The Australian Budget 2026–27 includes a proposed change that may affect Australians who use discretionary trusts, often called family trusts.
From 1 July 2028, trustees of discretionary trusts are expected to pay a 30% minimum tax on the taxable income of the trust. Beneficiaries would still declare trust income in their own tax returns, but non-corporate beneficiaries would receive non-refundable credits for tax paid by the trustee.
Corporate beneficiaries are expected to be treated differently and may not receive the same credit.
For Australians living in Thailand, this may matter if you are a trustee, appointor or beneficiary of an Australian family trust, or if trust distributions are paid to family members living across more than one country.
The rules are not final. The details will depend on the legislation and any ATO guidance. This article is for general information only and is not intended to replace Australian or Thai tax advice. Expat Tax Thailand does not provide Australian tax advice. Where Australian advice is required, we can help you identify the key questions to raise with a qualified Australian tax adviser.
What Is a Discretionary Trust?
A discretionary trust is a structure often used by Australian families, investors and business owners.
It is commonly called a family trust.
In simple terms, the trust holds assets or receives income and the trustee decides how income is distributed among eligible beneficiaries. Those beneficiaries may include family members, related entities or companies, depending on the terms of the trust deed.
Discretionary trusts are often used for:
- Family business structures
- Investment portfolios
- Asset planning
- Income distribution between family members
- Succession planning
The flexibility of a discretionary trust is one of the main reasons it has been widely used in Australia.
The trustee can decide which beneficiaries receive income and how much they receive, subject to the trust deed and tax rules.
The proposed Budget change is aimed at how trust income is taxed, particularly where income is distributed to beneficiaries on lower tax rates.
What Is Proposed From 1 July 2028?
The Budget proposes a 30% minimum tax on discretionary trusts from 1 July 2028.
Under the proposed rules, the trustee would pay tax at a minimum rate of 30% on the taxable income of the discretionary trust. Beneficiaries would still need to declare trust income on their own tax returns, but non-corporate beneficiaries would receive non-refundable credits for tax paid by the trustee.
This is a major change to the way many discretionary trusts are currently used.
At present, trust income is commonly distributed to beneficiaries, who then pay tax based on their own tax position. In some family structures, this may allow income to be distributed to beneficiaries on lower marginal tax rates.
The proposed rules are designed to reduce the tax benefit of this type of income distribution.
The law is not final, and the exact mechanics may change. However, Australians with family trusts should not wait until 2028 to understand whether their structure may be affected.
Why Low-Rate Beneficiary Distributions May Become Less Effective
Many family trusts are used to distribute income among family members.
Where a beneficiary has a low marginal tax rate, distributing income to that beneficiary may produce a lower overall tax outcome under the current rules.
The proposed 30% minimum tax may reduce this benefit.
If the trustee pays tax at 30% and the beneficiary receives a non-refundable credit, the result may be different depending on the beneficiary’s own tax position.
A beneficiary on a tax rate above 30% may still need to pay additional tax.
A beneficiary with a tax rate below 30% may not be able to use the full value of the credit if it is non-refundable. For a beneficiary with little or no Australian taxable income, the credit may be partly or entirely wasted, turning the trustee-level tax into a permanent cost.
This means some distributions to lower-rate beneficiaries may become less effective than before.
For Australians in Thailand, this may matter where family members live in different countries, have different tax residency positions or receive trust distributions that may later be remitted to Thailand.
What Happens to Bucket Company Strategies?
Some discretionary trusts distribute income to a corporate beneficiary, often known as a bucket company.
This strategy has often been used to retain income at a corporate tax rate and defer further tax until profits are later paid out.
The proposed rules may significantly reduce the benefit of this strategy.
Under the Budget materials, non-corporate beneficiaries may receive non-refundable credits for tax paid by the trustee. Corporate beneficiaries are expected not to receive those credits.
This may mean income distributed to a corporate beneficiary could face tax at the trustee level and then further tax at the company level, depending on the final rules.
The legislation will be important. Existing unpaid present entitlements, retained profits and historical arrangements may need detailed review.
This is not an area for quick assumptions. If your trust uses a corporate beneficiary or bucket company, Australian tax advice should be sought before making changes.
Which Trusts May Be Outside Scope?
The proposed rules are aimed at discretionary trusts.
Other trust structures and some categories of income may be treated differently. The final legislation will need to confirm exactly which trusts, income types and arrangements are included or excluded.
Based on current Budget material and commentary, the minimum tax is not expected to apply to every trust or every category of trust income.
Areas that may be outside the core scope include:
- Fixed trusts
- Widely held trusts
- Complying superannuation funds
- Special disability trusts
- Deceased estates
- Charitable trusts
- Primary production income
- Amounts already subject to non-resident withholding tax
- Certain income relating to vulnerable minors
- Income from assets of testamentary trusts existing at Budget announcement
- Salary and wages paid by small businesses to employees
These exclusions should not be assumed without advice. A trust’s name or purpose does not always determine its tax treatment.
The trust deed, trustee powers, beneficiary classes, income type, asset ownership and residency position of beneficiaries may all need to be reviewed before deciding whether the proposed rules apply.
Why Expats Need to Review Trust Beneficiaries and Residency
Family trusts can become more complex when family members live in different countries.
An Australian family trust may have:
- An Australian trustee
- A non-resident trustee
- Australian resident beneficiaries
- Foreign resident beneficiaries
- Beneficiaries living in Thailand
- Corporate beneficiaries
- Assets in Australia or overseas
This matters because tax outcomes can depend on who receives income, where they are tax resident and whether funds are remitted across borders.
For Australians in Thailand, key questions include:
- Are you a trustee, appointor or beneficiary of an Australian family trust?
- Are any beneficiaries living in Thailand or outside Australia?
- Are trust distributions paid to you while you are Thai tax resident?
- Are trust distributions remitted into Thailand?
- Does the trust use a corporate beneficiary?
- Does the trust hold Australian property, shares, business assets or foreign assets?
- Has the structure been reviewed since you moved overseas?
A trust that worked well when all family members lived in Australia may need review once one or more family members live overseas.
For Australians living in Thailand, trust distributions may also raise Thai tax questions if funds are brought into Thailand.
Thai tax residents may need to review foreign-sourced assessable income remitted into Thailand. This is especially important for foreign-sourced income earned from 1 January 2024 onward and later brought into Thailand. A trust distribution that is income for Australian purposes should not automatically be treated as capital for Thai purposes. The character of the funds matters.
The key questions are whether the distribution represents income, capital, a capital gain, previously taxed Australian income or another category of funds, when the amount arose and whether it was remitted while the person was Thai tax resident.
Australian tax paid by a trustee on behalf of a non-resident beneficiary may also need careful review before assuming a foreign tax credit is available in Thailand. This may depend on the Australia-Thailand DTA, the type of income and the supporting evidence available.
Existing Rules for Non-Resident Beneficiaries Already Matter
The proposed 30% minimum tax is not the only issue for Australians in Thailand with family trusts.
Existing Australian trust rules can already create complex tax outcomes where an Australian trust distributes income or capital gains to a non-resident beneficiary.
In some cases, the trustee may be assessed on income connected to a non-resident beneficiary. The beneficiary may then need to consider how that tax is reported or credited in their own Australian tax position.
Capital gains can also be complex. Australian resident discretionary trusts may create Australian CGT issues for non-resident beneficiaries, including in situations where the underlying asset is not Australian real property.
This can include trust distributions of capital gains from shares, business assets or other non-property assets, so non-resident beneficiaries should not assume Australian CGT only matters where the trust holds Australian real estate.
This is a specialist area. If a trust has beneficiaries living in Thailand or elsewhere overseas, the existing Australian non-resident beneficiary rules should be reviewed alongside the proposed 2028 Budget changes.
The Three-Year Restructure Window
The Budget indicates that rollover relief will be available for three years from 1 July 2027 to help eligible taxpayers restructure out of a discretionary trust into a company or fixed trust.
The window is expected to run from 1 July 2027 to 30 June 2030.
This timing should also be considered alongside the separate Budget CGT changes expected from 1 July 2027. Those changes may affect how capital gains are calculated for individuals, trusts and partners in partnerships. If a trust holds assets with large unrealised gains, Australian advice should consider both the proposed CGT changes and the discretionary trust minimum tax rules before any restructure is planned.
This does not mean every trust should be restructured.
It also does not mean restructuring will be simple.
The relief is expected to reduce some tax consequences, such as CGT, but the final legislation will determine its exact scope and conditions.
For many families, the restructure window should be treated as a planning opportunity, not a reason to rush.
Why Stamp Duty, CGT, Financing and Legal Advice Still Matter
Even if rollover relief is available, restructuring a trust can involve many issues beyond the headline Budget measure.
These may include:
- Stamp duty
- CGT consequences outside the rollover
- Income tax consequences
- Asset protection issues
- Financing arrangements
- Loan refinancing
- Bank consent
- Legal ownership of assets
- Trust deed powers
- Commercial contracts
- Family succession issues
A restructure may also create consequences in more than one country if beneficiaries, assets or income flows are cross-border.
For Australians in Thailand, the Thai tax and remittance position may also need review if trust distributions or proceeds from restructuring are later brought into Thailand.
This is why trust restructuring should not be treated as a simple administrative step.
What Should Australians in Thailand Do Now?
The proposed trust rules are expected to begin from 1 July 2028, but that does not mean families should wait.
Trust reviews can take time, especially where the structure includes businesses, property, corporate beneficiaries, family members overseas or complex asset ownership.
Before the rules begin, Australians in Thailand may want to review:
- Whether they are trustee, appointor or beneficiary of a discretionary trust
- Whether the trust distributes income to low-rate beneficiaries
- Whether the trust uses a corporate beneficiary or bucket company
- Whether beneficiaries live in Thailand or elsewhere overseas
- Whether distributions are remitted to Thailand
- Whether the trust holds assets with large unrealised gains
- Whether the three-year restructure window may be relevant
- Whether Australian legal and tax advice is needed
The key point is not to rush into restructuring. It is to identify whether the trust is affected and whether planning should begin before 2028.
What Records Should You Gather?
Useful records may include:
- Trust deed and variations
- Trust tax returns
- Distribution statements
- Beneficiary details
- Trust financial statements
- Records of corporate beneficiaries
- Unpaid present entitlement records
- Company tax records for bucket companies
- Asset registers
- Property records
- Loan agreements
- Previous Australian tax or legal advice
- Records of any distributions remitted to Thailand
These records can help Australian advisers assess whether the proposed rules may apply and whether the structure should be reviewed.
They may also help identify any Thai tax or remittance issues where trust income or proceeds are brought into Thailand.
Not sure which Budget changes may affect you? Download our Australian Budget 2026–27 checklist below and use it to review your property, investments, trusts, income, remittances and records before you act.
Review Your Trust Position Before 2028
If you are an Australian living in Thailand and have a family trust, discretionary trust or corporate beneficiary structure, it is worth reviewing your position before the proposed rules begin.
Our team can help you identify the Thai tax, remittance and documentation issues and explain which Australian trust and tax questions may need to be raised with a qualified Australian adviser.
Further Reading in This Series
The Australian Budget 2026–27 may affect Australians in Thailand in different ways depending on their property, investments, trust structures, tax residency and remittance plans. You may also find these related articles useful:
Australian Budget 2026–27: What Aussies in Thailand Need to Know
Start with the full overview of the key Budget changes affecting Australians in Thailand, including property, investments, trusts and remittances.
Australian Property Owners in Thailand: How the 2026–27 Budget May Affect You
A practical guide to the proposed negative gearing changes and what they may mean if you own Australian rental property while living in Thailand.
Australian Budget 2026–27: What Expats in Thailand with Shares, ETFs and Crypto Need to Know
A guide to the proposed CGT changes and why investment records, valuations and remittance planning may matter.
