Important: The proposals discussed below are not currently law and may change significantly before any legislation is introduced. We will continue to monitor developments and provide updates as further details become available.
The Federal Government’s 2026 Budget included proposed changes to the taxation of discretionary trusts, capital gains and franking credits that could significantly affect business owners, investors and family groups.
While the proposals have attracted considerable attention, it is important to remember that no legislation has yet been released, and the final rules may differ from the Budget announcement.
What Has Been Proposed?
The Government has proposed introducing a 30% minimum tax on discretionary trust income from 1 July 2028.
Under current rules, trust income is generally distributed to beneficiaries, who then pay tax at their own marginal tax rates. The proposed changes would require a minimum level of tax to be paid at the trust level before income flows to beneficiaries.
The Government has also proposed changes to:
- Capital gains tax treatment from 1 July 2027
- The use of bucket companies
- Access to franking credits through discretionary trusts
- Restructuring relief for certain trust structures
Who Could Be Affected?
These proposals may affect clients who:
- Operate through a family trust
- Hold investment properties in a trust
- Invest in Australian shares through a trust
- Use a bucket company as part of their structure
- Have long-term succession or wealth transfer plans involving trust assets
For many business owners and investors, discretionary trusts remain a key part of their overall asset protection and tax planning strategy.
Bucket Companies Under Review
One of the most significant proposed changes relates to bucket companies.
The Government has indicated that company beneficiaries may not receive credit for tax already paid by the trust. If enacted, this could reduce the effectiveness of many existing bucket company arrangements and potentially increase overall tax outcomes for some family groups.
As a result, many advisers are closely watching this aspect of the proposal.
What About Capital Gains and Franking Credits?
The Budget also included proposals that could alter the taxation of future capital gains and change how franking credits are utilised within discretionary trust structures.
While details remain limited, investors with significant property holdings or Australian share portfolios should pay close attention as further information becomes available.
Should You Make Changes Now?
At this stage, our recommendation is simple: do not rush into restructuring.
Major tax announcements often undergo significant refinement before legislation is finalised. Acting too early can create unnecessary costs and complexity.
Instead, now is a good time to review your current structure and understand how the proposed measures could affect your position if they ultimately become law.
CGH Accounting’s View
These proposals have the potential to be among the most significant trust taxation reforms seen in many years.
However, there is still considerable uncertainty regarding the final design of the measures, and substantial consultation is expected before legislation is introduced.
CGH Accounting is monitoring developments closely and will continue to keep clients informed as further details emerge.
If you operate through a family trust, use a bucket company, or hold significant investments within a trust structure, we encourage you to discuss the potential implications with our team as part of your ongoing tax planning.
CGH Accounting Services | Special Bulletin | June 2026
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