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)
- 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)
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)
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