Compliance
What Australia’s 2026-27 Budget Means for Compliance: Trusts, Discretionary Trust Tax, and PAYG Changes
New rules for discretionary trusts, loss carry back, and PAYG instalment flexibility are changing what trustees and small businesses need to do to stay compliant under the Australian tax system.
By NomadicTax Research Team • 5 min read • May 12, 2026
## Discretionary Trusts: Minimum Tax from 2028
From **1 July 2028**, discretionary trusts (excluding certain categories like charitable trusts, superannuation, special disability trusts, deceased estates, and farming income) will be subject to a **minimum 30% tax rate** on taxable income, regardless of how income is distributed. ([budget.gov.au](https://budget.gov.au/content/04-tax-reform.htm?utm_source=openai))
Trustees should:
- Review distributions to beneficiaries, considering whether income is being spread to low-income family members to reduce tax rates—those strategies will likely be less effective under the new minimum rate.
- Engage early with estate planning to account for transitions, especially where trusts hold investment property or other income-producing assets that may deliver gains taxed under new CGT rules.
## PAYG Instalments: More Flexibility Ahead
Small businesses will receive greater flexibility in adjusting their **Pay-as-You-Go (PAYG)** instalments from **1 July 2027**. Modifications include:
- Opting in to **monthly PAYG instalments** when business conditions change, improving cash flow management.
- Increased access to the ATO’s **dynamic instalments pilot**, using software to better align instalments with real-time income fluctuations. ([budget.gov.au](https://budget.gov.au/content/04-tax-reform.htm?utm_source=openai))
Businesses should assess their revenue patterns and engage their tax advisors or software providers to ensure they’re ready to take advantage.
## Loss Carry Back & Instant Asset Write-Off
- From **2026-27**, eligible companies can **carry back losses to prior two years** to claim a refund against previously paid tax. This is especially beneficial for small and medium enterprises (SMEs).
- The government has permanently extended the **$20,000 instant asset write-off** for businesses with turnover up to **$10 million**, taking effect from **1 July 2026**. This allows many small businesses to immediately deduct eligible assets costing less than $20,000. ([budget.gov.au](https://budget.gov.au/content/04-tax-reform.htm?utm_source=openai))
## Compliance Calendar & Practical Steps
- **Trustees**, especially discretionary trusts, need to assess whether distributions now expose them to the minimum tax. Consider restructuring or pre-trust measures where beneficial.
- **Small businesses**: Liaise with accountants or tax agents to ensure your accounting systems can handle dynamic instalments and monthly payments if needed.
- **Companies planning major asset purchases** should aim for purchases before 30 June 2026 if wanting full benefit, as post-30 June assets may face different CGT or deduction rules.
- Maintain clear, contemporaneous documentation of acquisition dates, contracts, expenses, ownership, as penalties or audits will scrutinize timing especially in the transition years.
## Real-World Example
**Bear Manufacturing Pty Ltd**, with turnover of $3 million, installs machinery costing $18,000 in early 2026. Under new rules, it can immediately write off this asset under the permanent $20,000 instant asset write-off. Suppose it has a loss in 2026-27; it might use that loss to offset tax paid in previous two years, obtaining a refund.
## Summary
- Discretionary trusts face key changes in rate structure—plan now.
- PAYG instalment flexibility is being enhanced—consider cash flow impacts.
- Loss carry back and asset write-off improvements favor SMEs.
Staying ahead of these reforms will help your entity remain compliant and possibly benefit from opportunities in the transition.