Compliance
Navigating Compliance Risks: Trusts, Discretionary Trusts and ATO Enforcement
New measures target discretionary trusts and tax fraud, raising compliance stakes for trust arrangements — here’s what trustees must do to stay compliant.
By NomadicTax Research Team • 6-7 min read • June 25, 2026
## Discretionary Trusts: What’s New
- From **1 July 2028**, a **30% minimum tax** will apply to distributions from discretionary trusts. The trustee will pay tax on the trust’s taxable income unless higher marginal rates apply, and non-corporate beneficiaries can receive **non-refundable credits** for this tax paid. Corporate beneficiaries, however, **won’t** get these credits. ([austax.tools](https://austax.tools/tax-insights/federal-budget-2026-summary/?utm_source=openai))
- There is no change to the treatment for existing discretionary trusts until the measure becomes effective. The proposal aims to discourage tax minimisation strategies where trusts defer or distribute income in ways that minimise tax outcomes. ([austax.tools](https://austax.tools/tax-insights/whats-changing-australian-tax-2026-27/?utm_source=openai))
## Increased ATO Enforcement Focus
- The ATO will receive **AU$86.3 million over four years** from 1 July 2026 to strengthen fraud detection in tax and super systems, including interventions related to R&D tax incentives. ([ey.com](https://www.ey.com/en_gl/technical/tax-alerts/australias-2026-27-federal-budget?utm_source=openai))
- New powers include: garbage powers over jointly held assets in cases obstructing tax debt recovery; ability to hold intermediaries liable when taxpayers are victims of agent fraud. ([ey.com](https://www.ey.com/en_gl/technical/tax-alerts/australias-2026-27-federal-budget?utm_source=openai))
## Trust-Related Tax Reforms to Watch
- The small business **50% active asset CGT concession**’s **turnover threshold** for eligibility is being increased from **AUD 2 million to AUD 10 million**. This expands access for more small businesses using trusts to hold active assets such as business property, shares, or intellectual property. This was announced in a press conference in mid-June 2026. ([pm.gov.au](https://www.pm.gov.au/media/press-conference-sydney-35?utm_source=openai))
- Negative gearing reforms and CGT discount removal will also alter the incentives around trust distributions and usage of investment property via trusts. ([taxathand.com](https://www.taxathand.com/article/41265/Australia/2026/Federal-Budget-2026-27-Tax-developments-for-individuals?utm_source=openai))
## Practical Compliance Tips
- **Trustees should prepare now**: Review trust deeds to ensure they permit upcoming tax changes, distributions, and beneficiary credit entitlements.
- **Audit your structures**: Seek legal or accounting advice to assess whether your trust structure will face adverse tax outcomes under the new minimum tax rules. If so, explore whether restructuring (e.g., converting to fixed trusts or companies) could reduce exposure.
- **Document distributions and resolutions**: Especially for distribution of gains or income, ensure proper resolutions are passed by the end of the income year; keep detailed minutes.
- **Watch turnover thresholds**: If your trust holds active assets, track whether turnover is under the increased threshold to maintain eligibility for small business concessions.
## Example Scenario
- A discretionary trust distributes **AUD 100,000** in income in 2028 to a beneficiary who is a sole trader. Under the new rules, the trust pays **30% minimum tax**—so tax is **AUD 30,000**. The beneficiary receives a credit (non-refundable) for that tax against their own tax liability. If the beneficiary’s marginal rate is lower than 30%, they don’t get a cash refund but can reduce future tax using the credit.
- If the beneficiary is a corporate entity, there is **no credit**—effectively increasing tax cost for corporate‐beneficiaries of discretionary trust distributions.
## Key Dates & Action Steps
- **12 May 2026, 7:30 pm AEST**: deadline to ensure property investments retain older negative gearing rules.
- **1 July 2026**: many business compliance, deduction, and asset write-off measures begin; also new ATO funding and powers.
- **1 July 2027**: Primary impact for CGT discount removal, negative gearing ring-fencing, and WATO fully in effect.
- **1 July 2028**: Discretionary trust minimum tax starts.
**Summary**: Trustees and business owners using trusts must map these reforms onto their structures now. Penalties, higher tax bases, and loss of benefits may follow if compliance gaps emerge.