The 2026 budget introduces a new 30 per cent minimum tax on discretionary trusts. If you currently own property in a trust, this creates urgency. You have three years—until June 2030—to restructure without triggering capital gains tax. This is a critical window. Your options are to move into a company structure, a fixed trust, personal ownership, or actively manage the trust itself. Additionally, if you are considering purchasing property, an SMSF may be a straightforward option worth exploring.

Understanding the Minimum Tax on Trusts

From July 2028, discretionary trusts will pay a minimum tax of 30 per cent on all taxable income, whether distributed to beneficiaries or not.

This is different from normal tax and it creates a double taxation problem. Normally, a trust distributes income to beneficiaries and the beneficiary pays tax at their own marginal rate. But with the minimum tax, the trust pays 30 per cent. Then when income is distributed to you, you pay tax again at your marginal rate. If you earn A$180,000 and above (45 per cent marginal rate), you pay 30 per cent to the trust plus 45 per cent on the distribution. That is double taxation.

If your trust owns investment property and the rental income sits inside the trust, you are now paying 30 per cent tax on it. If you distribute it to yourself, you pay your marginal rate on top. This is inefficient.

This creates urgency: if you own property in a discretionary trust, restructure before July 2028 to avoid this double tax trap.

If You Currently Own Property in a Discretionary Trust

You have until 30 June 2030 to restructure without triggering capital gains tax on unrealised gains. This rollover relief window is critical—do not miss it.

Option 1: Move to a Company Structure

A company holds the property. The company owns the debt. The company distributes dividends to shareholders.

The critical advantage: Company dividends come with franking credits. This is the key difference from trusts. When a company pays 30 per cent tax and distributes dividends with franking credits attached, you receive a credit against your personal tax. This eliminates the double taxation problem.

Example: A company earns A$100,000 in rental income. It pays A$30,000 in tax. It distributes A$70,000 to you with A$30,000 in franking credits. If you are in the 45 per cent marginal rate, you have A$100,000 taxable income at 45 per cent = A$45,000 tax. But you have A$30,000 in franking credits, so your final tax is A$15,000. Effective tax rate: 30 per cent. No double taxation.

Compare this to a trust: The trust earns A$100,000, pays A$30,000 minimum tax, distributes A$70,000 to you. You pay 45 per cent on A$100,000 = A$45,000. Plus the A$30,000 already paid by the trust. Total tax: A$75,000. That is double taxation and it is inefficient.

Advantages: Eliminates double taxation through franking credits. Clear liability separation—creditors cannot pursue personal assets. Distributions can be managed flexibly. Long-term tax savings are substantial for income earners above 30 per cent marginal rate.

Disadvantages: Stamp duty on transfer (in most states, around 3 to 4 per cent of property value) is a one-time cost. This cost is typically recouped within 2 to 3 years through franking credit tax savings for high-income earners. Getting property out of a company later requires either a capital gains tax event or restructure.

For property investors earning above 30 per cent marginal tax, a company structure is preferable to keeping the property in a discretionary trust. The franking credits eliminate the double taxation problem that makes trusts inefficient from July 2028 onwards. The stamp duty cost is real but is recovered quickly through tax savings.

Option 2: Move to a Fixed Trust

A fixed trust specifies exactly who owns what fraction of the trust. It is simpler than a discretionary trust. But it carries the same double taxation problem.

Advantages: No additional stamp duty (unlike company structure). Fixed trustee votes are clear. Estate planning is simpler. Lower compliance costs than a company.

Disadvantages: Still subject to the 30 per cent minimum tax from July 2028. Still has the double taxation problem: the trust pays 30 per cent, and you pay personal tax on distributions. Cannot vary distributions based on circumstances. You cannot shift income to lower-income beneficiaries like you could in a discretionary trust.

A fixed trust is a compromise option. It removes the discretionary trust minimum tax but does not solve the double taxation problem the way a company structure does through franking credits. Only consider this if a company structure is not available or if you have specific reasons to prefer trust flexibility.

Option 3: Move to Personal Ownership

Simple: you own the property directly. The rental income is yours. You pay tax at your marginal rate only. No trust. No company. No double taxation.

Advantages: Simplicity. Single layer of taxation. No trust minimum tax. No company stamp duty.

Disadvantages: No liability protection. If someone is injured on your property, they can sue you personally. Your personal assets are at risk. Estate planning is complex—the property goes through probate. No flexibility with beneficiaries.

Personal ownership works only if you have other assets that provide liability protection or if liability is not a concern.

Option 4: Keep in Discretionary Trust but Manage the Tax

You do not have to restructure. You can stay in the discretionary trust and manage the 30 per cent minimum tax through distributions and income planning.

Advantages: Flexibility. You can shift income to beneficiaries at different tax rates. You can accumulate income inside the trust in low-income years. Liability protection remains.

Disadvantages: The 30 per cent minimum tax plus personal tax on distributions creates the double taxation problem. You need active management every year. Your accountant must continuously run numbers to optimise distributions. This is ongoing complexity and cost.

This works only if you have multiple beneficiaries at varying income levels and actively manage distributions year to year. For most property investors, restructuring to a company is more efficient.

The Decision Framework for Current Trust Owners

Am I a high-income earner (above 30 per cent marginal tax rate) and do I need liability protection? If yes, a company structure is preferable. The franking credits eliminate the double taxation problem of trusts. The stamp duty cost is recouped through tax savings.

Do I have multiple beneficiaries at different tax rates and actively manage distributions? If yes, a discretionary trust with careful planning can work, but company structure is still likely more efficient.

Is simplicity more important than maximum tax efficiency and do I have other liability protections? If yes, personal ownership may work.

If You Are Considering Purchasing Property

If you are thinking of buying investment property, an SMSF may be a straightforward option to consider. This is not about restructuring existing assets—it is about choosing the right structure for new purchases.

SMSF: The Straightforward Option for New Property Purchases

An SMSF is a self-managed superannuation fund. If you are purchasing property for the first time, it is the most straightforward alternative to a trust or company structure.

Income is taxed at 15 per cent. Capital gains are taxed at 10 per cent (if held over one year). This is significantly lower than the 30 per cent minimum tax on discretionary trusts and avoids any double taxation problem.

Advantages: Straightforward structure. Tax rate of 15 per cent on income and 10 per cent on capital gains beats all other structures. No double taxation. Clear rules and compliance framework. You control the investment directly.

Disadvantages: You must be retired or between jobs. The property must be held for retirement income. You cannot purchase a rental property intending to sell it in five years and use the proceeds for something other than retirement. The fund is strictly for your retirement.

If your goal is to accumulate property wealth for retirement and you are eligible (retired or between jobs), an SMSF is your simplest and most tax-efficient choice. The 15 per cent tax rate is unbeatable, and there is no double taxation problem. There is no need to set up a company or trust—the SMSF handles it all.

The Critical Window: Act Before June 2030

If you currently own property in a discretionary trust and it has unrealised gains, moving it now (before 30 June 2030) means no capital gains tax on the move. After June 2030, restructuring triggers immediate capital gains tax.

Example: Your discretionary trust holds a property worth A$600,000 that you bought for A$300,000. You have an A$300,000 unrealised gain. Restructuring after June 2030 would trigger capital gains tax of approximately A$67,500 (at 45 per cent marginal rate with 50 per cent discount). Restructuring now into a company costs stamp duty and legal fees (typically A$15,000 to A$25,000 all up) but saves you A$67,500 in capital gains tax. Plus you start enjoying the franking credit benefit immediately.

The math is clear. The three-year window is critical. After June 2030, restructuring becomes expensive. Make the decision now.