Australia’s proposed 30% minimum tax measures could change how some individuals, property investors, business owners and family trusts manage their tax affairs. Depending on your income, investment strategy and ownership structure, these changes could increase the tax payable on certain trust distributions and capital gains.
The key issue is that a 30% minimum tax is not the same as Australia’s ordinary marginal tax rates. Under a minimum tax system, taxpayers may have to pay additional tax when the amount calculated under the usual rules falls below a specified threshold.
The 2026–27 Federal Budget proposed minimum tax measures covering two areas: capital gains and certain discretionary trust distributions. The capital gains measure has since become law, with changes scheduled to apply from 1 July 2027. The trust distribution measure remains a proposal, with exposure draft legislation released and consultation completed. Its final operation will depend on the legislation ultimately enacted.
Understanding the difference between these measures is important for anyone considering selling an investment, distributing family trust income or reviewing their business structure.
What Is the 30% Minimum Tax?
A minimum tax is designed to establish a tax floor for specified income. If the tax attributable to that income under the ordinary rules is below the required minimum, an additional amount may become payable. For affected taxpayers, this could mean paying more tax than they would under the usual individual income tax rules, even when their total income is relatively modest.
However, the two measures operate differently.
- Capital gains: The new rules calculate the tax attributable to a relevant capital gain and compare it with the 30% benchmark.
- Trust distributions: Under the proposed framework, the trustee would pay tax at 30% upfront, with eligible individual beneficiaries generally receiving a corresponding non-refundable tax offset.
These differences matter because the timing of tax payments, eligibility for offsets and ability to use tax credits can affect the final outcome.
How Do Australia’s Marginal Tax Rates Work?
Australia uses a progressive marginal tax system for individual taxpayers. Different portions of taxable income are taxed at different rates, with the applicable rate increasing as income rises.
For the 2026–27 financial year, the individual resident tax rates are illustrated below, excluding the Medicare levy and other adjustments.
| Taxable income | Ordinary income tax calculation |
| Up to $18,200 | Nil |
| $18,201–$45,000 | 15% of the amount above $18,200 |
| $45,001–$135,000 | $4,020 plus 30% of the amount above $45,000 |
| $135,001–$190,000 | $31,020 plus 37% of the amount above $135,000 |
| Over $190,000 | $51,370 plus 45% of the amount above $190,000 |
These rates reflect the scheduled 2026–27 resident individual tax rates and are subject to the taxpayer’s eligibility for offsets, deductions and other adjustments.
A marginal tax rate applies to the next dollar earned, while the effective tax rate reflects the tax paid on total income. A minimum tax may require additional tax on certain capital gains or trust distributions, even when the taxpayer’s overall tax liability is low.
How Will the Proposed 30% Minimum Tax Affect Trust Distributions?
Discretionary trusts are commonly used by Australian families and business owners to distribute income among eligible beneficiaries. Depending on the circumstances, a trust may distribute income to beneficiaries who have lower taxable incomes, helping families manage their overall tax position.
The proposed minimum tax on certain trust distributions could reduce the benefits of this approach.
Under the proposal, trustees would pay 30% tax on affected distributions, with eligible individual beneficiaries receiving a non-refundable tax offset. As the offset cannot generate a refund, beneficiaries with little or no other taxable income could face a higher overall tax cost.
Example: A $20,000 Trust Distribution
Suppose an individual receives a $20,000 trust distribution and has no other income.
Under the ordinary tax rules, the individual may have no income tax liability, assuming they are entitled to the full tax-free threshold and no other adjustments apply.
Under the proposed minimum tax framework:
- The trustee would pay $6,000 in tax, representing 30% of the distribution.
- The beneficiary would generally receive a corresponding non-refundable tax offset.
- If the beneficiary has no tax liability against which to apply the offset, it would not generate a cash refund.
The result could be an additional tax cost of $6,000 compared with the ordinary tax outcome.
This example illustrates why the proposed rules could affect low-income beneficiaries disproportionately. The actual result would depend on the final legislation, the trust’s circumstances and the beneficiary’s tax position.
Potential Additional Tax at Different Distribution Levels
The following figures are indicative estimates based on the supplied examples and ordinary individual tax rates for the year ending 30 June 2027. They are not personalised tax calculations and should be checked against the final legislation and each beneficiary’s circumstances.
| Trust distribution | Estimated additional tax cost |
| $20,000 | $6,000 |
| $50,000 | $9,730 |
| $100,000 | $9,480 |
| $150,000 | $8,430 |
| $200,000 | $4,130 |
| $230,000 | Nil |
These estimates illustrate how the potential additional cost may vary with the distribution amount. They should not be interpreted as a definitive schedule of tax outcomes, because eligibility for offsets, other income and the final rules can materially change the result.
What Happens When a Trust Distributes Income to a Company?
Many family trusts distribute income to corporate beneficiaries, sometimes called bucket companies, as part of their tax planning arrangements.
Under the proposal described above, companies would be excluded from accessing the individual beneficiary offset. This could create a risk of tax being imposed at both the trust and company levels.
Depending on the company tax rate and how the rules interact, combined tax could approach 60% in some circumstances. Existing corporate beneficiary arrangements should be reviewed to assess their ongoing tax effectiveness.
Trust franking credits may offset the 30% payment, with excess amounts potentially refundable. However, transfers between profit-making and loss-making trusts could create complications if credits cannot be fully used. Reviewing related trust structures together can help identify potential tax risks.
Could the Proposed Rules Affect Deductions and Donations?
The proposed minimum tax may affect the benefits of deductions such as personal super contributions and charitable donations. These deductions may not reduce overall tax payable as expected, so taxpayers should assess their after-tax benefits based on the final legislation and individual circumstances.
How Will the 30% Minimum Tax Apply to Capital Gains?
The capital gains measure works differently from the proposed trust distribution regime.
Capital gains can arise when an asset is sold or otherwise disposed of, including investment property, shares and other capital assets. Under ordinary tax rules, an eligible individual who has owned an asset for at least 12 months may qualify for the capital gains tax (CGT) discount, subject to the relevant conditions.
The new rules aim to ensure certain capital gains are taxed at a minimum 30% rate. Tax is calculated with and without the gain; if the tax attributable to the gain falls below the 30% benchmark, additional tax may be payable to cover the shortfall.
Who Is Most Likely to Be Affected?
Taxpayers on lower marginal tax rates are more likely to be affected because the tax attributable to their capital gains may fall below the minimum threshold.
For example, an individual with relatively little other taxable income who sells an investment asset at a significant profit may have a lower ordinary tax liability on the gain than someone with a high salary.
By comparison, a taxpayer with at least $45,000 of other taxable income before the relevant gain may be less likely to face an additional liability under the simplified calculation, because the 30% marginal tax bracket begins above that level.
However, this is only a general illustration. The actual calculation depends on the relevant gain, deductions, CGT concessions, other income and the statutory rules. Taxpayers should not assume that having $45,000 of other income automatically eliminates any additional tax.
What About Exemptions?
The capital gains measure includes an exemption for taxpayers receiving certain means-tested income support payments, such as the Age Pension, subject to the statutory eligibility requirements.
The proposed trust distribution measure is expected to include exemptions for certain distributions, including those from fixed widely held trusts, complying superannuation funds, special disability trusts, deceased estates and charitable trusts.
The exemptions are not identical. As the trust proposal is not yet law, its scope and conditions remain subject to change.
What Should Investors and Business Owners Do Now?
The appropriate response will depend on whether you hold investments personally, operate through a family trust, use a corporate beneficiary or have multiple related entities.
Consider the following steps:
1. Review your trust distribution strategy. Assess whether your current distribution arrangements could be affected by the proposed minimum tax, particularly where beneficiaries have low taxable incomes.
2. Reassess corporate beneficiary arrangements. Review the potential tax consequences of distributions to companies and the interaction between trust-level payments and company tax.
3. Plan capital gains events carefully. If you expect to sell an investment property, shares or another capital asset, obtain advice on the timing and potential tax consequences before committing to a transaction.
4. Check your records and ownership structures. Confirm that asset ownership, acquisition costs, capital improvements, trust deeds and distribution records are up to date.
5. Review deductions and contributions. Consider how deductible superannuation contributions, donations and other eligible expenses may interact with the relevant minimum tax rules.
6. Monitor the trust legislation. The proposed trust distribution measure remains subject to the legislative process. Avoid making irreversible decisions based on draft provisions that may change.
Any tax planning should be commercially appropriate and consistent with the trust deed, relevant tax legislation and anti-avoidance provisions. Restructuring assets or changing distributions solely to obtain a perceived tax advantage can create additional legal, tax and administrative risks.
How Camden Professionals Can Help
Camden Professionals can help business owners, property investors and families understand how the 30% minimum tax measures may affect their existing arrangements.
Our accounting team can assist with reviewing discretionary trust distribution strategies, assessing corporate beneficiary arrangements, estimating the potential tax implications of capital gains and reviewing business structures. We can also help you maintain appropriate records, understand your tax obligations and plan for proposed legislative changes.
Whether you operate a family business, hold investment property or manage wealth through trusts and companies, obtaining advice before making a significant distribution or selling an asset can help you make informed decisions.
Contact Camden Professionals to review your tax position and discuss a strategy suited to your circumstances.
Frequently Asked Questions
1. Is the 30% minimum tax law in Australia?
The capital gains minimum tax measure has been enacted and is scheduled to apply from 1 July 2027. The separate minimum tax proposal for certain trust distributions is not yet law and remains subject to change.
2. Will every trust distribution be taxed at 30%?
No. The proposal concerns specified trust distributions and is expected to include exemptions. Its final scope will depend on the legislation ultimately enacted.
3. Can I receive a refund for an unused trust tax offset?
Under the proposed framework, the individual beneficiary’s offset would be non-refundable. It could reduce tax otherwise payable but would not create a refund merely because the offset exceeds the beneficiary’s tax liability.
4. Will the minimum tax affect property investors?
It may affect investors who realise relevant capital gains, particularly where the tax attributable to a gain under the ordinary rules is below the 30% benchmark. The actual impact depends on the asset, gain, ownership structure and taxpayer’s circumstances.
5. Should I change my family trust or company structure?
Not without reviewing the full circumstances. Any restructure should consider tax consequences, commercial objectives, trust deed requirements, asset protection, administrative costs and applicable anti-avoidance rules.
6. When should I seek tax advice?
Ideally, before making a significant trust distribution, restructuring a business or committing to the sale of an investment. Early advice can help you assess the likely consequences and prepare for legislative changes.
General Information Warning
The material on this page and on this website has been prepared for general information purposes only and is not intended to provide tax advice for any person’s specific circumstances. Tax outcomes depend on the individual facts and the law applying at the relevant time.
Before acting on the information in this article, you should obtain professional advice that takes into account your circumstances and the details of the proposed transaction or property project.
Although every effort has been made to verify the accuracy of the information contained on this page and on this website, Camden Professionals, its officers, representatives, employees, and agents disclaim all liability (except for any liability which by law cannot be excluded), for any error, inaccuracy in, or omission from the information contained in this website or any loss or damage suffered by any person directly or indirectly through relying on this information.
Note: This article provides general information, not legal, insolvency or personalised tax advice. Business owners should obtain advice appropriate to their circumstances before entering into a sale agreement.
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