200,000 in wages would pay about $59,352 in 2028–29. Supporters argue a 30% floor narrows that gap.

The case against the change

• Restructuring costs. CPA Australia's submission (31 July 2026) estimated a restructure at $9,500 to $23,400 per trust, before any state duty, and pointed out that about 350,000 discretionary trusts carry on a business. It also said it was concerned the profession lacks the capacity to support that much restructuring in the proposed timeframe.
• Stamp duty sits outside the rollover relief. The Australian Chamber of Commerce and Industry (ACCI) has warned that the rollover doesn't cover the stamp duty a restructure can trigger (19 May 2026). Where a restructure moves property such as practice premises, state duty can apply; in Victoria, for example, general rates reach 5.5% to 6.5% of the property's value (as at 14 October 2026). The Government has said the opt-out election is not expected to trigger stamp duty.
• The 30% can be overshot. The Tax Institute's submission (18 September 2026) warned that denying the credit to company beneficiaries may result in effective double taxation, with outcomes above the stated 30%. CPA Australia has modelled a beneficiary whose only income is a trust distribution losing up to $9,748 a year, because the credit can't be refunded.
• Flexibility and complexity. ACCI argues the fixed-distribution election fails to recognise how much small business income varies. The Council of Small Business Organisations Australia (COSBOA) has called the 47% rate applied in the year an election is revoked punitive. CPA Australia called the first consultation window short for a measure of this significance, and the National Tax & Accountants' Association (NTAA) says the measures should not proceed in their current form.

Here's the critics' illustration in practice terms. A dental group whose trust also owns the surgery building may face stamp duty on any restructure, on top of adviser fees. Critics argue that costs like these can be out of proportion to the tax at stake for smaller practices.

What I'm watching

I'm not taking a side. Here's what I'll be following:

1. Whether the bill passes, and in what form. Any changes to the exclusions, the opt-out election or the rollover window.
2. Any Senate inquiry, and whether the 1 July 2028 start date holds.
3. Stamp duty. Whether any state moves to give relief for restructures under the rollover.
4. How the credit works for low-income beneficiaries, such as adult children at university.
5. The ATO's guidance on reporting and collection once the rules are final.

Where that leaves things

For now, this is a proposal still moving through the process. The owners who tend to find these changes easiest to follow are the ones who already know their own structure: which entities in the group are discretionary trusts, who has received distributions in recent years, and what each entity owns. That understanding makes any later conversation with a tax adviser simpler, whatever the final rules turn out to be.

If you'd like to talk through what the proposal could mean for how your practice is set up, book a call with me at Full Cycle Accounting.

This is general information only and doesn't take into account your objectives, financial situation or needs. Before acting on it, consider whether it's appropriate for you — or talk to me about your situation.