The measure itself is not new. What is new is that the design detail is now on the table, and the window to influence it is short.
The 30 per cent minimum tax on discretionary trusts has been coming since budget night. On 8 July, it moved a step closer. Treasury released its consultation paper on how the tax will actually work, and set a deadline for feedback of 31 July 2026. For any builder or tradie who runs their business through a family trust, that is a short runway on a change that could reshape how their structure is taxed.
The tax starts on 1 July 2028. From that date, trustees of discretionary trusts will pay a minimum of 30 per cent on the trust’s taxable income. The government’s stated aim is to bring the tax paid on trust income closer to the rate a wage earner pays on similar money. Beneficiaries who are individuals will still receive a credit for the tax the trustee has paid, but that credit is not refundable, which is where the sting sits for anyone currently distributing to family members on lower rates.
None of that headline detail is a surprise. It was announced in the 2026-27 budget, alongside the negative gearing and capital gains changes that took most of the coverage. For a large slice of small construction businesses, though, the most consequential item sat in a quieter part of the papers. What was missing then was the machinery: how the tax is collected, how it interacts with existing structures, and how a business gets out if it wants to. That machinery is what the consultation paper puts on the table.
What the consultation is actually asking
The paper is not reopening the decision to tax trusts. That call is made. What it seeks feedback on is the build. Treasury has flagged five areas where the detail is still being worked out.
The first is the core design of how the tax applies, including which trusts are in and which are out. The second is how distributions to income-tax-exempt entities such as charities are treated. The third is the expanded rollover relief that lets a business restructure out of a discretionary trust without triggering an immediate tax bill, available for three years from 1 July 2027. The fourth is the treatment of excess franking credits where a trust receives franked dividends. The fifth is the collection mechanism itself, the plumbing that gets the tax from trustee to the ATO.
One point in the paper matters more than its dry framing suggests. Treasury has acknowledged that relying on the existing definition of a fixed trust could pull in more trusts than intended. Modern commercial trust deeds often give the trustee power to change entitlements, add beneficiaries or amend the deed, whether or not those powers are ever used. If the line between a fixed trust and a discretionary trust is drawn on paper powers rather than actual practice, some structures that owners think of as fixed could find themselves inside the net. That is exactly the kind of definitional question a builder’s accountant will want to weigh in on.
The decision to tax trusts is made. What the consultation seeks feedback on is the build.
What has already been settled
Some of the noise from budget night has since been answered, and it is worth separating what is locked from what is still moving.
After the first round of post-budget consultation, the government confirmed that testamentary trusts would be fully exempt, provided they are set up for genuine testamentary purposes. That addressed the early criticism that the measure amounted to a tax on inherited assets. The exclusions now cover fixed trusts, widely held trusts, complying superannuation funds including self-managed funds, special disability trusts, deceased estates and charitable trusts. Primary production income is carved out, along with certain income relating to vulnerable minors.
The government has also been firm on scale. In announcing the consultation, the Treasurer said more than 90 per cent of small businesses will not be affected by the change. Reporting on the consultation paper put the share of active small businesses operating through a discretionary trust at less than 15 per cent. Both figures point the same way. This is a targeted measure, not a blanket one. But targeted is not the same as small, and construction is one of the sectors where trust structures are common rather than rare.
Why this matters for builders specifically
Construction has leaned on discretionary trusts for two practical reasons, and neither is a rort. The first is asset protection. It is a high-risk industry where contracts go wrong and disputes end up in court, and a trust creates a legal separation between the business and the owner’s personal assets. The second is tax flexibility: the ability to distribute a good year’s income across family members and smooth the overall bill. That flexibility is precisely what the minimum tax removes for distributions to anyone on a rate below 30 per cent.
The knock-on effect is not only a tax-return line item. A structure that suddenly pays more tax at the trustee level absorbs cash the business would otherwise keep on hand. For a sector already carrying the highest insolvency rate in the economy and margins squeezed by years of cost pressure, working capital is not an abstract concern. Anything that changes the timing or size of a tax obligation is worth understanding well before it lands.
There is also a restructuring question with a state-tax trap inside it. The rollover relief covers income tax and capital gains tax when a business moves out of a trust and into, say, a company or a fixed trust. It does not override state stamp duty. For a construction business holding plant, equipment or property in a trust, the duty cost of restructuring could be significant, and that is a Commonwealth-versus-state gap the consultation cannot fully close on its own. It is one of the reasons a restructure is a decision to assess carefully, not rush.
What to do now
The honest answer is: not much that is irreversible, but not nothing either. The tax is not law. The legislation has not been drafted. The start date is two years out and the rollover window does not even open until July 2027. Moving a structure today, before the rules are settled, risks solving a problem in a way the final design makes unnecessary.
What is worth doing now is the assessment. The first question is whether your structure is even captured. If your business runs through a fixed or unit trust rather than a discretionary one, the measure may not reach you. If your trust distributes mostly to beneficiaries already on rates above 30 per cent, the credit system limits the practical hit. Those are questions for a qualified accountant, and any decision about business structure sits alongside asset protection, succession and how the business actually operates, not tax alone.
The second thing worth doing, for anyone with a strong view, is using the consultation. Submissions close on 31 July 2026 through the Treasury consultation website. The definitional question around fixed trusts, the stamp-duty gap in the rollover relief, and the collection mechanism are all live. This is the stage where industry feedback still shapes the detail. After it closes, the design hardens.
THE GOOD BUILDER TAKE
It is easy to read “consultation paper” and tune out. Do not. The decision to tax trusts is settled, but the mechanics that determine whether your structure is caught, and what it costs to change, are being written right now.
Two things are worth separating. There is nothing to panic-restructure over before the rules are final. But there is a real, time-limited chance to have a say, and a real case for sitting down with your accountant to work out where you stand. If you have a strong view on how the fixed-trust line is drawn or how the rollover interacts with state duty, 31 July is the date. For the bigger picture on how tax settings ripple through the wider construction pipeline, the pattern is familiar: a change that looks narrow on paper can move more of the sector than the headline suggests.
Frequenty asked questions
It is a 30 per cent minimum tax on the taxable income of a discretionary trust, paid at the trustee level, starting 1 July 2028. Non-corporate beneficiaries receive a non-refundable credit for the tax the trustee has paid. The aim is to bring the tax on trust income closer to what a wage earner pays on comparable income.
Submissions close on 31 July 2026. The consultation paper was released on 8 July 2026 and is available on the Treasury consultation website, which is also where responses must be lodged.
It applies to discretionary trusts. Fixed trusts, unit trusts with fixed entitlements, widely held trusts, complying super funds, special disability trusts, deceased estates and charitable trusts are excluded, as is primary production income. Whether your specific structure is captured is a question for a qualified accountant, and the consultation is still refining where the fixed-versus-discretionary line falls.
It is time-limited relief, available for three years from 1 July 2027, that lets eligible businesses move assets out of a discretionary trust into another entity, such as a company or a fixed trust, without triggering an immediate income tax or capital gains tax bill. It does not cover state stamp duty, which can still apply on a restructure.
No. As of July 2026 it is an announced measure, not law. The legislation has not been drafted, the start date is 1 July 2028, and the design detail is the subject of the current consultation. The ATO has confirmed the measure is not yet law.
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Last updated: July 2026. Consultation closes 31 July 2026.
General information disclaimer: This article draws on the Treasurer’s media release of 8 July 2026, the Treasury consultation paper on the minimum tax on discretionary trusts, the Australian Taxation Office, and publicly available analysis. It is editorial commentary for industry professionals and does not constitute financial, tax, legal or structural advice. The measure is not yet law. Business owners should seek qualified professional advice specific to their circumstances before making any structural decisions.
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