Entity Setup
Entity Setup & Trusts: What Small Businesses Should Know Under Upcoming CGT & Trust Tax Reforms
Budget 2026 reshapes tax rules for trusts, discretionary trust minimum tax, and small business CGT concessions—key for structuring entities wisely.
By NomadicTax Research Team • 5-8 min read • July 7, 2026
## Reforms Impacting Trusts & Small Business Entities
- **Discretionary Trust Minimum Tax:** From **1 July 2028**, a **30% minimum tax** will apply to taxable income retained in discretionary trusts unless distributed. Distributions to non-corporate beneficiaries come with non-refundable tax credits; corporate beneficiaries do **not** get a credit (anti-bucket-company rule). ([austax.tools](https://austax.tools/tax-insights/federal-budget-2026-summary/?utm_source=openai))
- **Small Business Capital Gains Tax (CGT) Concession Expansion:** The Budget increases the **turnover threshold** for the 50% active asset CGT concession from **$2 million to $10 million**. This widens eligibility for concessionary treatment for gains from active assets held in small businesses. ([pm.gov.au](https://www.pm.gov.au/media/press-conference-sydney-35?utm_source=openai))
## Structuring Choices & Setup Insights
- If you're setting up a **trust**, assess whether your entity will distribute income regularly or retain profits—trustees need to know how the minimum tax will apply.
- For small businesses, check whether your active assets and turnover will meet the expanded thresholds. Scaling operations or combining business units may affect qualification.
- Existing trusts and assets: any beneficial structuring allowed under old rules remains until 30 June 2028 for trusts; CGT changes only affect gains from 1 July 2027 onwards. Planning now can align structure to future rules. ([grantthornton.com.au](https://www.grantthornton.com.au/insights/federal-budget-2026-27/?utm_source=openai))
## Case Example
A small startup with \$8 million turnover and active assets valued at \$500,000 can now use the **active asset CGT concession**, where the concession was previously out-of-reach for turnover above \$2 million. If profits are retained in the trust after 1 July 2028, the new 30% minimum tax could apply.
## Key Action Steps
- Review your trust deeds—do they allow distributions to non-corporate beneficiaries and accommodate tax credits?
- Track your business’s turnover and active asset tests—don’t assume past eligibility if your business grows.
- Consult a tax professional about whether distributing income before 1 July 2028 is beneficial or if retaining under the new minimum tax yields less impact.
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*Author: NomadicTax Research Team*
Category: Entity Setup
Read Time: 5–8 min