Budget 2026-27 announced a 30% minimum tax on discretionary trust distributions from 1 July 2028. Rollover relief is available during the transition window. Most service business owners have time to plan: the businesses starting that conversation in 2026 will have substantially more options than those who wait.
Most owners I've spoken to since Budget night have reacted to the discretionary trust changes the same way: a long pause, then "is my business about to become unworkable?"
The short answer is no. The longer answer is that the rules announced in Budget 2026-27 are real, the timing is meaningful, and the businesses that start the conversation in 2026 will have substantially more options than the ones that wait until early 2028.
This article walks through what was actually announced, who it affects, what the rollover window means, and what to do this year without panicking.
TL;DR: Budget 2026-27 introduced a proposed 30% minimum tax on discretionary trust distributions from 1 July 2028. Discretionary trusts are one of the most common business structures used by Australian service businesses, tradies, vet clinics, dentists, allied health practices, professional services, and family-run businesses. A three-year rollover relief window runs from 1 July 2027 to 30 June 2030. CGT concessions for eligible businesses are preserved.
What you'll find in this guide:
- What actually changed in Budget 2026-27
- Which businesses may be affected
- Which trusts are excluded
- What the rollover relief window means
- Why 2026 is the time to start planning
- What practical steps business owners should take now
Disclaimer
This article provides general information only.
Do not make restructuring decisions based on this article.
Tax treatment depends on your business structure, beneficiaries, existing trust arrangements, distribution patterns, asset ownership, ATO interpretation, and final legislation.
Always consult a registered tax adviser or accountant before making structural, tax, or asset ownership decisions. This article is informational only and should not be treated as tax, legal, or financial advice.
What changed in Budget 2026-27
Budget 2026-27 introduced a proposed 30% minimum tax on discretionary trust distributions from 1 July 2028. The measure forms part of broader trust taxation reforms announced by the Federal Government.
The core issue: some discretionary trust distributions currently flowing to beneficiaries on lower marginal tax rates may become subject to a 30% minimum tax. The proposal particularly affects family discretionary trust structures commonly used by Australian service businesses.
ATO source: https://www.ato.gov.au/about-ato/new-legislation/in-detail/businesses/tax-reform-introducing-a-minimum-tax-on-discretionary-trusts Budget overview: https://business.gov.au/news/budget-2026-27
Which businesses are affected by the 30% minimum discretionary trust tax?
This potentially affects a very large number of Australian service businesses. Discretionary trusts are extremely common in trades, veterinary clinics, dental practices, allied health clinics, accounting firms, professional services, and family-owned businesses.
Many businesses originally chose discretionary trusts for legitimate reasons (flexibility, asset protection, distribution flexibility, and family ownership structures). The proposed changes don't mean your business automatically becomes unviable, that you must restructure immediately, or that you'll pay dramatically more tax next year.
What they do mean: many owners should review their structure carefully well before 2028, and the conversation should start in 2026 rather than 2028.
What types of trusts are NOT affected
The proposed changes don't apply universally. The Budget materials indicate exclusions including:
- Primary production income
- Fixed trusts
- Charitable trusts
This matters because not all trust structures operate the same way. Some businesses may remain unaffected depending on structure, income source, entity classification, and beneficiary arrangements.
This is one reason generic online advice about trusts is risky; individual circumstances genuinely matter.
What this means in practice
The practical impact depends on how trust distributions currently occur.
Simple example: A discretionary trust distributes income to beneficiaries currently taxed below 30%. Under the proposed rules, those distributions may instead become subject to a minimum 30% tax outcome from 1 July 2028.
This does not automatically mean every beneficiary pays more tax, every trust becomes ineffective, or every business should incorporate. It means the current flexibility around discretionary trust distributions may narrow significantly.
Details matter. Structure matters. Professional advice matters.
Why business owners are reacting strongly
For many owners, this is emotional, not just financial.
Many family businesses have operated through discretionary trusts for years or decades. Owners are now asking the same five questions:
- "Will I need to restructure?"
- "Will this increase my tax?"
- "Should I move to a company?"
- "What happens to asset protection?"
- "Will this trigger CGT?"
Those concerns are understandable. The right thing right now is preparation, not panic. The changes don't begin until 1 July 2028. There is time to plan properly, but the time is meant to be used.
What is the rollover relief window for businesses restructuring away from discretionary trusts?
This is one of the most important parts of the announcement and one of the least covered in post-Budget media.
The government announced a three-year rollover relief window from 1 July 2027 to 30 June 2030, designed to help businesses restructure from discretionary trusts into alternative business structures where appropriate. That may reduce immediate restructuring barriers, tax friction, and administrative complexity.
Again: this doesn't mean every business should restructure. It means the government expects many businesses to at least review their structure before 2028.
Treasury factsheet: https://budget.gov.au/content/factsheets/download/factsheet-backing-small-business.pdf ATO legislation page: https://www.ato.gov.au/about-ato/new-legislation/in-detail/businesses/tax-reform-introducing-a-minimum-tax-on-discretionary-trusts
Government support during the restructure window
This part received almost no media attention but matters significantly.
According to the Treasury factsheet:
- The Australian Small Business and Family Enterprise Ombudsman (ASBFEO) will assist small businesses to understand options and where to seek advice
- ASIC will introduce arrangements to support businesses wishing to incorporate
- Existing CGT concessions remain preserved
That final point is the one to understand carefully. Many owners feared restructuring could immediately trigger major CGT problems. The factsheet specifically notes that eligible businesses can still halve CGT in some cases, and disregard CGT entirely in some circumstances under existing concessions.
That reduces some of the worst-case fear around restructuring conversations. Eligibility still depends on individual circumstances. But the worst-case scenarios that have been circulating in industry forums often overstate the friction.
Treasury factsheet: https://budget.gov.au/content/factsheets/download/factsheet-backing-small-business.pdf ASBFEO: https://www.asbfeo.gov.au/ ASIC: https://asic.gov.au/
Restructuring options business owners may discuss with advisers
This article doesn't recommend any specific structure. But these are the common options accountants are likely to discuss with affected businesses.
Company structure
Some businesses may review incorporation. The Treasury materials referenced potential advantages including a 25% small business company tax rate, dividend imputation, and easier retained earnings management. Companies may also simplify some operational areas.
But companies also create different compliance obligations, different tax considerations, and different succession issues. This is not a universal solution.
Fixed trusts
Some businesses may review whether fixed trust arrangements are appropriate. These operate differently from discretionary trusts and may suit some ownership arrangements better than others. Professional advice is critical.
Partnerships
Some smaller businesses may review partnership structures depending on ownership, income patterns, and liability. Partnerships create simplicity in some cases but introduce other risks and limitations.
Sole trader structures
Some very small businesses may reconsider sole trader arrangements. Asset protection, liability, growth plans, staffing, and succession all matter heavily before making that decision.
Why timing matters
The biggest mistake business owners could make is waiting until mid-2028 to start reviewing structures.
The rollover relief window opens 1 July 2027. But accountants and advisers will become heavily booked well before that, especially in trades, medical, allied health, and professional services. The businesses starting conversations in 2026 will usually have more options, less pressure, and more time to plan properly.
This isn't just about tax. It's about operations, asset ownership, succession, cash flow, and business continuity. None of those are decisions to make in a hurry.
What service business owners should do in 2026
1. Confirm your structure. Many owners don't fully understand how their structure currently operates. Clarify entity type, trust arrangements, beneficiaries, and distribution patterns.
2. Review your current distribution arrangements. Not about changing anything immediately. About understanding how distributions currently work, which beneficiaries are involved, and how exposed the structure may be.
3. Speak with your accountant early. Don't wait until 2027. Most advisers will experience heavy demand once restructuring activity accelerates.
4. Understand whether restructuring is even necessary. Not every business will need to change structure. Some may remain suitable as-is depending on income profile, trust type, beneficiary structure, and long-term goals.
5. Use the rollover window proactively if required. The three-year window exists to provide time and flexibility. Businesses forced into rushed decisions generally make worse decisions.
The bigger picture for service business owners
This change sits within a broader shift in Australian business taxation. The direction is becoming clearer:
- Less reliance on flexible trust distribution arrangements
- More focus on standardised tax outcomes
- More emphasis on company structures
- More scrutiny around business income distribution
At the same time, AI adoption is accelerating, operating costs are rising, and service businesses face increasing admin pressure. That means operational efficiency matters more than ever. Businesses reviewing structure often simultaneously review systems, automation, reporting, lead handling, profitability, and scalability.
This is why 2026 matters. Not because businesses need to panic, but because they need time, and time is the one thing the rule actually gives.
Frequently asked questions
Does the new 30% minimum tax start immediately?
No. The proposed start date is 1 July 2028.
Will every discretionary trust be affected?
No. Some trust types and income categories are excluded.
Do I need to restructure immediately?
Usually no. Most businesses should first seek professional advice and understand their current position.
What happens if I do nothing?
That depends entirely on your structure, beneficiaries, and distribution arrangements.
Will this affect my tax next year?
Not immediately. The proposed rules begin from 1 July 2028.
Is the rollover relief automatic?
No. Eligibility and implementation requirements still matter.
Will restructuring trigger CGT?
Potentially in some cases, although the government stated CGT concessions remain preserved for eligible businesses.
Should I move to a company structure?
That depends on your circumstances. This article doesn't recommend any specific structure.
Why are accountants talking about this already?
Because restructuring conversations, asset reviews, and succession planning often take significant time.
Does this affect sole traders?
Not directly. Sole traders don't operate through discretionary trust structures.
Key takeaways
- Budget 2026-27 introduced a proposed 30% minimum tax on discretionary trusts from 1 July 2028
- Many Australian service businesses operating through family trusts may be affected
- A three-year rollover relief window will operate from 1 July 2027 to 30 June 2030
- CGT concessions remain preserved for eligible businesses
- ASBFEO and ASIC support arrangements are expected during the transition period
- Not every business will need restructuring
- Early professional advice creates more options and less pressure
Structural change often forces operational change
Linkai works with service business owners going through structural and operational change. If your business is reviewing systems, lead handling, admin automation, operational efficiency, or communication workflows, we can help with the operational side while your accountant handles the structure.
The owners who navigate the next three years best are the ones who start both conversations together, not the ones who treat tax structure and operations as separate problems on separate timelines.
Budget 2026-27 overview for Australian service businesses
Sources
- Source: https://www.ato.gov.au/about-ato/new-legislation/in-detail/businesses/tax-reform-introducing-a-minimum-tax-on-discretionary-trusts
- Source: https://business.gov.au/news/budget-2026-27
- Source: https://budget.gov.au/content/factsheets/download/factsheet-backing-small-business.pdf
- Source: https://www.cpaaustralia.com.au/
- Source: https://www.charteredaccountantsanz.com/
- Source: https://www.asbfeo.gov.au/
- Source: https://asic.gov.au/
Written by Katrina Curll, Co-Founder of Linkai Digital. Twenty years in strategy, automation, and performance marketing, helping Australian service businesses build systems that scale without the busywork.