Labor's 30% Minimum Tax on Discretionary Trusts, Explained

The Albanese government has introduced legislation for a minimum 30% tax on income from discretionary trusts.

The bill is the Income Tax Rates Amendment (Minimum Tax on Discretionary Trusts) Bill 2026, introduced and read a first time on 14 October 2026. APH A discretionary trust is one where the trustee decides each year who gets what — like a family bucket with one person holding the ladle. Under the proposal, trustees would pay at least 30% tax on taxable trust income from 1 July 2028. The Guardian

Fixed trusts are exempt. Those trusts lock in who receives what, and that distinction matters for structuring. The exposure draft also offered discretionary trusts a way to avoid the minimum by electing to make fixed distributions. Treasury In practice, trustees would have to give up year-to-year discretion to stay outside the new rate.

The policy dates to budget night. The government announced the 30% minimum as part of the 2026-27 Federal Budget on 12 May 2026. The October bill puts that commitment into law, with almost two years before commencement for drafting, consultation on regulations and systems work at the ATO.

Treasurer Jim Chalmers says the change will deliver a fairer tax system and help fund tax cuts for workers. The government leans on Treasury analysis of 2022-23 tax data. More than 95% of taxpayers receive no trust income. Most discretionary trust benefits go to the top 10% of families by income, and families using discretionary trusts paid on average 4 percentage points less tax in 2022-23 than families on similar incomes without trusts. The Guardian

There is a separate proposal for a 30% minimum tax on net capital gains from July 2027. It has a different commencement date and a different base to the trusts measure, so practitioners will need to keep the timetables distinct.

The broader context here is Labor trying to limit scope and blowback. The 1 July 2028 start, the full carve-out for fixed trusts, and the elective fixed-distribution path give trustees time and a choice: pay the minimum, crystallise entitlements, or restructure. The questions to watch are definitional. What counts as fixed, what conditions attach to the election, and how trustee liability interacts with beneficiary assessments will decide if the 30% floor is a true minimum or a nudge towards fixed entitlements.

Looking at the parliamentary fight ahead, the Treasury numbers do the heavy lifting. A measure touching fewer than one in 20 taxpayers, concentrated in the top decile, and closing a four-point rate gap is easy to defend as base integrity rather than a broad revenue grab. Expect the crossbench and the accounting lobby to focus less on the rate and more on the exemption mechanics. Canberra being Canberra, that is where the final law is usually won or lost.