7 min read
Quick Summary
- The Context: Treasury is currently consulting on a mandatory 30% minimum tax for discretionary trusts, set to begin 1 July 2028.
- The Cost: Restructuring into a company or fixed trust could cost between $15,000 and $50,000 in professional fees alone.
- The Risk: Western Australia has not yet confirmed stamp duty relief, meaning moving a $1.5m Perth warehouse into a new structure could trigger a $60,000+ tax bill today.
- The Strategy: For many small-to-medium business owners in Perth, the "cost of fixing the problem" is actually higher than just paying the extra tax.
Since the Federal Government announced the 30% minimum tax on discretionary trusts, the advisory world has been in a frenzy. Every accountant and lawyer in Perth is waiting to see if it's worth waving a "restructure now" flag."
The fear is real: from 1 July 2028, the ability to split income among family members to stay in lower tax brackets will effectively vanish for most discretionary trusts. If your trust earns profit, the tax man wants at least 30 cents of every dollar, regardless of who it goes to.
But here is the contrarian truth: restructuring is often a trap. For a significant number of Perth business owners and property investors, doing absolutely nothing, and simply paying the 30% tax, is the smartest financial move you can make.
The High Price of "Fixing" Your Structure
The Council of Small Business Organisations Australia (COSBOA) recently estimated that the cost to restructure a typical small business ranges from $15,000 to $50,000.
This isn't just "paperwork." It involves new legal deeds, updated Asset Finance agreements, renegotiating Working Capital facilities, and potentially re-applying for every Home Loan where the trust acted as a guarantor.
If your trust is only paying an extra $3,000 a year in tax under the new 30% rule, it would take you over 10 years just to break even on the restructuring costs. In the world of business, a 10-year payback period is usually a "no-go" zone.
The WA "Postcode Lottery" and the Stamp Duty Wall
While the Federal Government has promised rollover relief for Capital Gains Tax (CGT) between 2027 and 2030, they don't control the State Government in West Perth.
Currently, Western Australia has not confirmed any stamp duty relief for businesses moving assets out of discretionary trusts. This creates a "postcode lottery." If you own a commercial warehouse in Malaga, Welshpool, or Osborne Park worth $1.5 million inside your trust, moving it to a company structure could trigger a transfer duty bill of roughly $60,000.
Unless the WA Government steps up with a specific exemption, the "tax saving" you're chasing could be dwarfed by an immediate, five-figure invoice from RevenueWA.
The Indexation Advantage You'd Lose
The 2026 Budget officially replaces the 50% CGT discount with a cost base indexation system for individuals, trusts, and partnerships, effective from 1 July 2027. This means you adjust your original purchase price for inflation, and only pay tax on the "real" gain above that.
Companies do not get this indexation benefit.
If you restructure your Commercial Property Loans and move your assets into a company to "save" on the 30% income tax, you are permanently forfeiting the ability to index the cost base of those assets. For a $1.5 million Perth warehouse held for 10 years, inflation could add $300,000+ to your cost base, meaning that much less tax to pay when you sell. Inside a company structure, that inflation adjustment simply doesn't exist.
The Treasury modelling confirms that even under the new system, trusts and individuals will still pay less tax on capital gains than companies, because the indexation adjustment ensures you're only taxed on real, not inflationary, growth.
Flexibility is a Hidden Asset
Discretionary trusts are popular because they are, well, discretionary. They allow you to change who gets what every single year.
Once you move to a company or a fixed trust, that flexibility is gone. You are locked into a rigid structure. If your family circumstances change: a child starts university, a spouse stops working, or you decide to bring in a partner for an Acquisition Finance deal: a company structure is far less forgiving than the "old" discretionary trust, even with a 30% tax floor.
The 5-Year Breakeven Test
Before you sign any documents to dismantle your trust, we recommend running this simple Strategic Funding Plan framework:
- Calculate the Tax Gap: What is the actual dollar difference between your current tax bill and a flat 30%? (e.g., $5,000).
- Estimate the Exit Cost: Get a firm quote for legal, accounting, and Commercial Development Loans re-documentation. Don't forget stamp duty. (e.g., $25,000).
- Find the Breakeven: Divide the Exit Cost by the Tax Gap ($25k / $5k = 5 years).
- Assess the Horizon: Are you planning to sell the business or property within that 5-year window?
If your breakeven is longer than 5 years, or if you plan to sell soon, the math says stay put.
When to Stay vs. When to Move
| Stay Put (Do Nothing) | Consider Restructuring |
|---|---|
| Annual profits are under $150,000. | Annual profits consistently exceed $300,000. |
| You own WA property with high land value. | You do not own property inside the trust. |
| You plan to sell the asset within 5–7 years. | This is a 20-year multi-generational play. |
| Your beneficiaries are mostly in the 30%+ bracket. | You have many beneficiaries with 0% tax rates. |
| You value simplicity and lower admin costs. | You need the structure for external investment. |
Risks and Transparency
It is important to acknowledge that "doing nothing" has its own risks. The government could eventually increase the 30% floor to 37% or 45% in future budgets. Furthermore, while the consultation period closes on 31 July 2026, the final legislation might contain "anti-avoidance" hooks that make staying in a trust even more complex.
However, the risk of acting too early is a guaranteed loss of cash today. Paying $30,000 now to solve a problem that might only cost you $4,000 a year from 2028 is not strategy: it’s a sunk cost.
Terms to Know
| Term | What it means for you |
|---|---|
| 30% Minimum Tax | The new tax floor for discretionary trusts starting July 2028. |
| Rollover Relief | A window (2027-2030) where you can move assets without triggering CGT. |
| Transfer Duty | Also known as stamp duty; the WA state tax on moving property. |
| Bucket Company | A company used to cap trust tax at 30%; these are the primary target of the new rules. |
| Discretionary Trust | A structure that allows trustees to choose how income is distributed. |
The Baseline Difference
At Baseline Finance, we aren't here to sell you a restructure or a complex legal scheme. We are here to ensure your commercial property and business debts are structured for long-term stability, not just a short-term tax win.
Our Strategic Funding Plan provides a 7-day roadmap that benchmarks your current lending and models the impact of these tax changes on your actual cash flow. We act as your single point of contact, coordinating with your accountant to ensure your finance structure matches your tax reality: without the jargon.
Contact Baseline Finance
If you’re unsure whether your current structure still serves your goals, let’s run the numbers together.
Phone: 08 6108 3925
Email: commercial@baselinefin.com.au
