The exposure draft gives builders a way to keep the trust and skip the restructure. The catch sits in the timing, and in what the trustee signs away to get it.
Treasury released the exposure draft legislation for the 30 per cent minimum tax on discretionary trusts on 3 September 2026. Submissions close on 18 September.
That is a fifteen day window on the first piece of actual drafting for a measure that starts on 1 July 2028.
The rate has not changed. The start date has not changed. What has changed is that there is now a third option on the table, and it is the one most likely to matter to a residential builder, because it reaches directly into how a large share of building businesses are structured.
The election lets the trust survive
Under the draft, a discretionary trust that exists on 1 July 2028 can elect to become what the legislation calls an excluded election trust. If that election is in force and the trustee meets the conditions, the minimum tax does not apply to the net income of the trust.
The trust is not wound up. No assets move. No new entity is created.
Definition: excluded election trust
A discretionary trust that would otherwise pay the 30 per cent minimum tax, but whose trustee has elected to distribute income and capital in fixed shares to a list of beneficiaries nominated in advance. While the election is in force the trust is not a minimum tax trust. The election can only be made in the first income year beginning on or after 1 July 2028, only once, and cannot be remade if it is revoked.
That the trust survives intact is the part builders have been waiting for.
TGB has previously reported two costs of restructuring that apply to building businesses and to almost nobody else. One is state transfer duty, which in Queensland and Western Australia still bites on business assets other than land. The other is the loss of licence and performance history when a building business moves into a new entity, and the gap that opens in home warranty cover while the new entity establishes itself.
The election sidesteps both, because nothing is transferred and no new entity applies for a licence. Treasury’s own explainer states the election would not require a restructure and is not expected to result in state and territory stamp duties. That is Treasury’s expectation of how state law will treat it, not a ruling from any state revenue office.
What the trustee gives up
The election comes with a nomination. The trustee must specify every beneficiary it may make presently entitled to trust income and capital, and the share each one receives. The shares must total 100 per cent.
Three constraints sit inside that.
The share of income must equal the share of capital for each beneficiary. A trustee cannot send the income one way and the capital another.
Nothing can be held back. The nomination cannot set aside a portion for the trustee to decide on later, which means the trust cannot accumulate income at the trust level while the election is in force.
The list closes on 1 July 2028. A beneficiary must have been capable of benefiting under the trust deed in force on that date. A company or trust named in the nomination must have existed on that date. Adding someone later by amending the deed does not work.
Complying superannuation entities and partnerships cannot be nominated at all. A company can only be nominated if it is an eligible company, which the draft defines as one with no material discretionary elements affecting the rights or interests of its members.
Once made, the nomination can only be varied in two situations. A nominated beneficiary dies, or two nominated beneficiaries separate under consent orders, a binding financial agreement or a court order. On death, only the deceased beneficiary’s share can be reallocated, and only to individuals who are beneficiaries of that person’s estate.
The election revokes itself
If in any income year the trustee does not make each nominated beneficiary presently entitled to exactly the share set out in the nomination, the election is automatically revoked.
The consequences in that year are heavy. Every beneficiary made presently entitled is treated as never having been presently entitled. The trustee is then assessed on all of the net income of the trust at the top marginal rate plus the Medicare levy. In later years the minimum tax applies. The election cannot be remade.
Revocation is not limited to distribution decisions. If a company named in the nomination is wound up, deregistered, ceases to be an object of the trust, or stops being an eligible company, the election goes with it. So does it if a shareholder in that company ceases to hold their shares for any reason other than death or a relationship breakdown.
For a builder who nominates a bucket company and later wants to bring in a business partner, or move shares to a son or daughter as part of succession, that is worth understanding before the nomination is lodged rather than after.
The election window shuts twelve months before the restructuring window does.
The two windows do not close on the same day
This is the part worth putting in the diary.
The election can only be made in the first income year beginning on or after 1 July 2028. For a trust on a standard income year, that means between 1 July 2028 and 30 June 2029. One year. A trustee cannot make it in a later year, and only one election can ever be made for a trust.
Rollover relief runs on a different clock. The transitional relief period starts on 1 July 2027 and ends on 30 June 2030. Every asset required to be transferred must move inside that period. If they have not all moved, the rollover is not available for any of them, and the Commissioner can amend assessments to reverse relief already claimed.
So the election window shuts twelve months before the restructuring window does.
The draft also prevents a trustee doing both. Proposed section 102UYB bars the election where a rollover applies in respect of the assets of the trust. The explanatory materials put it more firmly again, stating that a trustee who has chosen to apply the rollover cannot make the election regardless of whether the rollover is completed or any assets are left behind.
Read together, a trustee who commits to a restructure and then runs out of road before 30 June 2030 has no election to fall back on. It closed a year earlier.
What the draft still leaves open
Several things are unsettled.
Distributions to income tax exempt entities such as sporting clubs will be excluded up to a cap that Treasury says will be finalised after consultation. That cap is not in the draft. Distributions to registered charities and deductible gift recipients are excluded with no stated cap.
The definition of eligible company, and the new definition of fixed trust that replaces the existing one, both carry powers for the Minister to add or remove matters by legislative instrument. The boundaries will keep moving after the primary law passes.
Treasury has said administrative and integrity arrangements are coming in further tranches. Notification rules, collection, and the mechanics of how a beneficiary actually claims the offset are not in this draft.
On the offset itself, a beneficiary who is not a company receives an offset equal to 30 per cent of their share of minimum tax income. It is not refundable. A beneficiary on a low income whose own tax bill is smaller than the offset does not get the difference back. Corporate beneficiaries receive no offset at all.
The numbers Treasury is working with
Treasury’s explainer states around 350,000 active small businesses operated through a discretionary trust structure in 2022 and 2023, fewer than 15 per cent of all active small businesses. Of those, around 140,000 are not expected to pay additional tax or need to restructure in any given year. More than 95 per cent of individual taxfilers and more than 90 per cent of Australia’s 2.7 million active small businesses will not be affected in any given year.
Those figures describe the whole economy. They do not describe construction, and Treasury has not published a construction split. In this industry the assets sitting inside the structure are usually the plant, the goodwill and the working capital, not a share portfolio, which is why the restructuring question here has always been harder than the tax question.
Where this leaves a builder
The measure is not law. It is draft legislation open for comment until 18 September, and Treasury has confirmed more is coming.
But the shape is clear enough to plan against. There are three paths. Pay the minimum tax. Restructure out under the rollover and wear the duty and the licensing consequences. Or elect, keep the trust, and lock the shares in place.
The election is the cheapest to execute and the hardest to undo. It has one window, and it is gone after 30 June 2029.
Which means the question that decides it is not the tax rate. It is whether the shares that suit a family in 2029 will still suit it in 2039.
Frequently asked questions
It is an option for a discretionary trust that exists on 1 July 2028 to become an excluded election trust. The trustee nominates the beneficiaries it will distribute to and the fixed share each one receives, totalling 100 per cent of income and capital. While the election is in force the 30 per cent minimum tax does not apply to the trust’s net income, and no restructure is required.
In the first income year beginning on or after 1 July 2028. For a trust on a standard income year that is the period from 1 July 2028 to 30 June 2029. It cannot be made in a later year, only one election can be made for a trust, and it cannot be remade once revoked.
Treasury’s explainer states the election would not require a restructure and is not expected to result in state and territory stamp duties, because no assets are transferred. That is Treasury’s stated expectation rather than a determination by any state revenue office, and duty is state law.
The election is automatically revoked. In that income year every beneficiary made presently entitled is treated as never having been presently entitled, and the trustee is assessed on all of the trust’s net income at the top marginal rate plus the Medicare levy. The minimum tax then applies in later years, and the election cannot be remade.
No. The draft bars the election where a rollover applies to the assets of the trust, and the explanatory materials state a trustee who has chosen to apply the rollover cannot elect regardless of whether the restructure is finished. Because the election window closes on 30 June 2029 and the rollover period runs to 30 June 2030, a failed restructure cannot be swapped for an election after the fact.
Related articles
- Australian Construction Industry Trends Guide
- If Your Construction Business Runs Through a Discretionary Trust, the Tax Rules Are Changing
Last updated 7 September 2026. Submissions on the exposure draft close 18 September 2026.
General information disclaimer: This article draws on the Treasury exposure draft legislation and explanatory materials for the minimum tax on discretionary trusts, the rollover relief and the electable regime, and the Treasury fact sheet, all published 3 September 2026. It is editorial commentary for industry professionals and does not constitute financial, tax, legal or structural advice. The measure is not yet law and the draft may change before any bill is introduced. Readers should seek qualified professional advice specific to their circumstances.
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