Government releases consultation paper on the minimum tax on discretionary trusts

The Government has released a consultation paper on the implementation of the minimum tax on discretionary trusts.

Editor: In the 2026/27 Federal Budget, the Government announced that it would introduce a 30% minimum tax on discretionary trusts, with beneficiaries (other than corporate beneficiaries) to receive non-refundable credits for the tax payable by the trustee.

The Government has also confirmed that certain types of trusts will be exempt, and that certain types of income, such as primary production income and income relating to certain vulnerable minors, will be excluded.

The consultation paper seeks feedback on further implementation details, including:

• implementation of the core arrangements for discretionary trusts, including exclusions;

• the treatment of distributions to income-tax exempt entities like charities;

• implementation of expanded rollover relief for three years from 1 July 2027 to allow groups to restructure businesses and investments held through discretionary trusts into other entities;

• the treatment of excess franking credits; and

• appropriate collection mechanisms.

The paper also considers the High Court’s recent judgment in Bendel v FCT [2026] HCA 18, in which the majority held that unpaid present entitlements (‘UPEs’) owed to a corporate beneficiary were not “loans” for the purposes of Division 7A. It seeks views on any interactions between the treatment of such UPEs and the minimum tax.

The paper also seeks feedback on implementing a measure announced in the 2018/19 Budget that would bring UPEs within the existing Division 7A integrity provisions.