Pitcher Partners on the shifting landscape for family-owned businesses

The federal government’s proposed introduction of a 30 per cent minimum tax on discretionary trusts from 1 July 2028 has become one of the most significant proposed tax reforms affecting private wealth and business structures.

As highlighted by Australian accounting and business advisory firm Pitcher Partners, the measure is intended to reduce income-splitting opportunities but raises important considerations for trustees, business owners, and families.

While the legislation remains subject to consultation and refinement, recent government announcements have provided greater clarity on how the proposed rules are expected to operate and which trust arrangements, including testamentary trusts, are likely to be exempt.

Australian trust tax reforms created a limited opportunity to restructure discretionary trusts, warning that moving assets into companies or unit trusts can introduce significant succession, estate planning, and long-term tax risks if not carefully planned.

According to insights from Pitcher Partners, testamentary trusts have secured a critical carve-out; following a declaration on 18 June 2026, earnings derived from such entities will remain shielded from the 30 per cent minimum tax, provided they are structured for legitimate succession objectives.

However, there have been concerns raised over the fact that the backdown will only exempt testamentary trusts that the Tax Office concludes are for “genuine testamentary purposes”, with several accountants noting that flexibility has been restricted by the government.

Pitcher Partners acknowledged that perhaps the largest consideration amidst testamentary trusts is the unique role it plays in supporting families, particularly where minor children are involved.

Under the current rules, minors that receive distributions from testamentary trusts can generally access adult tax rates, including the tax-free threshold, provided the income is derived from assets of the deceased estate.

The government also proposed excluding income relating to vulnerable minors from the minimum tax in a manner broadly consistent with current tax settings.

Lauren Hosie, partner at Pitcher Partners, was asked by Accounting Times about how families are able to realistically trace and separate these asset classes without triggering a compliance nightmare.

“We are beginning to see our clients concerned with this, and particularly with asset classes that are not traded on the market – real estate, unlisted investments,” Hosie said.

“Clients who manage their own investments will need to lean on advisors for their assistance initially; we are also seeing software providers starting to release draft calculators and expect more to come to the market to deal with what would otherwise be a compliance nightmare but will definitely still have its challenges.”

“The government did advise they would provide guidance, calculators and tools to assist taxpayers – these are not yet available.”

Moreover, as these proposed tax reforms introduce significant complexity, Hosie warned that families and business owners may find that tax considerations increasingly clash with their broader commercial objectives.

“That is a concern that has been raised; the risk is that tax considerations, rather than commercial objectives, begin driving business decisions,” Hosie said.

“Some families may decide to separate or dispose of assets to simply preserve their existing tax treatment.”

“The complexity around running a family business has never been greater, and reducing the flexibility that has made discretionary trusts such a common structure for family-owned businesses is just another factor for them to now have to consider.”

While the federal government evaluates ongoing industry feedback regarding its sweeping tax amendments, a significant portion of families utilising testamentary structures have greeted the news of a carve-out with relief, ensuring legitimate arrangements remain shielded from the proposed minimum tax levy.

Nonetheless, the firm noted that several critical operational nuances remain under deliberation, specifically pertaining to anti-avoidance measures for contributed capital, criteria for beneficiary qualification, and the potentially volatile intersection between this new framework and existing trust taxation principles.