The 30 per cent minimum tax on discretionary trusts has passed the House, and two days of Senate hearings start today. The rate and the start date are set in the bill. Much of what a building business needs to choose its structure is not.
The minimum tax on discretionary trusts is now one chamber away from becoming law.
The bill passed the House of Representatives on 29 October. Today and tomorrow, the Senate Economics Legislation Committee holds public hearings on it in Canberra. Its report is due on 13 November.
For builders who trade through a family trust, this is the stage where the detail gets tested in public. It is also where it becomes clear how much of the detail is still missing.
The bill sets a 30 per cent floor from 1 July 2028
Under the bill, trustees of discretionary trusts pay a minimum 30 per cent tax on the trust’s taxable income from 1 July 2028. Beneficiaries other than companies receive a non refundable credit for the tax the trustee has paid.
Company beneficiaries get no credit. For a builder who distributes profit to a bucket company, the trustee’s 30 per cent is not offset when that income lands in the company.
The Government’s stated aim, set out in Treasury’s Budget tax explainer, is to bring the tax on trust income closer to what wage and salary earners pay. Treasury analysis cited when the bill was introduced found families with discretionary trusts faced an average tax rate around four percentage points lower than similar families without one, in the year to June 2023.
The measure is not yet law. Nothing changes for a trust today.
Around 350,000 small businesses operate through a discretionary trust
Treasury puts the number of active small businesses running through a discretionary trust at about 350,000, or under 15 per cent of all active small businesses. It expects about 140,000 of those will not pay additional tax or need to restructure in a given year.
Master Builders Australia says the changes would hit more than 90,000 construction businesses. It is due to appear before the committee today to oppose them.
Treasury does not publish an industry breakdown in its explainer, so the two figures cannot be lined up directly. If Master Builders’ figure is accurate, a large share of the building industry sits inside the scope of the bill.
Affected builders have three broad paths under the bill
The first is to stay in the trust and pay the minimum tax. Treasury notes that wages paid to beneficiaries who work in the business are not subject to the minimum tax, which reduces the impact for some family operations.
The second is to restructure into a company or a fixed trust. Rollover relief from income tax, including capital gains tax, opens on 1 July 2027 and runs for three years. It is Commonwealth relief only. State stamp duty sits outside it.
For a licensed builder, a restructure is not only a tax exercise. A new entity can mean a new licence, new contracts and a gap in home warranty cover.
The third is the election. A discretionary trust that exists on 1 July 2028 can elect to distribute income and capital in fixed shares to beneficiaries nominated up front. While the election stays in force, the minimum tax does not apply.
What is an excluded election trust?
An excluded election trust is a discretionary trust whose trustee has elected, under the proposed minimum tax rules, to distribute income and capital in fixed shares to beneficiaries nominated in advance. While the election is in force and its conditions are met, the 30 per cent minimum tax does not apply. The election is available only to trusts in existence on 1 July 2028.
The election trades flexibility for certainty
The election avoids a restructure, but the trade is real. Under the bill as introduced, it can be made once, in the income year starting 1 July 2028. The list of nominated beneficiaries is largely fixed, with changes allowed on a death or a relationship breakdown.
A distribution that departs from the nominated shares revokes the election automatically. The trustee is then taxed at the top marginal rate plus the Medicare levy for that year, and the minimum tax applies from then on. A trustee who has chosen the rollover cannot elect, and a trust that has elected cannot later use the rollover.
We set out how the election works when Treasury released the draft law. One change since then, according to the Tax Institute’s submission, is a new discretion for the Commissioner to disregard an automatic revocation where it would be unreasonable, though it does not cover every kind of revocation.
The Senate is being asked to pass the bill before the rest of the rules exist
This is the gap that runs through several submissions. In its submission to the committee, the Tax Institute says the administrative, reporting, notification and collection rules for the minimum tax have not been released.
It also lists threshold questions left to legislative instruments that are not yet public. These include parts of the new fixed trust definition and the entire continuity test for rollover relief for trusts that are not family trusts. Its position is that the trust schedules should not pass until those rules have been released for consultation.
Timing is the second concern it raises. Consultation on the exposure draft ran for 12 business days. Submissions to the Senate committee closed 10 business days after the bill was referred.
Stamp duty is the third. The explanatory memorandum states that making the election does not, of itself, require a resettlement of trust property. The Tax Institute notes that this statement does not bind state and territory revenue authorities.
The official cost estimate leaves out stamp duty
According to the Tax Institute’s submission, the impact analysis attached to the explanatory memorandum estimates that the Government’s preferred design carries implementation costs of $939 million, within a range of $780 million to $1.1 billion, plus $48 million a year in ongoing costs. It assumes an average restructure cost of around $11,000 for a business.
Those figures exclude state and territory duty. The same analysis notes stakeholder estimates that duty on a $1 million transfer could range from $36,590 to $55,000.
For a building business moving property or other dutiable assets out of a trust, duty sits outside the official cost estimate entirely.
For a building business moving property or other dutiable assets out of a trust, duty sits outside the official cost estimate entirely. Whether a given transfer attracts duty depends on the state and the asset.
The dates in the bill keep running whatever the Senate decides
The committee reports on 13 November. The Senate then decides whether the bill passes as it stands, passes with amendments, or does not pass.
If it passes in its current form, the timetable is already written. Rollover relief opens on 1 July 2027. The minimum tax starts on 1 July 2028, and the election window is the income year that begins that day. Separately, Treasury says the Australian Small Business and Family Enterprise Ombudsman will start assisting small businesses from 1 January 2027.
That puts the main structure decisions inside the next 20 months or so for many family building businesses, before several of the rules that shape it have been published.
The hearings today and tomorrow are where those gaps go on the public record. We will report on what the committee recommends when it reports on 13 November.
Frequently Asked Questions
If the bill passes, the minimum tax applies from 1 July 2028. It is not yet law. Trustees of discretionary trusts would pay a minimum 30 per cent on the trust’s taxable income, with beneficiaries other than companies receiving a non refundable credit.
The Treasury Laws Amendment (Tax Reform No. 3) Bill 2026 passed the House of Representatives on 29 October 2026. It is now before the Senate. The Senate Economics Legislation Committee is holding hearings on 5 and 6 November and reports on 13 November 2026.
The bill provides rollover relief from income tax, including capital gains tax, for restructures out of a discretionary trust into a company or fixed trust. It is available for three years from 1 July 2027. It does not cover state and territory stamp duty.
Under the bill as introduced, a distribution that departs from the nominated shares revokes the election automatically. The trustee is taxed at the top marginal rate plus the Medicare levy for that year, the minimum tax applies from then on, and the election cannot be made again. The bill gives the Commissioner a discretion to disregard some automatic revocations where they would be unreasonable.
Related articles
- Treasury’s Draft Trust Tax Law Adds an Election That Avoids Restructuring. It Can Only Be Made in One Year.
- Master Builders Told Treasury the Family Trust Is a Risk Management Tool for Builders. Treasury Sees a Tax Structure.
- How to Run a Building Business in Australia
- Australian Construction Industry Trends Guide
Last updated 5 November 2026. Sources: Treasury Budget 2026 to 27 tax explainer; Treasury Laws Amendment (Tax Reform No. 3) Bill 2026; Tax Institute submission to the Senate Economics Legislation Committee, 29 October 2026.
General Information Only. This article provides general information only and does not take into account your objectives, financial situation or needs. It is not tax, legal or financial advice. The bill discussed is before Parliament and may change. You should seek advice from a qualified professional before making decisions about your business structure.
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