For a residential builder, the most consequential part of the proposed thirty per cent trust tax may not be the tax rate. It is what happens to the licence.

Master Builders Australia lodged its submission to Treasury on 31 July 2026 and published its findings on 7 August. The cost modelling in that submission drew most of the coverage. The argument sitting underneath it is the one that applies to almost no other industry, and it is the part builders should read closely.

Master Builders told Treasury that a building business cannot simply move out of a trust and into a company. The licence, the insurance eligibility, the statutory warranties and the contracts all attach to a specific legal entity. Change the entity and every one of those things has to be rebuilt.

What Master Builders told Treasury

The measure was announced in the 2026-27 Federal Budget on 12 May 2026. From 1 July 2028, trustees of discretionary trusts would pay a minimum of thirty per cent tax on the trust’s taxable income, with non corporate beneficiaries receiving a non refundable credit for tax the trustee has already paid. Treasury released a consultation paper on implementation on 8 July 2026. Submissions closed on 31 July. The measure is not yet law.

The government’s position is that the change brings the tax paid on trust income closer to what wage earners pay on comparable income, that more than ninety per cent of small businesses will not be affected, and that time limited rollover relief will be available for businesses that want to restructure out of a trust. That relief is proposed to run for three years from 1 July 2027.

Master Builders opposes the measure. Its central argument is not that the relief is too small. It is that the relief was designed for a tax problem and does not reach the operational one.

“As our submission outlines, changing a building business from one structure to another isn’t like changing your mobile phone plan. It can involve lawyers, accountants, banks, insurers, licences and contracts, all of which cost money and ultimately make building more expensive at the worst possible time,” Master Builders Australia chief executive Denita Wawn said.

“We have identified a range of unintended consequences that have not been properly considered and provided them to the Treasurer. These include flow on consequences that may undermine state and territory regulatory arrangements and the fact that the proposed tax rollover relief fails to account for the practical realities of changing long-standing business structures.”

Why a restructure can mean a new licence

The submission’s position is that a licence generally cannot be transferred from one business structure to another. Where a builder moves the business into a newly established company, that company must secure a new licence in the new entity’s name before it can lawfully contract, and operating unlicensed is an offence.

That is correct, but it is worth being precise about when it bites, because the answer depends on your existing structure.

A great many building businesses do not trade as a trust. They trade as a company that acts as trustee for a family trust. In Queensland, for example, the QBCC does not license a trust at all. It licenses the trustee. If the licensed company keeps trading and simply stops acting as trustee, the licensed entity has not changed. If the restructure creates a brand new company, it has.

So the first question for any builder is not what the tax rate will be. It is a much smaller one: which legal entity is actually named on the licence. That is worth confirming before assuming anything about cost.

What resets when the entity is new

Where a new entity is required, Master Builders argues the consequences run well past the application fee.

• Performance history. A licence check on the new entity shows a recent commencement date and no record carried across from the previous licence. Master Builders describes this as removing a consumer protection and undermining hard won reputation.
• Financial assessment. In Queensland a new licence application triggers a minimum financial requirements report, and the maximum revenue a licensee may earn is tied to its net tangible assets. Other jurisdictions run comparable assessments for warranty or indemnity insurance.
• Insurance eligibility. Master Builders says a new entity with a new licence triggers a fresh eligibility review by warranty underwriters, and that limits on the number and value of residential jobs are not revised until the new entity has built a record of financial stability.
• Workers compensation. The submission notes that history based premium discounts, including the New South Wales Safe Employer Reward and Victorian claims history ratings, may not follow the business into the new entity.
• Everything with a licence number on it. Advertising and promotional material must carry current licence details, so signage, vehicles, website and stationery all change.

None of that appears in a tax calculation, which is Master Builders’ point about the rollover relief.

Where the consumer protection gap opens

Statutory warranty

A set of warranties that state law implies into a residential building contract whether or not the contract mentions them. In New South Wales, section 18B of the Home Building Act 1989 implies warranties on due care and skill, materials, compliance with law, diligence and fitness for occupation, and attaches them to the holder of the contractor licence.

This is the part of the submission that reaches past the industry and into the client’s position.

Statutory warranties attach to the licensed entity that did the work. Where that entity has been dissolved as part of a restructure, Master Builders asks a question the consultation paper does not answer: if a homeowner has a defect claim and the builder that signed the contract no longer exists, who do they claim against.

The obvious answer is the warranty insurance scheme. Master Builders argues it does not work. Across most of the country those schemes respond only as a last resort, and the triggers are narrow: the builder has died, disappeared, become insolvent, or in some jurisdictions has been the subject of a failure to comply with a money order from a court or tribunal. A voluntary restructure by a solvent, living, contactable builder is none of those things.

The submission calls the result a regulatory gap, and argues federal tax policy should not create incentives that leave historical warranty obligations attached to an entity that no longer trades.

One part of the submission has already been overtaken

The submission describes Queensland as the only jurisdiction running a first resort model. That was accurate until recently. Victoria switched to a first resort scheme on 1 July 2026, four weeks before the submission was lodged, and under that model a claim is triggered by the state of the work rather than the state of the builder.

It matters for how far the argument travels. In Queensland and Victoria, a homeowner facing defective work has a pathway that does not depend on proving what happened to the building company. In New South Wales, Western Australia, South Australia, the Australian Capital Territory and the Northern Territory the schemes remain last resort, so the gap Master Builders describes still applies. Tasmania has no mandated scheme and relies on statutory warranties alone.

That narrows the problem geographically. It does not remove it.

Contracts already on foot

The submission raises a separate issue for work already under way. Where a business restructures mid build, each live contract needs to be transferred or novated to the new entity, and novation requires the client to agree.

Master Builders notes the practical risk in asking a homeowner to sign that document part way through their build. Reasonable people ask why. Some will refuse. Where a client refuses, the submission says the builder may be left having to terminate and re enter a contract, which reopens price and time on a job that was already priced and programmed.

On commercial work the issue is privity. If the entity that signed is gone, another entity that was never a party cannot enforce the contract, and negligence may be the only remedy left.

What builders can do before 2028

Nothing here is urgent in the sense of requiring action this month. The measure is not law, no exposure draft has been released, and the start date is more than two years away. Master Builders has asked for grandfathering, a permanent carve out for businesses under $10 million turnover, a narrower statutory definition of discretionary trust, and a formal regulatory impact assessment.

Three things are worth doing while the design is still moving.

Find out which entity holds your licence, and whether it is the trustee company or something else. Ask your accountant to list what actually sits inside the trust, because assets are what drive transfer duty on any restructure and duty is not covered by the federal rollover. And ask your warranty insurer, in writing, what an entity change would trigger for your eligibility and your job limits, because that answer varies and it is the one most likely to constrain how much work you can carry.

The decision itself can wait for the legislation. The information gathering should not, because it is the part that takes months.

Frequently asked questions

Sources: Master Builders Australia submission to Treasury, 31 July 2026, and media release, 7 August 2026. Treasury consultation paper on the minimum tax on discretionary trusts, 8 July 2026. Australian Taxation Office guidance on the announced measure. Home Building Act 1989 (NSW) section 18B. Queensland Building and Construction Commission licensing and minimum financial requirements guidance. Victorian Government material on the First Resort Home Warranty Scheme.

Last updated: 17 August 2026. The measure is not yet law and this article will be updated when an exposure draft is released.

This article is editorial commentary for industry professionals. It is not financial, tax, legal or structural advice. Speak to a qualified adviser about your own structure.

For more conversations with builders working through structure, risk and compliance decisions, listen to The Good Builder Podcast.

Author: TGB Editorial