8 min read
Quick Summary
- The Deadline: A 30% minimum tax on discretionary trust income is set to start on 1 July 2028.
- The Opportunity: A three-year "rollover window" opens from 1 July 2027 to 30 June 2030, allowing asset transfers without triggering CGT.
- The Impact: Traditional "bucket company" strategies face potential double taxation, making them far less attractive.
- The Action: Perth property investors and business owners must review their structures now to prepare for the 2027 transition.
For decades, the discretionary trust has been the "Swiss Army Knife" of the Australian tax system. It offered Perth business owners and property investors unparalleled flexibility in distributing income and managing capital gains across family members.
But the clock has started ticking. The 2026-27 Federal Budget has introduced a fundamental shift that will change how many Western Australian families hold their wealth.
With a 30% minimum tax on the horizon, the era of simple income-splitting is drawing to a close. If your wealth is tied up in a family trust, the next three years will be the most critical period for your financial structure since the introduction of GST.
The 30% Minimum Tax: What Is Changing?
Currently, discretionary trusts are "pass-through" entities. The trust itself usually pays no tax, provided all income is distributed to beneficiaries who then pay tax at their individual marginal rates.
From 1 July 2028, the game changes. Under the proposed legislation, the Trustee will be required to pay a minimum of 30% tax on the trust’s taxable income at the source.
For beneficiaries on lower tax brackets (like adult children or non-working spouses), this is a significant hit. While they can claim a non-refundable tax credit for the tax the trustee has already paid, any "excess" credit is lost. If their marginal rate is 19%, that extra 11% tax simply disappears into the government coffers.
The Death of the "Bucket Company"?
One of the most common strategies for high-net-worth investors in Perth has been the use of a "bucket company." By distributing trust income to a corporate beneficiary, investors capped their tax rate at 25% or 30%, keeping more capital for future Commercial Property Loans or other investments.
The new rules target this specifically. Corporate beneficiaries will get zero tax credits for the tax paid by the trustee.
This creates a "double taxation" trap. The trust pays 30%, and the company may then be taxed on its own income. This effectively destroys the primary benefit of the bucket company for future distributions, forcing a total rethink of how you fund your next Acquisition Finance play.
The Three-Year Rollover Window (2027–2030)
The government isn't completely pulling the rug out from under you: yet. Recognizing that thousands of West Australians are now in "unfit" structures, they have announced a three-year expanded rollover relief window.
From 1 July 2027 to 30 June 2030, you can move assets: such as your portfolio of warehouses in Welshpool or residential units in Scarborough: out of a discretionary trust and into a company or a fixed trust.
Crucially, during this window, these transfers will not trigger Capital Gains Tax (CGT) or immediate income tax. It is a one-off "get out of jail free" card to move into a structure that is more tax-efficient under the new 30% regime.
Why You Can’t Afford to Wait Until 2027
While the rollover window doesn't open until July 2027, the planning must start today. Restructuring a property portfolio isn't just about tax; it’s about financing.
When you move a property from "Trust A" to "Company B," your existing lenders will treat this as a new application. You will need to prove serviceability under the new entity, and your current loan terms for Home Loans or investment debt may change.
Perth’s commercial market is also evolving. If you are planning a Commercial Development Loan in the next 24 months, the structure you choose now will dictate your tax liabilities for the next decade.
Step-by-Step: Preparing for the Shift
- Audit Your Assets: List every property and business asset currently held within your discretionary trusts.
- Calculate the "30% Gap": Work out how much extra tax you will pay if you continue with your current distribution strategy after 2028.
- Model the Fixed Trust/Company Alternative: Compare the 30% trust tax against the flat corporate tax rate or a fixed unit trust structure.
- Review Your Financing: Speak to Baseline Finance about how a change in entity will affect your borrowing capacity and Working Capital.
- Check for Exclusions: If your trust holds primary production assets or was formed under a will (testamentary trust), you may be exempt from the new rules.
Risks, Costs, and Transparency
No major restructure is without its downsides. It is vital to understand that the federal rollover relief only covers federal taxes like CGT.
- Stamp Duty: Western Australia’s Department of Finance has not yet confirmed if they will match the federal rollover with stamp duty exemptions. Transferring a multi-million dollar property into a new company could still trigger a massive stamp duty bill in WA.
- Refinancing Costs: You may face break costs on fixed-rate loans or new application fees when moving debt between entities.
- Loss of Flexibility: Moving to a fixed trust or company means losing the ability to change who gets the income each year. You trade flexibility for tax stability.
- Legislative Risk: These measures are currently in consultation. The final law may look different from the budget announcement, meaning your strategy must remain adaptable.
Terms to Know
| Term | What it Means in This Context |
|---|---|
| Discretionary Trust | A structure where the trustee decides who gets the income each year. |
| Fixed Trust | A trust where beneficiaries have a set, "fixed" right to income and capital. |
| Rollover Relief | A tax rule that lets you defer a tax liability (like CGT) until a later date. |
| Bucket Company | A company set up solely to receive and hold distributions from a trust. |
| Double Taxation | When the same dollar of profit is taxed twice (e.g., at the trust level and then the company level). |
The Baseline Difference
Navigating the intersection of tax law and finance is where Baseline Finance thrives. We don't just find you a loan; we look at how your debt structure interacts with your long-term tax obligations.
As the "Tick-Tock" of the discretionary trust tax approaches, our Strategic Funding Plan becomes your most valuable asset. We work alongside your accountants to ensure that when you use the 2027 rollover window, your finance is ready to move with you: seamlessly and without hidden surprises.
Whether you are looking at SMSF Loans or upgrading your Asset Finance, we provide the jargon-free, honest advice you need to stay ahead of the curve.
Contact Baseline Finance
If you’re concerned about how the 30% minimum tax will impact your Perth property portfolio, let's have a casual chat about your options.
Phone: 08 6108 3925
Email: commercial@baselinefin.com.au
