Family Trust Distributions: What's Changed in 2026?

Last Updated September 2026

If you have a family trust, there are some important changes you need to be aware of this year.

The proposed 30% minimum tax on discretionary trusts has attracted most of the attention, but it's not the only development worth knowing about. The ATO is also paying closer attention to how trust distributions are actually made, documented, and reported. Here's what's changed, and what it means for you.

Proposed 30% Minimum Tax on Discretionary Trusts

This is the biggest proposed change, and it could materially change how some discretionary trusts are taxed.

In the 2026–27 Federal Budget (12 May 2026), the Government announced it will introduce a 30% minimum tax on discretionary trusts, proposed to start from 1 July 2028. Exposure draft legislation was released on 3 September 2026, with consultation open until 18 September 2026 — so this is still being finalised, not yet law, but it's well past being just an announcement.

Under the current exposure draft, here's broadly how it would work:

• The trustee would generally be required to pay tax at a minimum of 30% on the trust's taxable income, regardless of how that income is distributed to beneficiaries.

• Individual beneficiaries would generally receive a non-refundable tax credit for the tax the trustee has already paid — so a beneficiary on a marginal rate above 30% would pay top-up tax, while a beneficiary below 30% would generally lose the benefit of the excess credit rather than have it refunded.

• Corporate beneficiaries are proposed to not receive a credit for the tax paid by the trustee — a significant change specifically aimed at the common "bucket company" arrangement, which the Government has indicated it wants to discourage from being used to get around the minimum tax.

• Some trusts may be able to elect to be treated as an excluded election trust (EET). This is a new concept introduced in the exposure draft, and may allow certain discretionary trusts to avoid the minimum tax if specific requirements are met — the detail is still being worked through in consultation.

• Certain trusts are proposed to be excluded altogether, including fixed trusts, widely held trusts, complying superannuation funds, deceased estates, and testamentary trusts holding assets that already existed at Budget night.

  
  

For example, imagine a discretionary trust has $200,000 of taxable income and distributes that between a spouse on a lower marginal tax rate and a corporate beneficiary. Under the proposed rules, the tax outcome could look materially different from how the same distribution is treated today. The exact result would depend on the trust's specific circumstances and the final legislation, but the key point is this: the tax outcome may no longer be driven simply by which beneficiary receives the distribution.

What this actually means for you

The proposal would reduce one of the traditional tax advantages of a discretionary trust — the ability to distribute income between beneficiaries on different marginal tax rates. For a family group that typically distributes between a spouse, adult children, and a bucket company, this could materially change the tax outcome if it proceeds as currently drafted. This is worth reviewing now, while the legislation is still in consultation, rather than waiting for the final rules.

Trust Distribution Resolutions Are Under More Scrutiny

A recent tribunal decision shows why the timing and documentation of your distribution resolutions matter in practice.

In The Trustee for Goldenville Family Trust v Commissioner of Taxation [2025] ARTA 1355, the Administrative Review Tribunal found that a trust's distribution resolutions were invalid because there was no genuine evidence the decisions had actually been made before 30 June, despite the documents being dated 30 June. Digital metadata suggested the resolutions had been prepared months later, after the financial accounts were already finalised. The result: the intended distributions failed, and the trust's default beneficiaries were assessed on the income at higher rates instead — with no benefit from the attempted distribution to a lower-taxed beneficiary.

The important takeaway isn't really about that specific case — it's that trust resolutions need to reflect what actually happened, not simply what the paperwork says happened. A resolution dated 30 June doesn't necessarily prove the decision was made on 30 June. The Goldenville case also demonstrates that evidence such as document metadata can become relevant when the timing of a resolution is disputed.

Section 100A Still Matters

Section 100A is another area family trusts need to be careful with — it's the rule that can apply where a beneficiary is presently entitled to trust income, but the real economic benefit flows to someone else, under an arrangement that isn't a genuine family or commercial dealing.

Section 100A doesn't mean family distributions should stop. It means they need to reflect genuine arrangements — properly documented — rather than being an accounting entry disconnected from where the money and benefit actually land.

New ATO Reporting Requirements

The ATO has also made real changes to how trust distributions are reported, not just how closely they're scrutinised.

For the 2025–26 trust tax return, three new labels have been added to the statement of distribution (covering non-primary production managed investment scheme amounts, franked distributions related to investments, and other foreign source income from a financial investment) — largely to support beneficiaries' own return calculations, rather than requiring that information to be supplied separately as it has been in the past.

More significantly, from 1 July 2026 the ATO will begin pre-filling trust distribution data directly into individual beneficiaries' tax returns, based on what trustees report in the trust return. In practice, this makes prompt trust return lodgment more important, as delays in the trust return may flow through to the information available for beneficiaries' own tax returns.

Separately, the ATO's own published timeline for these reforms confirms that from 1 July 2027, further changes will specifically require reporting of unpaid present entitlements (UPEs) within the statement of distribution — intended to help the ATO identify arrangements where a beneficiary is entitled to income but hasn't actually received it. The change is still a year away, but it's worth considering now if your trust has unpaid present entitlements that will need to be reported.

What Should You Do With Your Family Trust?

A few practical takeaways, given everything above:

• Get your 30 June resolution right, and make it genuinely contemporaneous. A resolution needs to reflect a decision actually made by your trust deed's deadline, with evidence to support that timing — not just a document dated correctly after the fact.

• Make sure distributions reflect genuine family or commercial dealings. If a distribution is made to one beneficiary but the practical benefit is enjoyed by someone else, you should consider whether Section 100A applies to the arrangement.

• Review how you're using corporate beneficiaries, given the proposed minimum tax specifically targets that structure. This is worth reviewing now, while the legislation is still in consultation, rather than waiting for the final rules.

• Lodge your trust return promptly, given pre-fill now depends on it — a late trust lodgment creates a genuine flow-on problem for your beneficiaries' own returns.

• Don't automatically assume your trust is still the right structure. Family trusts can still offer real benefits around flexibility, asset protection, and succession planning. That doesn't mean everyone needs to restructure — but if the proposed minimum tax becomes law, it's worth reviewing whether the tax and non-tax benefits of your existing structure still make sense for your circumstances, rather than assuming they do by default.

Not sure how these changes affect your trust? If you're using a family trust to run your business or manage investments, now is a good time to review how your trust is structured, how distributions are being made, and whether the proposed changes could affect you.

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This article provides general information about family trust distributions and the changes referenced, and isn't a substitute for advice about your specific trust and circumstances. The 30% minimum tax discussed here is proposed legislation, not yet law, and details may change before enactment — speak with your accountant about how these changes could affect your trust before making any decisions.

Frequently Asked Questions

1. Is the 30% minimum tax on discretionary trusts law yet?

No. As at the publication of this article, it's exposure draft legislation, with consultation closing 18 September 2026. It's proposed to start from 1 July 2028 if it proceeds. Detail — including how corporate beneficiaries and the excluded election trust option will ultimately work — may still change before it's finalised.

2. Does the proposed minimum tax apply to all trusts?

No. It's specifically targeted at discretionary trusts. Fixed trusts, widely held trusts, complying superannuation funds, deceased estates, and testamentary trusts holding assets that existed at Budget night are proposed to be excluded, based on the current draft.

3. What happens if my trust distribution resolution isn't made in time?

If a valid resolution isn't made by the deadline in your trust deed, income may default to whichever beneficiaries the deed specifies, or the trustee may be assessed directly — often at a less favourable outcome than intended. The Goldenville case is a real example of how costly a resolution that isn't genuinely made in time can be.

4. What is Section 100A, and does it mean I should stop distributing to family members?

Section 100A is an anti-avoidance rule that can apply where a beneficiary is entitled to trust income but someone else receives the real economic benefit, under an arrangement that isn't an ordinary family or commercial dealing. It doesn't mean family distributions should stop — it means they need to reflect genuine arrangements and be properly documented.

5. Should I still use a discretionary trust given all these changes?

These changes don't automatically mean you should get rid of your discretionary trust. Trusts can still provide real benefits around flexibility, asset protection, and succession planning. However, if the proposed 30% minimum tax becomes law, it would be worth reviewing whether the tax and non-tax benefits of your existing structure still make sense for your circumstances.