Key Changes for Business Structures
Budget 2026-27 introduces several entity-focused reforms that affect how trusts, startups, and R&D-oriented firms should be structured. (budget.gov.au)
Minimum Tax on Discretionary Trusts
From 1 July 2028, discretionary trusts (excluding widely held trusts and super funds) will face a minimum tax rate of 30% on trust income allocations to beneficiaries. There will be a three-year rollover relief period beginning 1 July 2027 for small businesses and others to restructure. (budget.gov.au)
Loss Carry-Back and Loss Refundability
- Loss carry-back: From 2026-27, eligible companies can apply losses against profits in the previous two years (claim refunds). Great for cyclical or investment heavy businesses. (budget.gov.au)
- Loss refundability: From 2028-29, small start-ups in their first two years can get refunds up to the FBT and withholding tax paid on wages. Helps young businesses with early-stage cash flow. (budget.gov.au)
R&D Tax Incentive Adjustments
Starting 1 July 2028, R&D-intensive firms will align with updated thresholds and caps:
- Higher, refundable offset increased but only if you pass the intensity test (reduced to 1.5%) (budget.gov.au)
- Turnover threshold for higher refundable offset increased to $50 million, but limited to younger firms (less than 10 years old). (budget.gov.au)
- Raise maximum expenditure cap to $200 million; increase minimum qualifying spend to $50,000 for certain R&D. (budget.gov.au)
What this Means for Your Entity Design
Some practical implications:
- Trusts previously used to distribute income flexibly may now face steeper tax or lose benefits—consider structuring or converting to companies or alter beneficiary designs.
- Start-ups should anticipate loss carry-back benefit NOW, but wait until 2028-29 for loss refundability. Plan investments and hiring accordingly.
- If relying on R&D offsets, ensure current and future research meets core-R&D standards, monitor age and turnover to retain higher refundable benefits.
Example Scenarios
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A discretionary trust earning $200,000 allocated to family beneficiary: under new rules if still a discretionary trust, taxable proportions may hit the 30% minimum. Restructuring into unit trusts or companies might reduce tax.
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A freshly launched tech startup with $1 million turnover in its first year: loss carry-back can ease initial overheads; in 2028-29, could get refundability for losses up to FBT/withholding levels.
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An R&D firm with $80 million turnover under 10 years old: higher refundable offset and elevated expenditure cap benefit them—but from 2028-29.
Actionable Recommendations
- If you run or plan to run a discretionary trust, review your structure now and engage tax counsel to explore conversion or protective amendments.
- Budget for loss carry-back when forecasting cash flows for 2026-27. An unexpected loss could now turn into a refund.
- R&D-focused entities should invest early to benefit under old rules and map eligibility for new ones.
- Keep strong records to validate R&D intensity, turnover, firm age, and trust structures—these rules have precise thresholds and documentation requirements.
Bottom Line
These entity-focused reforms shift the landscape for trusts, startups, and companies with R&D. Early planning is a must. With trust minimum rates, loss carry-back, and R&D changes, the right entity structure can mean the difference between favourable tax treatment and avoidable cost.