Tax trust changes could spark further administrative burden: Corrs

In the face of the Treasurer's announcement that it would introduce a 30 per cent minimum tax on discretionary trust distributions in its 2026 federal budget, Corrs Chambers Westgarth tax partner Simon Mifsud has stressed the importance of practitioners keeping up to date with policy changes to the taxation of trusts.

“They should be conscious of new deadlines, and any penalties for non-compliance with the minimum tax,” Mifsud said. In addition, Corrs stressed that businesses should monitor whether these changes also apply to other concessional trust vehicles.

“Any change to the taxation of trusts may also impact preferred holding structures of privately-owned businesses going forward,” the firm said.

Mifsud added that the minimum tax rate may substantially reduce the effectiveness of income-splitting arrangements, potentially adding a new layer of administration for existing discretionary trusts.

In light of this, he stressed that practitioners should keep an eye on how any new minimum tax rate is calculated, whether any income types are exempt, and note previous suggestions that the tax should not apply to income from primary production.

“[It's] important to understand the interaction with dividend imputation in the case of trusts that distribute income from franked dividends of a company,“ Mifsud said.

Mifsud noted that discretionary trusts are already subject to a range of complex requirements, including the ongoing need to ensure that beneficiaries are presently entitled to the trust's income each year, notwithstanding that a new minimum tax may apply.

“There is a perception that this can allow high earners to exploit tax-free thresholds in certain circumstances, while such arrangements are not available to employed individuals,” he said.

“Accountants should revisit existing trust arrangements with their clients and be aware of the likely impact and ongoing administration. Accountants should also monitor the progress of the measure, any post-budget changes, and the details of final legislation that is enacted.”

Editor's note: This story has been edited following the release of the 2026 Federal Budget.