CGT Reform 2027 and Discretionary Trust Restructuring: An Australian Accountant's Planning Guide

The 2026–27 Federal Budget delivered the most significant overhaul of Australia's capital gains tax and trust taxation framework in decades. From 1 July 2027, the familiar 50% CGT discount will be replaced by a cost base indexation system with a 30% minimum tax on net capital gains. From 1 July 2028, discretionary trusts will face a 30% minimum tax at the trustee level — a change that fundamentally alters the tax efficiency of one of Australia's most widely used business and wealth structures. For business owners, investors, and families with discretionary trusts, the window to plan and act is now open, and the guidance of a qualified accountant has never been more critical.

Understanding the CGT Reforms Taking Effect from 1 July 2027

Australia's current capital gains tax system allows individuals and trusts to discount a capital gain by 50% if the asset has been held for more than 12 months. This discount has been a cornerstone of investment and business exit planning for over two decades. From 1 July 2027, this system will be replaced.

Under the new regime, capital gains on assets held for more than 12 months will be calculated using cost base indexation — adjusting the original cost of the asset for inflation — rather than applying a flat 50% discount. A 30% minimum tax will then apply to the net capital gain after indexation. For assets that have appreciated significantly in real terms, the new system may produce a lower tax outcome than the old 50% discount. For assets with modest real gains, the outcome may be less favourable.

Transitional Rules and Pre-1 July 2027 Gains

The reforms are prospective. Capital gains that accrued on assets before 1 July 2027 remain eligible for the existing 50% CGT discount rules. This means that for assets sold after 1 July 2027, there will need to be an apportionment between the pre-reform and post-reform gain components.

For business owners contemplating a sale or succession event, the timing of any transaction relative to 1 July 2027 is now a critical planning consideration. An accountant can model the tax outcomes under both the old and new regimes to help you determine the optimal timing for your exit or asset disposal.

Housing Carve-Out for New Residential Builds

Investors in new residential builds have been given a choice under the reforms. They may elect to apply either the existing 50% CGT discount or the new indexation and minimum tax regime to gains on new residential property. This carve-out is designed to incentivise housing supply and may benefit investors who hold new builds for extended periods in a high-inflation environment.

The Discretionary Trust Minimum Tax: What It Means for Your Structure

From 1 July 2028, the trustee of a discretionary trust will be required to pay a minimum 30% tax on the trust's taxable income. This is a fundamental change to the way discretionary trusts are taxed in Australia.

Under the current system, trustees distribute income to beneficiaries who are then taxed at their individual marginal rates. This flexibility has made discretionary trusts a popular vehicle for income splitting — distributing income to lower-income family members or to a corporate beneficiary (a "bucket company") to cap the tax rate at 25% or 30%.

The End of the Bucket Company Strategy

The 30% minimum tax effectively eliminates the bucket company strategy for most discretionary trusts. Under the new rules, corporate beneficiaries will not receive the non-refundable tax credits that non-corporate beneficiaries receive for the trustee-level tax. This means that streaming income to a corporate beneficiary will no longer provide a tax advantage — the trust will pay 30% at the trustee level, and the corporate beneficiary will not receive a credit to offset its own tax liability.

For business owners who have relied on bucket companies as part of their tax planning, this change requires a fundamental reassessment of their structure. An accountant can help you model the after-tax outcomes under the new regime and identify whether restructuring is appropriate for your circumstances.

Exclusions from the Minimum Tax

Not all trusts are affected by the 30% minimum tax. The following are excluded:

• Complying superannuation funds — including self-managed superannuation funds (SMSFs)
• Fixed trusts and widely-held trusts — where beneficiaries have fixed entitlements to income and capital
• Special disability trusts — established for the benefit of a severely disabled person
• Charitable trusts — registered with the Australian Charities and Not-for-profits Commission (ACNC)
• Primary production income — income derived from primary production activities is excluded from the minimum tax calculation
• Testamentary trusts established before 12 May 2026 — existing testamentary trusts are grandfathered; new testamentary trusts created after this date are subject to the minimum tax

The Restructure Rollover Relief Window: 1 July 2027 to 30 June 2030

Recognising that many businesses and families will need time to restructure, the government has announced a three-year rollover relief window from 1 July 2027 to 30 June 2030. During this period, assets can be transferred out of a discretionary trust into a company or fixed trust without triggering immediate income tax or CGT consequences.

This relief does not eliminate the tax — it defers it. The receiving entity takes on the cost base of the transferred assets, meaning the deferred gain will crystallise when those assets are eventually sold. An accountant can help you assess whether rollover relief is appropriate and structure the transfer to maximise its benefits.

Choosing the Right Successor Structure

The most common restructuring options are a transfer to a company or a transfer to a fixed trust. Each has different implications for ongoing tax, asset protection, stamp duty, and succession planning.

• Company structure — A company pays a flat tax rate of 25% (for base rate entities) or 30%, provides strong asset protection, and facilitates future capital raising or sale. However, it does not provide the CGT discount on asset sales, and extracting profits requires paying dividends that are taxed in the hands of shareholders.
• Fixed trust — A fixed trust preserves the CGT discount for individual beneficiaries and provides more flexibility in income distribution than a company, but offers less asset protection and may be more complex to administer.

The right choice depends on your assets, succession plans, family tax profile, and long-term objectives. The decision should be made with the guidance of a qualified accountant and, where appropriate, a solicitor.

Common Mistakes to Avoid in CGT and Trust Reform Planning

• Acting too early without final legislation — The reforms are still working through the legislative process. Restructuring before the final details are enacted carries the risk of restructuring into a structure that is not optimal under the final law. Monitor the legislation closely and seek professional advice before taking action.
• Ignoring stamp duty implications — Transferring assets out of a trust may trigger stamp duty in some states and territories, even if CGT rollover relief is available. The stamp duty cost can be substantial for property-holding trusts and must be factored into any restructuring analysis.
• Failing to update trust deeds — If you decide to retain your discretionary trust structure, your trust deed may need to be updated to reflect the new tax environment and to ensure the trustee has the powers needed to manage the minimum tax obligations.
• Overlooking the small business CGT concessions — The four small business CGT concessions (15-year exemption, 50% active asset reduction, retirement exemption, and small business roll-over) are preserved under the reforms. For eligible business owners, these concessions can significantly reduce or eliminate CGT on the sale of active business assets, and should be considered as part of any exit or restructuring strategy.
• Delaying planning until 2027 or 2028 — The rollover relief window opens on 1 July 2027, but the planning and preparation required to execute a restructure takes time. Valuations, legal documentation, stamp duty assessments, and ATO rulings can take months. Starting the planning process now gives you the best chance of executing a well-considered restructure within the relief window.

Australian Regulatory Context

The CGT and trust reforms are being implemented through amendments to the Income Tax Assessment Act 1997 and related legislation. The Australian Taxation Office (ATO) has published initial guidance on the discretionary trust minimum tax at ato.gov.au, and further detailed guidance is expected as the legislation is finalised.

The Australian Securities and Investments Commission (ASIC) regulates the conduct of companies and financial services, and any restructuring that involves the issue of shares or changes to corporate governance must comply with the Corporations Act 2001. Where a restructure involves the transfer of financial products or the provision of financial advice, an Australian Financial Services Licence (AFSL) may be required.

The Australian Small Business and Family Enterprise Ombudsman (ASBFEO) will provide advisory support from 1 January 2027 to help small businesses navigate the trust restructuring process. This is a free government service that can complement the advice of your accountant.

State and territory revenue offices administer stamp duty on asset transfers. Concessions for trust restructures vary by jurisdiction, and specialist advice should be sought in each relevant state or territory.

Questions to Ask Your Accountant

• How will the new CGT indexation and 30% minimum tax affect the after-tax proceeds if I sell my business or investment assets after 1 July 2027?
• Does my discretionary trust structure fall within any of the exclusions from the 30% minimum tax?
• Should I consider restructuring out of my discretionary trust, and if so, what is the most appropriate successor structure for my circumstances?
• What are the stamp duty implications of transferring assets out of my trust in my state or territory?
• Am I eligible for any of the four small business CGT concessions, and how do they interact with the new CGT regime?
• What records and valuations do I need to prepare now to support a future restructure or asset sale?

How MyMoney® Can Help

The CGT and trust reforms represent a once-in-a-generation shift in Australia's tax landscape. Business owners, investors, and families with discretionary trusts need to act now — not to restructure immediately, but to understand their options, model the outcomes, and develop a plan that positions them for the changes ahead.

MyMoney® connects Australians with qualified accountants who specialise in tax planning, business structuring, and CGT strategy. Whether you need a comprehensive review of your trust structure, a CGT modelling exercise, or guidance on the small business CGT concessions, our platform makes it easy to find the right professional for your needs.

Post a Brief on MyMoney® to receive tailored proposals from qualified accountants, or Browse Accountants to find a CPA or Chartered Accountant with expertise in CGT and trust planning. All accountants listed on MyMoney® are required to hold current professional memberships with CPA Australia or Chartered Accountants ANZ, ensuring you receive advice that meets the highest professional standards.