Entity Setup
Setting up a Trust or Entity in Aus? Beware the New Reporting & Threshold Changes
Recent law tweaks are transforming how closely held trusts and entities are taxed—and reported. Here’s what trust-owners and small business entity founders should know.
By NomadicTax Research Team • 5-8 min read • April 24, 2026
## Understanding the Landscape
Australia’s tax system has long used trusts and entities such as discretionary trusts or small private companies for asset protection, estate planning, or family business structuring. But recent regulatory changes mean greater transparency and compliance, and new reporting obligations.
## Key Changes in Reporting & Thresholds
Based on the Treasury Laws Amendment (Delivering an Efficient and Trusted Tax System) Bill 2026, significant changes are proposed or recently enacted:
- **Removal of the $2 threshold** for deductible gifts, making even very small donations fully deductible. ([pwc.com.au](https://www.pwc.com.au/tax/monthly-tax-updates/april-2026.html?utm_source=openai))
- New laws to **streamline how closely held trusts report beneficiary information**—for example, requiring trustees to report **Tax File Numbers (TFNs)** of beneficiaries when distributing trust income. ([aph.gov.au](https://www.aph.gov.au/Parliamentary_Business/Bills_Legislation/bd/bd2526/26bd056?utm_source=openai))
- Increased disclosure and reporting burden for entities in sectors like tobacco, gambling, and R&D—ensuring activities in such fields are **excluded** or correctly treated under incentive schemes. ([pwc.com.au](https://www.pwc.com.au/tax/monthly-tax-updates/april-2026.html?utm_source=openai))
## Entity Setup Implications
When considering setting up an entity or trust now, here are actionable insights you should integrate into your plan:
### Entity type choices
- Trusts: Discretionary, family, or hybrid trusts now face tighter rules on distributions and beneficiary reporting. With TFNs now needed, anonymity (explicit or implied) is less feasible.
- Companies & private firms: Ensure transparency, especially if receiving payments or investments that may relate to **withholding obligations in the R&D incentive or linked to regulated sectors**.
### Reporting & Compliance
- Keep beneficiary data clean. Recording accurate names, TFNs, addresses, and income stream details will be crucial. Mistakes can trigger audits.
- If you're involved in R&D or receive royalties, be aware that certain activities are being disqualified or scrutinized more heavily.
- Understand how your entity interacts with **PAYG-withholding**, **GST**, or withholding variations recently introduced (e.g., for certain religious practitioners, indigenous artists, or directors). *Some Instruments now allow nil withholding in specific zones or circumstances*. ([pwc.com.au](https://www.pwc.com.au/tax/monthly-tax-updates/april-2026.html?utm_source=openai))
## Example Scenario
Sarah sets up a family trust to distribute income among her children. Previously, she could distribute without reporting all beneficiary TFNs, and small gifts supporting local charities (less than $2) were treated as negligible. Now, she needs to collect and report TFNs for each beneficiary receiving income, and even small donations have implications on deductible gifts. Plus, if the trust earns income connected to gambling or tobacco, certain research or investment incentives could get excluded. This means she may revise the entity structure or shift beneficiaries.
## Action Steps if Considering a New Entity
1. **Evaluate structure at the planning stage**—trust vs company vs hybrid—and assess reporting requirements.
2. **Prepare systems for accurate record-keeping**—TFNs, income-distribution statements, activities performed, and purpose of any payments.
3. **Consult with tax professionals** to understand whether your entity’s field (arts, R&D, tobacco, gambling) is affected by exclusion or incentive changes.
4. **Monitor legislative progress**—some bills are still in consultation or proposed; tracking their passage will help time your setup or structural changes.
These compliance and reporting shifts mean that entity setups today will be scrutinised more heavily. But with the right plan, entities can still deliver flexibility, control, and tax efficiency—legally and transparently.