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Discretionary Trusts and Beneficiary TFN Reporting: What’s Changing by 1 July 2026-28
New rules will overhaul how discretionary trusts are taxed and monitored—mandatory beneficiary TFNs from mid-2026 and a 30% minimum tax on trust income from mid-2028.
By NomadicTax Research Team • 5-8 min read • June 2, 2026
## Trust Taxation Reforms: A Two-Phase Transition
Australia’s 2026 Federal Budget introduces major changes for **discretionary trusts** and trust reporting. These reforms roll out in phases, starting 1 July 2026. ([gavinmaandco.com.au](https://www.gavinmaandco.com.au/compulsory-tfn-reporting-for-trust-beneficiaries/?utm_source=openai))
## Phase 1: Reporting and Transparency (From 1 July 2026)
- **Beneficiary TFN Reporting**: Trustees of closely held trusts must include beneficiaries’ Tax File Numbers (TFNs) in the trust tax return for any income year where beneficiaries are *presently entitled* to income. ([gavinmaandco.com.au](https://www.gavinmaandco.com.au/compulsory-tfn-reporting-for-trust-beneficiaries/?utm_source=openai))
- **Mandatory Labels and Data Fields**: New return forms will require trustees to indicate “closely held trust” status, offer a checkbox for “No TFN Provided,” and ensure Statement of Distribution includes beneficiary TFN field. ([gavinmaandco.com.au](https://www.gavinmaandco.com.au/compulsory-tfn-reporting-for-trust-beneficiaries/?utm_source=openai))
- **Pre-fill Data Roll-out**: ATO is modernising trust-beneficiary reporting so that data from trust returns pre-fill individuals’ tax returns. Less manual input, more matching and audit risk. ([softwaredevelopers.ato.gov.au](https://softwaredevelopers.ato.gov.au/MTAS220260121?utm_source=openai))
## Phase 2: Minimum Tax on Discretionary Trusts (From 1 July 2028)
- **30% Trustee-Level Minimum Tax**: Discretionary trusts will be taxed at **least 30%** on their taxable income, unless a higher rate is already applicable. ([treasury.gov.au](https://treasury.gov.au/policy-topics/taxation/budget2026-27?utm_source=openai))
- **Credits to Beneficiaries**: Non-corporate beneficiaries to receive **non-refundable tax credits** for the tax trustee has already paid. Corporate beneficiaries do *not* get this credit under current proposals. ([bdo.com.au](https://www.bdo.com.au/en-au/insights/tax/articles/2026-federal-budget-what-the-new-30-per-cent-minimum-tax-on-discretionary-trusts-means-for-professi?utm_source=openai))
- **Expanded Rollover Relief (1 July 2027 - 30 June 2030)**: For those restructuring out of discretionary trusts into companies or fixed trusts without immediate tax consequences. Helps mitigate impact of reforms for existing structures. ([treasury.gov.au](https://treasury.gov.au/policy-topics/taxation/budget2026-27?utm_source=openai))
## What This Means Practically
- If you're using a discretionary trust for income splitting (e.g. distributing income among family members to lower tax rates), you’ll have less benefit unless you anticipate rates above 30% or restructure.
- Trustees should prepare for new reporting requirements—collect TFNs from beneficiaries, obtain consent for data, adjust trust deeds if needed.
- Non-corporate beneficiaries should understand how the credit works: will reduce their tax payable, but only non-refundable.
## Action Steps Before Changes Take Hold
- **Audit your existing trusts**: Are they “discretionary”? Fixed or testamentary trusts have different treatment.
- **Consider structural change**: Converting discretionary trusts to companies or fixed trusts may be beneficial given rollover relief.
- **Ensure accurate TFNs from beneficiaries**: Start collecting and recording now.
- **Review distributions**: As trustee becomes liable for minimum tax, distributions matters and timing may change.
These proposals are subject to legislation. But with exposure drafts and Bills already on the table, now is the time to plan. ([pwc.com.au](https://www.pwc.com.au/tax/tax-alerts/cgt-and-housing-tax-reform.html?utm_source=openai))