Family trusts face major tax shake-up

Business owners across the City of Moreton Bay are being urged to review their family trust arrangements ahead of significant tax changes, with proposed reforms potentially increasing costs for families distributing income to lower-income beneficiaries.

Evergent Group CEO Lucas Helmke says the prospect of a 30 per cent tax on family trusts has prompted business owners to question whether they should wind up their existing structures.

“My answer is no, not on a headline,” Lucas said.

He says family trusts continue to offer benefits for business owners, including asset protection, income distribution and succession planning, but understanding the changes will be important before making potentially costly decisions.

The reforms outlined by Lucas involve two stages, with capital gains tax (CGT) changes from 1 July 2027 followed by a proposed minimum tax on discretionary trust income from 1 July 2028.

Under the CGT changes, the existing 50 per cent discount would be replaced with a system that adjusts an asset’s original cost for inflation, alongside a minimum tax on resulting gains.

Gains accumulated before July 2027 would retain access to the existing discount, while small business CGT concessions would continue.

“The proposed trust tax could have greater consequences for families distributing income to beneficiaries on lower tax rates,” Lucas said. 

Under the draft arrangements, trusts would pay 30 per cent tax on their net income, with eligible individual beneficiaries receiving a non-refundable credit against their personal tax liability.

Lucas gives the example of a trust distributing $45,000 to a university student.

“The trust would pay $13,500 in tax, but if the student’s personal tax liability was about $3,430, approximately $10,000 of the credit could go unused,” he warns. 

Distributions to corporate beneficiaries could also become more expensive, with companies excluded from receiving the proposed tax credit.

However, the draft legislation includes transitional arrangements that could give existing trusts options to manage the changes.

“One option would allow eligible trusts to fix beneficiaries’ entitlements to income and capital, giving up the flexibility to change distributions each year in exchange for remaining outside the proposed minimum tax,” Lucas suggests. 

A separate rollover period, proposed to run from July 2027 to June 2030, could allow eligible assets to be transferred into a company or fixed trust without triggering income tax, although Queensland transfer duty could still apply.

Consultation on the draft legislation closed on 18 September 2026, with the final rules and transitional arrangements still subject to change.

Lucas believes business owners should use this period to review their existing arrangements rather than rush into restructuring.

“So don’t wind up your trust and don’t restructure yet, because a trust that’s still standing in July 2028 keeps every option,” he said.

He recommends reviewing who receives trust income and their tax position, whether companies receive distributions or are owed money by the trust, any accumulated losses and the provisions of the trust deed.

Queensland property owners should also review their trustee arrangements, as land held through multiple trusts can be assessed together for land tax in certain circumstances.

Despite the uncertainty, Lucas believes family trusts remain valuable for business owners seeking to protect assets and plan for the future.

“My own view is that trust is still one of the best tools a small business family has to keep what they’ve built, it just needs running with 2028 in mind, and most owners haven’t read their deed since the day they signed it.”