If your group has a discretionary trust distributing to a private company, this is the part of the trust reform package you should read first.
Under the proposed 30 per cent minimum tax, corporate beneficiaries would continue to be assessed on their share of the trust's net income, but they would not be entitled to the minimum tax offset that individual beneficiaries get.
Work through what that does.
The trustee pays 30 per cent minimum tax on the trust's net income. The company is then assessed on its share of that same income at the corporate rate, with no credit for the tax already paid. The effective rate on trust income distributed to a corporate beneficiary lands at around 60 per cent.
If the company then pays that income out to its shareholders as a franked dividend, and those shareholders are on the top marginal rate, the combined effective rate on the underlying trust income comes to roughly 70 per cent.
Why the design does that
Treasury's explanation is that allowing corporate beneficiaries the offset would let companies convert it into refundable franking credits, which could then be distributed and potentially refunded to non-corporate shareholders who are also beneficiaries of the trust. Denying the offset is described as the simplest way to stop the minimum tax being undermined by interposing a company, without having to change the imputation system.
Whatever you think of the reasoning, the consequence is clear. If this is legislated as described, distributing trust income to a corporate beneficiary stops making sense from 1 July 2028.
The chain of trusts problem
There is a related design feature worth knowing about. Where a discretionary trust distributes to another discretionary trust, the second trust gets the offset but cannot pass it on to its own beneficiaries. It has to apply it against its own liabilities.
So income flowing through a chain of discretionary trusts is subject to the minimum tax at every level, with an offset only at the first. Because a beneficiary's share of net income is not reduced by the minimum tax the trustee paid, the total minimum tax through a long chain could theoretically exceed the underlying income. The consultation paper acknowledges this and describes it as discouraging complex planning, which is a fair characterisation.
What this is not
It is not law. It is a consultation paper released on 8 July 2026 describing a measure proposed to start on 1 July 2028. Consultation papers change, and this particular feature has attracted a great deal of criticism from the profession.
It is also not retrospective in any obvious sense. Existing unpaid present entitlements and existing Division 7A loan arrangements are not directly affected by the announcement.
What is worth doing
Know whether you have a corporate beneficiary and what the balance of any unpaid present entitlements is. A surprising number of business owners have a bucket company they have not thought about in five years, holding a substantial entitlement, with a Division 7A loan agreement someone set up once and nobody has looked at since.
That is worth having on paper regardless of what happens to this measure, because the same information is what you would need to act on rollover relief if you decided to.
What is not worth doing is unwinding a structure in 2026 on the basis of a consultation paper about a measure starting in 2028. There is a real risk of paying transfer duty and triggering capital gains to solve a problem whose final shape nobody knows yet.