The Trust Tax Workaround May Not Be Stamp-Duty Free After All
Why family businesses should review the new fixed-distribution option carefully before acting
Written by: Melissa Cunliffe (CA)
Family businesses have now been given another possible path through the proposed 30% minimum tax on discretionary trusts — but it creates a new question: could the federal workaround itself have state duty consequences?
Treasury released exposure draft legislation on 3 September 2026. The draft includes an option for discretionary trusts to be exempt from the proposed minimum tax if they elect to make fixed distributions to pre-nominated beneficiaries, as an alternative to restructuring. Treasury says the election would not require a restructure and is “not expected” to result in state or territory stamp duties.
The phrase “not expected” is not the same as a state revenue authority ruling that duty can never apply in every fact pattern.
Where the trust tax reform currently stands
The proposed minimum tax is intended to commence from 1 July 2028, subject to the legislation ultimately passing. The Government has also proposed a three-year federal rollover period from 1 July 2027 for taxpayers choosing to restructure.
The exposure draft therefore creates three broad strategic paths for an affected trust: retain full discretion and deal with the minimum tax, elect into the proposed fixed-distribution model, or restructure using available relief if appropriate.
Why the fixed-distribution election is significant
For some families, being able to remain in the existing trust may avoid the legal and commercial disruption of transferring businesses and assets into a different structure.
But the tax benefit comes with a key commercial question: what flexibility is the family giving up by fixing distributions to nominated beneficiaries? A discretionary trust is valuable partly because family circumstances can change over decades.
Start with why the trust exists
Before changing a trust, understand its original and current purpose.
Does it hold the operating business, investments or both?
Does it hold land?
Is asset protection important?
Are children expected to enter the business?
Is succession decided?
Does the trust interact with wills and estate planning?
Are there retained earnings, UPEs, loans or corporate beneficiaries?
Is the trust used for primary production income that may be excluded?
Why stamp duty is not a minor side issue
State duty can be one of the largest costs in a restructure involving land or changes in beneficial ownership. Federal tax legislation cannot simply switch off a separate state taxing statute.
Treasury’s expectation is encouraging, but where a trust holds Victorian or other state land, the duty analysis should be specifically confirmed before an election or restructure is implemented. The trust deed, assets and precise legal effect of the proposed changes matter.
A family example
Assume Mum and Dad control a discretionary trust that holds shares in the family business and a valuable commercial property. They have three adult children: one works in the business, one has a separate career and the third may return later.
A tax model may show that fixing distributions to particular beneficiaries is attractive. But the family still needs to ask what happens if succession changes, one child experiences financial difficulty, the property is sold or the family wants different people to benefit in ten years.
A tax saving can be real and still be the wrong overall decision.
Restructuring is not automatically the better answer
The proposed rollover relief may reduce federal tax barriers, but “rollover” should not be read as “cost-free”. Depending on the structure, other issues can include state duty, GST, finance, legal contracts, licences, Division 7A, land tax, asset protection and succession.
For that reason, a restructure should be modelled as a complete transaction, including one-off costs and the ongoing tax and commercial position after the restructure.
Primary production and other exclusions
Treasury has stated that primary production income and a range of trust types or circumstances will be excluded from the minimum tax proposal. This is highly relevant for farming families.
Do not assume “we have a discretionary trust” automatically means “we must restructure”. First identify what income is actually proposed to be caught.
What should families do now?
Map every trust, company, partnership, asset and loan in the family group.
Identify which trust income may actually be affected by the proposal.
Document why the discretionary trust is valuable to the family.
Model the do-nothing position.
Model the fixed-distribution election, including family flexibility and state duty questions.
Model restructuring, including federal tax, duty, GST, finance, legal and ongoing tax consequences.
Review succession and estate planning before changing beneficiary economics.
Wait for sufficient legislative and state-duty certainty before implementing irreversible changes.
The educational takeaway
The new election is potentially valuable because it gives families another option. But the existence of another option makes the need for a full review greater, not smaller. This is a decision about people, family wealth and control as much as it is about tax.
The 4P's Future Prosperity Model
PEOPLE
Start with the family. Who are the beneficiaries, who works in the business, who is expected to succeed Mum and Dad, and what flexibility may be needed if family circumstances change?
PRESERVE
Preserve the wealth, flexibility and tax attributes already built inside the group. Do not surrender a valuable feature of the structure without understanding what it is worth.
PROTECT
Protect against unintended duty, GST, Division 7A, asset-protection, finance, legal and succession consequences. One tax solution should not create three new problems.
PROSPER
Choose the structure or election that best supports the family’s long-term future rather than simply minimising the next year’s income tax.
Considering the proposed trust tax changes?
Before choosing a fixed distribution election or restructuring a family trust, it is important to understand the potential tax, stamp duty, GST, asset protection, finance and succession consequences.
Book a consultation with 4P's Future Accounting today to review your family group structure, model your options and make a decision based on the long term position, not just the next tax bill.
Disclaimer
This article does not constitute financial advice and is for general information only. It does not take into account any individual’s personal objectives, situation or needs, and is not intended as professional advice. Any similarity to an individual’s personal circumstances and the examples provided in this article is purely coincidental. Any person acting upon such information without receiving specific advice, does so entirely at their own risk.
Authorisation under an Australian Financial Services Licence (AFSL) is not required in the provision of this article and the author plus Future Accounting Group Pty Ltd is not acting in its capacity as an Australian Financial Services Licence holder
Liability limited by a scheme approved under professional standards legislation.
