Is Your Trust Structure Still Working for You? Preparing for the Proposed 30% Trust Tax

For decades, discretionary trusts have been a cornerstone of wealth creation and asset protection in Australia. They have provided families, business owners and investors with flexibility in distributing income, managing succession planning and protecting assets across generations.

However, the proposed 30% Trust Floor, announced as part of the 2026 Federal Budget reforms, signals a significant shift in how trusts may be taxed moving forward.

While the changes are not due to commence until 1 July 2028, sophisticated investors should not mistake the implementation timeline for a reason to delay action. Structural reforms of this magnitude often require years of planning, modelling and execution.

At 7 Bells, we see this reform as more than a tax change—it represents a fundamental rethink of how wealth structures will operate in Australia over the coming decade.

At 7 Bells, we believe clarity is the precursor to advantage. Below, we examine the structural pillars of this budget and the strategic implications for your portfolio and business interests.

What is 30% Trust Floor

Under the proposed rules, trust income distributed through discretionary trusts will be subject to a minimum tax rate of 30% at the trustee level.

Historically, discretionary trusts offered considerable flexibility by allowing trustees to distribute income among beneficiaries based on individual circumstances. This flexibility often enabled legitimate tax planning opportunities through family group distributions.

The government's objective is to reduce the perceived tax advantages associated with income splitting while simplifying the administration of trust taxation.

For many families, the practical outcome is straightforward:

If trust income is currently being distributed to adult beneficiaries in lower tax brackets, the tax savings generated through those distributions may be significantly reduced under the new framework.

Why the Government Is Introducing the Change

The reform forms part of a broader strategy to modernise Australia's tax system and create greater consistency between different investment structures.

From a policy perspective, the government has focused on three key objectives:

• Simplifying trust taxation.

• Reducing opportunities for aggressive income splitting.

• Increasing long-term revenue sustainability.

Whether one agrees with the policy rationale or not, the direction is clear: future tax planning will place greater emphasis on commercial purpose, investment strategy and wealth preservation rather than simply distributing income to minimise tax.

Which Clients Could Be Most Affected

The impact will vary significantly depending on how a trust is currently being used.

Structures likely to require review include:

• Family discretionary trusts holding investment portfolios.

• Trusts owning rental property portfolios.

• Business trading trusts.

• Wealth accumulation vehicles used across multiple generations.

• Complex group structures involving companies, trusts and SMSFs.

Not every trust will be disadvantaged. In some cases, existing structures may remain appropriate. In others, the new rules could materially alter long-term after-tax outcomes.

This is why generic advice or last-minute restructuring can create more risk than reward.

The Strategic Rollover Relief Window

Recognising the significance of the reform, the government has proposed a three-year Strategic Rollover Relief period beginning 1 July 2027.

This transitional window may allow eligible taxpayers to restructure assets and ownership arrangements without triggering the full tax consequences that would ordinarily arise from transferring assets between entities.

For many families, this could be the most valuable aspect of the reform package.

The relief period creates an opportunity to undertake a comprehensive review of:

• Existing trust arrangements.

• Corporate beneficiary structures.

• Asset ownership models.

• Succession planning strategies.

• SMSF investment frameworks.

Those who wait until 2028 may discover that their options are significantly more limited.

Questions Every Trust Owner Should Be Asking Today

Even though implementation remains several years away, trust owners should begin considering:

• Is my current trust structure still fit for purpose?

• What does the proposed reform mean for future distributions?

• Should assets remain in the trust or be held elsewhere?

• How will succession planning be affected?

• Are there opportunities during the rollover relief period that should be explored?

The answers will vary for every family and business.Legislation of this magnitude requires more than an automated tax return; it requires a partnership built on foresight. At 7 Bells, our role is to ensure that "simplification" does not lead to missed opportunities.

Conclusion

The proposed 30% Trust Floor is not necessarily a reason to abandon trusts. Rather, it is a reason to revisit whether your existing structure still serves its intended purpose. For many families, the greatest opportunity may lie in creating a more deliberate relationship between trusts, companies and SMSFs—well before implementation deadlines force change. In structural reform, the winners are rarely those who react first; they are those who plan earliest.

That positioning aligns perfectly with 7 Bells' SMSF and wealth-structuring expertise while remaining professional and advisory rather than alarmist.

Want to understand how the proposed Trust Floor could affect your family trust, investment portfolio or SMSF strategy?

📧 Write to us for more support: info@7bells.com.au