EXPOSURE DRAFT • 3 SEPTEMBER 2026 • TRUSTS • BUCKET COMPANIES

The 30% Trust Tax Draft Law Has Landed: What Changed on 3 September 2026

A practical Cruz & Co update comparing the Budget proposal with Treasury's exposure draft legislation, including the new election to stay outside the minimum tax, expanded rollover relief, refundable franking credits and what it all means for bucket companies.

See the old vs new comparison Jump to case studies

Start date unchanged: 1 July 2028. Rollover relief window: 1 July 2027 to 30 June 2030. New election: must be made in the 2028–29 income year. Consultation on the draft closed on 18 September 2026.

In June we published Trust Distributions and Bucket Companies Under the Microscope, explaining the 2026–27 Federal Budget proposal for a 30% minimum tax on discretionary trust income from 1 July 2028.

On 3 September 2026, Treasury released the exposure draft legislation and explanatory materials to put that proposal into law. The package covers the minimum tax itself, a new definition of "fixed trust", rollover relief for restructures, and a brand-new election that lets existing trusts stay outside the regime without moving any assets.

The core policy has not changed. What has changed is the detail, and some of that detail opens up planning options that were not available when the Budget was announced.

Executive Summary

The draft law confirms a 30% trustee-level minimum tax on discretionary trusts from 1 July 2028. Non-corporate beneficiaries still receive a non-refundable offset; corporate beneficiaries such as bucket companies still do not. The headline new features are:

An "excluded election trust" (EET) election for trusts that exist on 1 July 2028, allowing them to fix each beneficiary's share of income and capital and sit outside the minimum tax without a restructure.
Expanded rollover relief to move assets out of a discretionary trust into a company, fixed trust or individuals, with strict conditions.
Refunds of excess franking credits to the trustee, addressing the concern about "stranded" credits.
A new, broader definition of fixed trust that applies across the whole income tax law.
Clearer exclusions for primary production income, vulnerable minors, distributions to charities and DGRs, and genuine testamentary trusts.

Practical point

This is still exposure draft legislation, not law. It may change before it is introduced into Parliament. However, some decisions, such as who must be a beneficiary of the trust on 1 July 2028, need to be made well ahead of the start date. Waiting for the final law could close off options.

What Has Not Changed

Minimum Tax Model

Confirmed in the draft law

Trustee Pays 30%

Tax at a minimum 30% on the trust's net income, from 1 July 2028.

Individuals Get an Offset

Non-corporate beneficiaries receive a non-refundable offset for 30% of their share.

Companies Get Nothing

Corporate beneficiaries remain assessable with no offset for the trustee's tax.

The Government's stated purpose also remains the same: to reduce the tax advantages from splitting income through discretionary trusts, so that families with similar economic income bear a similar effective tax rate.

Old vs New: Budget Proposal Compared with the Draft Law

The table below compares the position as announced in the May 2026 Budget (as covered in our June article) with the position in the exposure draft released on 3 September 2026.

Feature	Budget Proposal	Exposure Draft
Start date	1 July 2028.	1 July 2028. SAME
Rate	Minimum 30% tax at trustee level.	Minimum 30% tax at trustee level. SAME
Individual beneficiaries	Non-refundable credit for tax paid by the trustee.	Non-refundable offset equal to 30% of their share of minimum tax income. SAME
Bucket companies	No credit for trustee tax. Effective rate of 55% to 60% possible.	Still no offset and no franking credit. Double taxation remains unless the trust makes an EET election. SAME
Avoiding the tax without restructuring	No mechanism. Restructuring was the main way out.	New EET election for trusts existing on 1 July 2028. Fix each beneficiary's share of income and capital and the minimum tax does not apply. NEW
Franking credits	Trustee uses franking credits to pay the minimum tax. Treatment of excess credits unclear.	Trustee applies franking credits against the minimum tax and receives a refund of any excess. Credits no longer flow through to beneficiaries. IMPROVED
Rollover relief	Three-year income tax and CGT relief, 1 July 2027 to 30 June 2030.	Same window. Assets can move to a company, fixed trust or individuals, but all relevant assets must go to a single transferee with continuity of ownership. CONDITIONS
Stamp duty	Not covered by rollover relief.	Still not covered by rollover relief. The EET election is not expected to trigger duty because no assets move, but no State or Territory has confirmed this yet. NEW
Excluded trusts	Fixed and widely held trusts, super funds, charitable trusts, special disability trusts and deceased estates expected to be excluded.	Fixed trusts, special disability trusts, deceased estates, complying super entities and trusts prescribed by instrument. MITs, AMITs, bare trusts and employee share trusts intended to fall within the fixed trust definition. CONFIRMED
Definition of fixed trust	Existing law, which many unit trusts struggle to satisfy.	New, broader definition based on whether there are any "material discretionary elements". Applies across the whole income tax law. NEW
Excluded income	Exclusions flagged in principle, with detail to follow.	Primary production income, certain income of vulnerable minors, distributions to charities and DGRs, income subject to non-resident withholding, and genuine testamentary trust income. CLARIFIED
Testamentary trusts	Expected to be excluded.	Excluded, but only for income from estate property. Property added after 7.30 pm on 12 May 2026 is caught. New testamentary trusts from 1 July 2028 must distribute to individuals or exempt entities. CONDITIONS

The draft law does not soften the minimum tax. It gives trustees a choice: accept the tax, give up flexibility, or restructure. Each option has a cost.

Cruz & Co practical planning insight

Your Three Options Under the Draft Law

Option 1

Accept the Minimum Tax

Keep full discretion over distributions.
Trustee pays 30%, individuals receive an offset.
Low-rate beneficiaries lose much of their benefit.
Bucket company distributions taxed twice.

Option 2 · New

Make an EET Election

Fix each beneficiary's share of income and capital.
No asset transfers or deed amendment.
One-off election in 2028–29 only.
Breaching it triggers top-rate tax.

Option 3 · Expanded

Restructure with Rollover

Move assets to a company, fixed trust or individuals.
Income tax and CGT deferred, not stamp duty.
All assets to a single transferee by 30 June 2030.
Transferee must stay non-discretionary for four years.

The New Excluded Election Trust (EET)

The most significant new feature in the draft law is the ability for an existing discretionary trust to elect out of the minimum tax. In effect, the trust operates like a fixed trust for tax purposes while keeping its existing deed and assets.

How the EET Election Works

Trusts existing on 1 July 2028

Nominate Beneficiaries

Choose beneficiaries who were capable of benefiting under the deed on 1 July 2028.

Fix the Percentages

Each nominee takes the same share of income and capital, totalling 100%.

Lodge in 2028–29

Notify the ATO in the approved form. The minimum tax then does not apply.

EET Requirement	What the Draft Law Says
Eligible trusts	Discretionary trusts in existence on 1 July 2028. New trusts after that date cannot elect.
Timing	Election made once, in the 2028–29 income year. Not available if the trustee has used the rollover relief.
Who can be nominated	Individuals, trusts, exempt entities and "eligible companies" (broadly, companies without discretionary rights to dividends or capital). Partnerships and super funds cannot be nominated.
Fixed shares	Each nominee must have the same percentage of income and capital. For example, you cannot give one person 100% of income and another 100% of capital.
Changing nominees	Generally not allowed. Limited exceptions apply on the death of a nominee or a relationship breakdown.
Automatic revocation	A distribution that does not follow the nomination, the vesting or winding up of a nominated trust, or a change in shareholding of a nominated company (other than on death or relationship breakdown).
Cost of revocation	In the year of revocation, the trustee is taxed on all of the trust's net income at the top marginal rate (47% including Medicare levy). The trust is then subject to the minimum tax from the following year and can never re-elect.

Cruz & Co Warning: The Election Is Not "Set and Forget"

The EET election swaps a tax cost for a permanent governance obligation. Fixing entitlements can affect asset protection, family law outcomes and succession planning. Children born after 2028 cannot be added except through a deceased nominee's share. A single non-compliant distribution could cost the trust tax at 47% on its entire net income for that year.

Franking Credits: What Has Changed

Our June article showed a simple example where a trust's franking credits exactly covered the 30% minimum tax. A key concern raised during consultation was what happens when franking credits exceed the minimum tax, for example where the trust has interest or other deductions. Under the Budget proposal, those excess credits risked being wasted. The draft law now allows the trustee to claim a refund of the excess.

The flip side is that franking credits no longer flow through to beneficiaries. Beneficiaries on low marginal rates who currently receive refunds of excess franking credits may be worse off and should model their position.

Bucket Companies: Still the Biggest Pressure Point

The Government has not changed its policy on corporate beneficiaries. The draft law still denies bucket companies any offset for the trustee's 30% tax, so the double taxation we highlighted in June remains.

Current Rules

30%

$100,000 distributed to a bucket company taxed at 30%. No trustee tax.

Draft Law, No Election

60%

Trustee tax of $30,000 plus company tax of $30,000 on the same $100,000.

Paid Out to a Top-Rate Shareholder

69.71%

Total tax once the company's after-tax profit is paid as a franked dividend to an individual on 47%.

Cruz & Co Insight

For trusts in existence on 1 July 2028, the EET election may preserve a bucket company strategy, provided the bucket company qualifies as an "eligible company" and the nominations are structured correctly. For trusts that cannot or will not elect, distributing to a bucket company after 1 July 2028 is unlikely to be tax effective. See Case Study 1 below.

Rollover Relief: Old vs New Conditions

Feature	Budget Proposal	Exposure Draft
Window	1 July 2027 to 30 June 2030.	1 July 2027 to 30 June 2030.
Taxes covered	Income tax and CGT only.	Income tax and CGT only. Consequences are deferred, not exempted.
Where assets can go	Not specified in detail.	A single company, fixed trust or other eligible entity. Not an exempt entity, super fund or another minimum tax trust.
Which assets	Not specified in detail.	All relevant assets, apart from limited exceptions (for example, primary production assets, assets needed to pay trust liabilities, and assets costing $1,000 or less).
Ownership continuity	Not specified in detail.	Where a family trust election is in force, everyone with an interest in the transferee must have been a beneficiary and part of the family group.
Clawback	Not specified.	Relief can be clawed back if the transferee has material discretionary elements before the end of the fourth income year after the final transfer.
Stamp duty	Not covered.	Not covered.

Case Study Examples

The following simplified case studies illustrate how the draft law may change outcomes compared with the Budget proposal. Names are fictional. Individual tax is estimated using the legislated 2028–29 resident rates and ignores the Medicare levy (except where stated), the low income tax offset and other offsets.

The Morgan Family Trust and Its Bucket Company

Can the EET election rescue a bucket company strategy?

The Morgan Family Trust runs a profitable consulting business. Each year, after distributing to family members, it distributes $100,000 to Morgan Holdings Pty Ltd, a bucket company taxed at 30%. The company's shares are held by a second trust, the Morgan Investment Trust.

Before 1 July 2028, the Morgans' adviser confirms Morgan Holdings is an "eligible company" and that it is a beneficiary under the deed. In 2028–29, the Morgan Family Trust elects to be an EET, nominating Morgan Holdings for 100% of income and capital. The family members are paid salaries from the business instead.

On $100,000 of trust income	Budget Proposal	Draft Law, No Election	Draft Law, EET Election
Trustee minimum tax	$30,000	$30,000	$0
Bucket company tax at 30%	$30,000	$30,000	$30,000
Tax while retained in company	$60,000 (60%)	$60,000 (60%)	$30,000 (30%)
Further tax if profits later reach a 47% individual	$9,714	$9,714	$17,000
Total tax, fully paid out	$69,714	$69,714	$47,000

How the EET column works: the company pays a $70,000 fully franked dividend to the Morgan Investment Trust. That trust is a minimum tax trust, but its $30,000 of franking credits cover the 30% minimum tax on $100,000. When a top-rate individual receives the distribution, they pay $47,000 less a $30,000 offset, a top-up of $17,000.

Outcome

The EET election may save the Morgans around $30,000 in tax on every $100,000 retained in the company. The trade-off is that the Morgan Family Trust can never distribute to anyone other than Morgan Holdings, and any change to the company's shareholding (other than on death or relationship breakdown) revokes the election.

The Patel Share Portfolio Trust

Geared share portfolio with excess franking credits

The Patel Family Trust holds an Australian share portfolio funded partly by a margin loan. It does not make an EET election.

Item	Budget Proposal	Exposure Draft
Franked dividends received	$70,000	$70,000
Franking credits attached	$30,000	$30,000
Interest on margin loan	($40,000)	($40,000)
Trust net income	$60,000	$60,000
30% minimum tax	$18,000	$18,000
Franking credits applied	($18,000)	($18,000)
Excess franking credits	$12,000 at risk of being wasted	$12,000 refunded to trustee

Cruz & Co Insight

The refund is a welcome change for geared investment trusts. However, beneficiaries now receive a non-refundable offset rather than the franking credits themselves. A retired parent on a low income who currently receives a franking credit refund through the trust may no longer get that refund personally. The overall family outcome needs modelling.

The Chen Family Trust

Three adult beneficiaries on lower incomes

The Chen Family Trust earns $150,000 of business income each year and distributes it equally to two semi-retired parents and their adult daughter, a university student. None of them has other income.

Annual position	Current Rules	Draft Law, No Election	Draft Law, EET (one-third each)
Trustee minimum tax	$0	$45,000	$0
Each beneficiary's own tax on $50,000	≈ $5,252	≈ $5,252	≈ $5,252
Offset available to each beneficiary	n/a	$15,000 (non-refundable)	n/a
Unused offset per beneficiary	n/a	≈ $9,748 lost	n/a
Total family tax	≈ $15,756	$45,000	≈ $15,756

Key Takeaway

An EET election could keep the Chens' tax close to today's level, around $29,000 a year less than accepting the minimum tax. But the one-third split is locked in. If the daughter starts a high-paying job, the trust cannot redirect her share to her parents without revoking the election.

The O'Brien Property Trust

Restructure with rollover relief or make the election?

The O'Brien Family Trust owns two commercial properties and a share portfolio. The family considers moving everything into a company to escape the minimum tax.

Consideration	Rollover to a Company	EET Election
Income tax and CGT on transfer	Deferred under rollover.	Not applicable, as no assets move.
Stamp duty	Likely payable on both properties. Can be a very significant cost.	Not expected, but not yet confirmed by the States.
Bank and lease consents	Refinancing and lease assignment likely required.	Generally not required, but financier review clauses should be checked.
All assets must move	Yes, including the share portfolio, to a single entity by 30 June 2030.	Not applicable.
Future flexibility	Company retains profits at the corporate rate; dividends can be paid to shareholders.	Fixed percentages for life of the election.
Future CGT discount	Companies do not receive the 50% CGT discount.	Trust can continue to pass on discount capital gains to individual nominees.

Cruz & Co Insight

For property-holding trusts, the EET election may be far simpler and cheaper than a restructure. However, the family must be comfortable with permanently fixed shares. If the family wants to keep flexibility, accepting the minimum tax may be the better choice, particularly if the beneficiaries are already on rates of 30% or above.

The Walker Family Trust

The cost of breaching an EET election

The Walker Family Trust makes an EET election in 2028–29, nominating two parents at 50% each. In 2032, the trustee distributes $20,000 to a grandchild to help with a house deposit. The grandchild is not a nominated beneficiary, so the election is automatically revoked.

2031–32 income year	Amount
Trust net income	$150,000
Beneficiaries treated as never presently entitled	All
Trustee tax at 47%	$70,500
From 2032–33 onwards	30% minimum tax applies, no re-election

Lesson

A well-meaning $20,000 gift could cost $70,500 in tax and permanently remove the trust's ability to stay outside the regime. Trustees making the election will need strict distribution controls and annual checks before resolutions are signed.

Which Option May Suit Which Family Group?

Family Group Profile	Option Worth Modelling First
Beneficiaries already on 30% or higher marginal rates	Accepting the minimum tax may cost little extra and preserves full flexibility.
Stable family with predictable, long-term income splits	EET election, if the family is comfortable fixing shares permanently.
Heavy use of a bucket company	EET election nominating an eligible company, or holding the business directly in a company.
Property-holding trust	EET election, given stamp duty on a restructure. Confirm the State duty position first.
Operating business wanting to retain profits	Rollover into a company, possibly owned by a trust for asset protection.
Young family expecting more children or grandchildren	Be cautious with the EET election. New family members cannot easily be added.
Primary production trust	Primary production income is excluded. Check whether any other income is caught.
Unit trust with some discretionary features	Test against the new fixed trust definition. It may now be outside the regime entirely.

Key Dates

12 May 2026 2026–27 Federal Budget announces the 30% minimum tax.
July 2026 Treasury consultation paper released.
3 September 2026 Exposure draft legislation released.
18 September 2026 Consultation on the exposure draft closes.
Late 2026 First tranche of legislation expected to be introduced into Parliament.
1 July 2027 Rollover relief window opens.
Before 1 July 2028 Nominee beneficiaries and companies must exist and be beneficiaries under the deed if an EET election is planned.
1 July 2028 Minimum tax commences.
2028–29 income year The only year an EET election can be made.
30 June 2030 Rollover relief window closes.

What Should Trustees Do Now?

Do not act on the draft alone. Legislation may still change before it passes.
List every discretionary trust in the family group, including trusts that own shares in companies.
Model the three options: pay the minimum tax, make an EET election, or restructure.
If an EET election is likely, review the trust deed and make sure every intended nominee is a beneficiary before 1 July 2028.
Check whether any bucket company would qualify as an "eligible company".
Test any unit trusts against the new fixed trust definition.
Review existing UPEs and Division 7A loans alongside the trust changes.
Obtain stamp duty, finance and legal advice before any asset transfer.
Consider the asset protection, family law and succession effects of fixing entitlements.
Review wills that establish testamentary trusts in light of the new conditions.

The election deadline is a single year, but the groundwork has to be done before 1 July 2028. Planning in 2027 gives families the most options.

Cruz & Co practical planning insight

References and Further Reading

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Important information: This article is general information only and does not constitute tax, legal or financial advice. It is based on exposure draft legislation released on 3 September 2026, which is not law and may change. Case studies are simplified and fictional, use estimated 2028–29 resident tax rates, and do not account for every offset, levy or individual circumstance. You should obtain advice tailored to your circumstances before acting or making any change to an existing structure.