If you’ve heard your advisor mention dividend access shares or fixed trusts since budget night, they’re responding to one thing: the government’s proposal to impose a 30% minimum tax on discretionary trust distributions from 2028. Here’s what those strategies actually involve — and which ones carry more risk than your advisor might be letting on.
This article contains general information only. The reforms discussed are budget announcements and have not yet been legislated. Please seek advice specific to your circumstances.
Where things stand
The 30% minimum tax is still planned to start on 1 July 2028, but it is not yet law. The 2026–27 Budget announced it on 12 May 2026. Treasury consulted on a design paper in July, then released the first tranche of exposure draft legislation on 3 September 2026. Consultation on that draft closed on 18 September.
As at early October, the bill had not been introduced to Parliament. Treasury may still change the draft, and further legislation is expected on residency, the interaction with the new CGT rules, international tax, and administration.
The key dates to plan around:
• 30 June 2027: last day before the CGT discount is replaced (see Planning an exit).
• 1 July 2027: restructure rollover relief opens; new CGT rules start.
• 1 July 2028: the 30% minimum tax on discretionary trusts starts.
• 30 June 2030: rollover relief window closes.
How the minimum tax actually works
The tax is paid by the trustee, not the beneficiary. From 1 July 2028, the trustee of a discretionary trust pays tax so that the trust’s taxable income bears at least 30%. Where no tax would otherwise be payable, the rate is 30%; where tax is payable at a lower rate, the trustee pays the shortfall.
Individual beneficiaries then receive a non-refundable credit for the tax the trustee paid. In practice, distributions to beneficiaries on marginal rates above 30% are largely unaffected. Distributions to lower-income family members end up taxed at 30% instead of their own rate, and any excess credit is lost.
Corporate beneficiaries get no credit. This is the change that matters most for many family groups. Income distributed to a bucket company is taxed at 30% in the trust and then again at 25% or 30% in the company, a combined rate of around 55% or more.
Some trusts and income are outside the regime:
• fixed trusts (under a new, broader definition), widely held trusts, super funds, special disability trusts, deceased estates and charitable trusts
• most testamentary trusts
• primary production income
• distributions to charities, DGRs and other income tax exempt entities
Trustees will also have to use franking credits against the minimum tax, with any excess refunded under the current draft.
Your three paths
The draft legislation gives an affected trust three broad choices: stay in the regime, elect out, or restructure.
Path 1: Stay discretionary and accept the tax
You keep full flexibility over who receives income each year, and you pay at least 30% on the trust’s income. For families whose beneficiaries are mostly on marginal rates above 30%, this may cost little.
The cost rises where income has been going to lower-income family members, and rises sharply where it has been going to a bucket company. If you stay, your distribution strategy will need rethinking from the 2028–29 year.
Path 2: Elect out without restructuring (the EET election)
This is the most significant addition in the draft legislation. A discretionary trust that exists on 1 July 2028 can elect to become an “excluded election trust” (EET). It nominates eligible beneficiaries and a fixed percentage of income and capital for each. If the trust keeps to those proportions, the minimum tax does not apply.
The appeal is that you avoid the cost and complexity of moving assets into a new entity. The trade-off is that the proportions are locked in indefinitely. If the trustee later departs from them, the draft imposes an additional tax cost and the trust falls back into the 30% minimum tax going forward.
The election suits families with a stable, predictable split, for example two spouses sharing equally. It suits poorly where the family’s needs and incomes are likely to change. Whether making the election triggers state stamp duty is also still an open question and needs checking for your state and assets.
Path 3: Restructure into a fixed trust or company
Fixed trusts are outside the minimum tax, and the draft broadens the definition of a fixed trust. Many commercial unit trusts should now qualify, provided there are no material discretionary elements affecting beneficiaries’ rights to income or capital.
Normally, moving assets out of a discretionary trust would trigger CGT on the whole accrued gain. The draft gives temporary rollover relief for transfers into a company or fixed trust made between 1 July 2027 and 30 June 2030. The gain is deferred into the new structure, not removed. State stamp duty may still apply, depending on the assets and the state.
A fixed or unit trust gives up year-to-year flexibility. For a business with a clear ownership split, particularly one heading toward a capital raise or sale, it may be the better structure regardless of the tax. A company suits businesses that plan to reinvest profits rather than distribute them.
What about bucket companies and dividend access shares?
After the Budget, some advisers suggested routing trust income through a company with dividend access shares. The idea was that the trust would distribute to the company, and the company would pay dividends on separate share classes to chosen family members.
Under the draft legislation, this does not work. The minimum tax is levied on the trust’s income before it reaches the company, and companies get no credit for it. Adding a company in the chain does not avoid the 30%. It adds company tax on top.
Dividend access shares can still have a place where a business operates directly through a company, with no discretionary trust distributing to it. Even then they carry real risk. The ATO has long targeted arrangements that use them to divert dividends to low-tax family members, and Part IVA can apply where the dominant purpose is a tax benefit. Treat any such proposal with caution and get formal written advice.
The options side by side
Option | Tax outcome from 1 July 2028 | Flexibility | Main cost or risk | Timing |
Stay discretionary | At least 30% on trust income; no credit for bucket companies | Full | Higher tax where income went to low-rate beneficiaries or companies | No action needed |
EET election | Outside the minimum tax while proportions are kept | Fixed proportions, locked in indefinitely | Extra tax if proportions change; possible stamp duty | Trusts existing at 1 July 2028 |
Restructure to fixed or unit trust | Outside the minimum tax | Fixed entitlements | Restructure costs; stamp duty; gain carried forward | 1 July 2027 to 30 June 2030 for rollover |
Restructure to company | Company tax rate; no minimum tax | Profits retained; dividends to shareholders | Restructure costs; stamp duty; no CGT discount in a company | 1 July 2027 to 30 June 2030 for rollover |
Distribute only to beneficiaries above 30% | Their marginal rate | Reduced | Little; accepts higher tax | From 2028–29 |
Trust to company with dividend access shares | Worse: trust tax plus company tax | Moderate | Does not avoid the tax; Part IVA risk | Not recommended |
Don’t overlook superannuation
Whatever you decide about the trust, concessional super contributions remain one of the most tax-effective ways to extract profit. They are generally taxed at 15% in the fund, well under the 30% minimum. If your total super balance is under $500,000, you may also be able to use unused cap amounts from earlier years.
This is tax planning, not financial product advice. We are not recommending investments inside super, only noting that for many owners, maximising concessional contributions should come before relying on trust distributions.
Planning an exit? The CGT changes matter more
If you plan to sell in the next few years, a separate Budget measure probably affects you more than the trust tax. From 1 July 2027, the 50% CGT discount for resident individuals and trusts is replaced by cost base indexation, with a 30% minimum tax on net capital gains.
This applies whatever kind of trust you hold through. Moving to a fixed or unit trust takes you outside the discretionary trust minimum tax, but not outside the new CGT rules.
Gains that accrue before 1 July 2027 keep the 50% discount, even if you sell later. That makes the asset’s value at 30 June 2027 important, so plan for a supportable valuation at that date. A sale completed before then is taxed under the current rules in full.
The Government has said it will consult on how the CGT changes interact with start-up and early-stage investment, and further legislation will deal with how the trust minimum tax and the CGT minimum tax fit together. If an exit is on your horizon, talk to us now about the timing of the sale and your structure together.
What should you do now?
There is no need to restructure today, but there is enough detail to start planning properly.
- Model all three paths. Compare staying in, the EET election and a restructure using your actual beneficiaries and income.
- Review where your income goes. Trusts distributing heavily to bucket companies or low-income beneficiaries are hit hardest.
- Get a 30 June 2027 valuation plan in place if you hold assets with significant growth or expect to sell.
- Maximise concessional super contributions where it suits you.
- Avoid aggressive workarounds until the final legislation is settled.
- Get formal written advice before restructuring or electing. Both have CGT, stamp duty and legal consequences.
At Fullstack, we are working through the draft legislation with clients now. If you want to know which path suits your trust, reach out.
