Important: The 30% minimum tax on discretionary trusts was announced in the 2026 Federal Budget and is proposed, not yet legislated. The statutory definition of a fixed trust for these purposes is subject to consultation and draft legislation. Seek tailored advice before making any restructuring decisions.
The 2026 Federal Budget creates a clear division in Australian trust structures. Discretionary trusts face a proposed 30% minimum tax at the trustee level from 1 July 2028. Fixed trusts are explicitly exempt. That exemption makes restructuring appear straightforward. The federal rollover relief removes the CGT and income tax cost. State stamp duty does not follow. The cost-benefit answer depends on four variables: the assets held, the state they sit in, the annual trust income, and the trust deed’s terms.
What Makes a Trust "Fixed", and Why the ATO Test Is Stricter Than Your Trust Deed
A fixed trust gives each beneficiary a defined, predetermined interest in the trust’s income and capital. The trustee has no discretion to change what proportion a beneficiary receives. A unit trust is the most common form; distributions flow proportionally to unit holdings, and the trustee cannot redirect them.
This characteristic is precisely why fixed trusts fall outside the minimum tax regime. The 30% minimum tax targets the trustee’s discretion to direct income to low-tax beneficiaries. Remove that discretion, and the income-splitting mechanism the government is taxing no longer exists.
Mallesons flagged this risk in their budget analysis: trusts intended to operate as fixed trusts may fail the ATO’s existing statutory test and be treated as non-fixed. The ATO’s definition of a fixed trust under the trust loss rules is stricter than what most trust deeds provide. A deed that establishes unit holdings but retains certain trustee powers, even minor administrative powers, may fail the test.
A business owner who converts without confirming the ATO test is satisfied may remain subject to the 30% minimum tax despite believing the restructure is complete. Legal review of the trust deed against the statutory definition is non-negotiable before treating any conversion as finalised.
Fixed Trust vs Company: Two Paths Out, Two Different Outcomes
Two restructuring destinations remove the minimum tax exposure. Each preserves different outcomes.
A fixed trust preserves flow-through tax treatment. Income and capital gains pass to beneficiaries and are taxed at their individual marginal rates. The 50% CGT discount flows through to unit holders on asset disposals. Foreign income tax offsets also pass through more effectively than through a company. For business owners prioritising succession planning and intergenerational wealth transfer, the fixed trust retains structural flexibility a company cannot replicate.
A company provides a flat 25% tax rate for base rate entities under $50 million turnover. Retained earnings compound at the corporate rate without the annual distribution obligation that applies to trusts. The company structure suits profit retention. It does not provide the CGT discount on asset disposals, and extracting wealth from a company creates a separate personal tax liability on dividends.
The choice between the two paths depends primarily on the nature of the assets. A trust holding significant unrealised capital gains, goodwill, property, and investment shares faces materially different outcomes in a fixed trust versus a company on disposal.
The Real Cost of Restructuring: Stamp Duty Is the Variable That Decides Everything
The federal rollover relief covers CGT and income tax consequences of the restructure. State governments have not extended equivalent relief to stamp duty. Every state imposes transfer duty on dutiable property transferred between entities.
In NSW, the maximum transfer duty rate on property is 5.5% of market value. A trust holding a $2 million investment property faces a transfer duty of approximately $95,490 on transfer to a new fixed trust. A restructure into a company where the corporate reconstruction concession applies reduces that to 10% of normal duty, approximately $9,549.
In Queensland and Western Australia, the exposure extends beyond real estate. Both states impose stamp duty on business assets, including goodwill, receivables, and supply rights. A service business or trade business in QLD with $500,000 in goodwill faces stamp duty on that transfer in addition to any land. This is the restructuring cost that catches most non-property businesses without prior advice.
The AFR quoted the head of tax at Corrs Chambers Westgarth: the absence of stamp duty relief is a real friction that risks stalling otherwise sensible transitions. That assessment is accurate. The federal government created the incentive to restructure. The states retained the cost of doing so. Stamp duty must be calculated, not estimated, against the specific assets held in the specific state, before any restructuring decision is made.
The Flexibility a Fixed Trust Removes, and When That Matters
A discretionary trust gives the trustee full flexibility to determine which beneficiaries receive income and capital each year. A fixed trust removes that flexibility entirely. Unit holdings are set at establishment. The trustee cannot redirect distributions in response to a beneficiary’s changing marginal rate, a family law event, or a bankruptcy.
For business owners whose primary use of the trust was income splitting to low-tax beneficiaries, this loss is largely irrelevant. The minimum tax eliminates that benefit from 1 July 2028 regardless of structure. The flexibility being surrendered no longer delivers the tax outcome it once did.
For business owners using the trust primarily for asset protection and succession planning, the trade-off requires more careful consideration. A fixed trust preserves asset protection and flow-through treatment. The fixed trust removes the trustee’s annual ability to respond to changing family circumstances. That ability has real value in complex family situations independent of the tax outcome.
How to Calculate Whether Restructuring Is Worth It
The break-even calculation requires three inputs: the annual minimum tax cost avoided, the total restructuring cost including stamp duty, and the time horizon.
Annual minimum tax cost avoided is the 30% trustee-level tax on income that would otherwise apply from 1 July 2028. For a trust distributing $150,000 annually to beneficiaries on marginal rates below 30%, the annual cost avoided is $45,000. For a trust distributing $80,000, it is $24,000.
Total restructuring cost includes stamp duty plus legal fees ($3,000–$8,000) plus accounting and tax advice ($5,000–$15,000). Stamp duty is the dominant variable.
Break-even: An NSW trust holding a $2 million property facing full transfer duty ($95,490) with annual minimum tax avoided of $45,000 reaches break-even in approximately 26 months — inside the rollover window and before the minimum tax takes effect. The same trust restructuring into a company under the NSW corporate reconstruction concession ($9,549 duty) breaks even in under three months.
For business owners in QLD or WA with significant goodwill, the calculation is materially different. A professional services business with $800,000 in goodwill may face stamp duty on that asset transfer that extends the break-even timeline beyond the rollover window entirely.
The Three-Year Rollover Window That Removes the CGT Cost
The rollover relief window opens on 1 July 2027 and closes on 30 June 2030. Assets transferred from a discretionary trust into a fixed trust or company within this window do not trigger income tax or CGT consequences at the Commonwealth level.
The rollover does not cover stamp duty. Eligibility conditions and technical requirements are subject to final legislation, which has not been released. The window is not a reason to delay planning. Begin the stamp duty calculation, the trust deed review, and the break-even modelling now, so execution is ready when the window opens.
Frequently Asked Questions
Can I amend my trust deed to convert a discretionary trust into a fixed trust?
A deed amendment may be possible, but the deed amendment alone does not confirm the trust meets the ATO’s statutory definition of a fixed trust. The statutory test under the trust loss rules is stricter than a unit holding structure in a deed. Legal review confirming the ATO test is satisfied is a required step before treating the conversion as complete.
Does stamp duty apply in all states when restructuring a trust?
Yes. All states impose transfer duty on dutiable property transferred between entities. NSW and Victoria have corporate reconstruction concessions for trust-to-company transfers. QLD and WA impose duty on broader business assets, including goodwill. No state provides automatic relief; an application must be made and approved.
What happens to bucket company distributions after 1 July 2028?
Corporate beneficiaries receive no credit for the trustee-level minimum tax. The same income is taxed twice, first at 30% at the trustee level, then again at 30% at the company level. Pitcher Partners has calculated the effective tax rate on bucket distributions at up to 62.9% on ultimate distribution to an individual. The bucket company’s distribution strategy is eliminated under the proposed rules.
Should I restructure before or after the legislation is passed?
After. The statutory definition of a fixed trust for minimum tax purposes, rollover eligibility conditions, and transitional rules are all subject to final drafting. Begin the analysis now: deed review, stamp duty calculation, break-even modelling. Execute when the rollover window opens in July 2027 and the legislation is confirmed.
The Restructuring Decision That Requires a Calculation, Not a Headline
Fixed trusts are exempt from the proposed 30% minimum tax. For many middle-market business owners in NSW and Victoria, the break-even point falls well inside the rollover window. For business owners in QLD and WA with significant goodwill, the calculation is more complex and the outcome less certain.
The planning begins now. The rollover window opens on a fixed date. Stamp duty does not disappear. The decisions made before July 2027 determine the options available after it.
Blackwattle Tax advises innovative Australian businesses on trust restructuring, stamp duty implications, and proactive tax planning under the proposed 2026 budget changes. Book a complimentary trust restructuring review with Blackwattle Tax before the rollover window opens. For a full overview of our business structuring services, visit our proactive tax advisory page.
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Disclaimer: We endeavour to make sure the information provided in this guidance is up to date and accurate. Please note, that the information is only intended to be a guide, with a general overview of information. This guidance is not a comprehensive document and should not be interpreted as legal advice or tax advice. The information is general in nature. You should seek the assistance of a professional opinion for any legal and tax issues related to your personal circumstances.