Real estate principals who operate through a discretionary trust – a common structure for smaller agencies and family-run businesses – are among those CPA Australia says could be caught out by a gap in the Federal Government’s proposed trust tax reforms.
The Government is proposing a 30 per cent minimum tax on discretionary trusts from 1 July 2028, with Commonwealth rollover relief on offer for businesses that choose to move into a company, fixed trust or individual structure instead. A restructuring window is expected to open from mid-2027.
But CPA Australia Tax Lead Jenny Wong said the consultation, while a welcome step, leaves state and territory stamp duty untouched – meaning businesses could still face significant costs even where they qualify for federal relief.
“Discretionary trusts are the default starting point for many small businesses in Australia. They are not automatically sophisticated tax plays,” Ms Wong said.
“A trust gives many family businesses flexibility to manage uncertainty and asset protection to manage risk, without the cost and rigidity of a company.”
She said restructuring is rarely simple, often requiring legal and tax advice, and amended employment agreements, leases, supplier contracts and finance arrangements.
“This consultation paper runs to 17 pages and includes 17 discussion questions but does not mention state stamp duty once. Until that changes, the Commonwealth’s rollover relief only solves part of the bill small business is being asked to pay.
“Right now, the same restructure can cost one business nothing and another business tens of thousands of dollars, purely because of the state they are in. That is not tax reform – it’s a postcode lottery.”
CPA Australia is calling on the Commonwealth to coordinate with state and territory governments through the Council on Federal Financial Relations or National Cabinet before the legislation is finalised.
Ms Wong said the design risks hitting smaller and regional businesses hardest, because larger family businesses have often already moved into company structures where the 25 per cent corporate tax rate is more attractive.
She said regional retail businesses, trades, professional practices and farms are among those most likely to still operate through trust structures – not because of aggressive tax planning, but because it suits their business.
“The businesses most exposed are smaller operators without significant advisory budgets, often with trust structures built up over many years.”
CPA Australia also flagged a proposal to make directors of corporate trustees jointly and severally liable for the minimum tax, alongside new ATO collection notice powers, describing it as “a meaningful new personal risk” for family-run businesses using that common structure.
The organisation also raised concern that the proposed rollover appears to require all, or essentially all, of a trust’s assets to move into a new structure at once, rather than allowing a partial restructure.
She acknowledged some positives in the consultation paper, including a proposal to switch off Family Trust Distributions Tax for genuine restructures and a rollover more generous than the small business template it’s based on. However, she noted that the state duty gap is the piece that is still missing
The paper also proposes a legislative response to the ATO’s High Court loss in the Bendel case, adding a further layer of uncertainty for businesses and advisers navigating the changes at the same time.
CPA Australia is not opposing the policy’s aim of aligning tax outcomes between trust-derived income and wage income, but says the design needs work.
“Good tax reform should help Australian small businesses compete and invest, not divert their attention and capital into avoidable restructuring costs,” Jenny said.