Family Trust Tax Planning in Australia 2026: Section 100A, the 30% Minimum Tax, and What Trustees Must Know

Family trusts have long been a cornerstone of Australian tax planning for business owners, investors, and high-income families. But 2026 marks a turning point: the Federal Budget has announced a 30% minimum tax on discretionary trust income (effective 1 July 2028), the ATO continues to scrutinise distributions under Section 100A, and the landmark Bendel case is heading to the High Court. For trustees and beneficiaries, the stakes have never been higher — and the need for expert accounting advice has never been more urgent.

Understanding Family Trust Tax Planning in Australia

A discretionary (family) trust is a legal structure in which a trustee holds assets and distributes income to beneficiaries at their discretion. Historically, this flexibility has allowed trustees to direct income to beneficiaries in lower tax brackets, reducing the overall family tax burden. The trust itself does not pay tax on distributed income; instead, each beneficiary includes their share in their own tax return.

For the 2025–26 income year, this framework remains in place. However, the 2026–27 Federal Budget has signalled a fundamental shift: from 1 July 2028, a minimum 30% tax will apply to discretionary trust income at the trustee level. Beneficiaries will receive a non-refundable credit for the tax paid by the trustee, but if their marginal rate is below 30%, the excess credit is lost. This effectively eliminates the tax advantage of distributing to low-income beneficiaries.

Understanding these changes — and acting before they take effect — requires the guidance of a qualified accountant who specialises in trust structures and tax planning.

Key Compliance Obligations for Trustees in 2025–26

Even before the 2028 changes take effect, trustees face significant compliance obligations in the current income year. Failing to meet these requirements can result in trust income being taxed at the top marginal rate of 47% (including the Medicare levy).

• Annual distribution resolutions — Trustees must prepare and execute valid written distribution resolutions before 30 June each year. Failure to do so means the trust's income defaults to the trustee, who is then assessed at the top marginal rate
• Section 100A compliance — The ATO's anti-avoidance provision targets arrangements where a beneficiary is made presently entitled to trust income but the actual economic benefit flows to another party. The ATO uses a risk-based framework (PCG 2022/2) to categorise distributions as Green (low risk) or Red (high risk)
• Family Trust Election (FTE) obligations — Trusts that have made an FTE must restrict distributions to the defined family group. Distributions outside this group trigger Family Trust Distribution Tax (FTDT) at 47%, plus the General Interest Charge
• Unpaid Present Entitlements (UPEs) — Where a beneficiary is entitled to trust income but has not received payment, the UPE must be managed carefully to avoid Division 7A consequences, particularly where a private company is a beneficiary
• Record retention — All trust records, including resolutions, distribution statements, and supporting documentation, must be retained for at least five years

Section 100A: What Trustees Must Know

Section 100A of the Income Tax Assessment Act 1936 is one of the ATO's most powerful anti-avoidance tools. It applies where a beneficiary is made presently entitled to trust income, but the actual benefit is diverted to another party — typically to reduce the overall tax liability of the group.

If the ATO determines that Section 100A applies, the beneficiary's entitlement is disregarded and the trustee is assessed on the income at the top marginal rate. The ATO's compliance framework (PCG 2022/2) categorises arrangements into risk zones. Green zone arrangements — those consistent with ordinary family or commercial dealings — are generally low risk. Red zone arrangements — those involving contrivance, artificial structures, or distributions to entities that do not genuinely benefit — attract close scrutiny.

Trustees should document the commercial rationale for every distribution decision, particularly where the beneficiary does not immediately receive the cash. An experienced accountant can help structure distributions to remain firmly within the Green zone and maintain the documentation required to defend that position if audited.

The 2028 Minimum Tax: Planning Now for Future Changes

The announcement of a 30% minimum tax on discretionary trust income from 1 July 2028 has significant implications for existing trust structures. While the legislation has not yet been finalised, trustees should begin modelling the impact on their specific circumstances now.

Several categories of trusts are excluded from the minimum tax, including fixed trusts, widely held trusts, superannuation funds, special disability trusts, deceased estates, and certain charitable trusts. Primary production income is also excluded. Trustees of discretionary trusts that do not fall within these exclusions should assess whether their current structure remains optimal.

The government has announced a three-year restructure rollover relief window beginning 1 July 2027, allowing trustees to transfer assets out of discretionary trusts into companies or fixed trusts without immediate capital gains tax consequences. However, this relief does not automatically exempt state-based stamp duty, so the total cost of restructuring must be carefully assessed with both accounting and legal advice.

Common Mistakes in Family Trust Tax Planning

Even well-intentioned trustees can make errors that create significant tax liabilities or compliance risks. The following mistakes are among the most frequently identified by the ATO and accounting professionals.

• Late or invalid distribution resolutions — Resolutions executed after 30 June, or that do not comply with the trust deed, can result in the trustee being assessed at 47%
• Distributing outside the family group — Trustees who have made a Family Trust Election must not distribute to beneficiaries outside the defined family group without triggering FTDT
• Ignoring Section 100A risks — Arrangements where a beneficiary receives a distribution on paper but the cash is used for the benefit of another party (such as a parent paying a child's expenses) can fall within Section 100A
• Mismanaging UPEs with corporate beneficiaries — Where a private company is a beneficiary and the UPE is not properly structured, Division 7A may deem the amount an unfranked dividend, creating an unexpected tax liability
• Failing to review the trust deed — Outdated trust deeds may not authorise current distribution strategies, including the streaming of capital gains and franked distributions to specific beneficiaries
• Assuming the 2028 changes will not apply — Trustees who delay reviewing their structures risk being caught without adequate time to restructure before the minimum tax takes effect

Australian Regulatory Context: ATO, ASIC, and the Bendel Case

Family trust tax planning in Australia is governed by the Income Tax Assessment Act 1936 and the Income Tax Assessment Act 1997, administered by the Australian Taxation Office (ATO). The ATO has published detailed guidance through Taxation Ruling TR 2022/4 (on Section 100A) and Practical Compliance Guideline PCG 2022/2 (on the risk framework for trust distributions).

The Commissioner of Taxation v Bendel case is a critical ongoing development. The Full Federal Court dismissed the ATO's appeal in early 2025, finding that unpaid present entitlements owed to a private company beneficiary do not automatically constitute loans under Division 7A. The ATO was granted special leave to appeal to the High Court in June 2025. The outcome of this case will significantly affect how UPEs involving corporate beneficiaries are treated, and trustees should monitor it closely with their accountant.

Where trusts hold assets on behalf of companies, the Australian Securities and Investments Commission (ASIC) may also have oversight responsibilities. Trustees who are also company directors must ensure their obligations under the Corporations Act 2001 are met alongside their trust obligations.

Questions to Ask an Accountant About Your Family Trust

Engaging a qualified accountant to review your family trust structure is an important step, particularly given the regulatory changes underway. The following questions will help you assess whether your accountant has the expertise your situation requires.

1. Is our current distribution strategy compliant with Section 100A, and does it fall within the ATO's Green zone under PCG 2022/2?
2. Are our annual distribution resolutions valid, timely, and consistent with the trust deed?
3. How will the proposed 30% minimum tax from 1 July 2028 affect our trust's tax position, and should we consider restructuring?
4. Do we have any UPEs involving a corporate beneficiary, and are they structured to avoid Division 7A consequences?
5. Does our trust deed need to be updated to authorise current or planned distribution strategies?
6. What records should we be maintaining to defend our distribution decisions if audited?
7. How does the Bendel High Court appeal affect our current UPE arrangements?

How MyMoney® Can Help You Find a Specialist Accountant

Family trust tax planning is a specialised field that requires an accountant with deep knowledge of trust law, ATO compliance frameworks, and the evolving legislative landscape. Not every accountant has this expertise, and choosing the wrong adviser can result in costly errors or missed opportunities.

MyMoney® Marketplace connects Australian business owners and trustees with qualified accountants who specialise in trust structures, tax planning, and ATO compliance. By posting a brief, you describe your situation once and receive competitive proposals from multiple accountants — allowing you to compare expertise, fees, and approach before making a decision.

Whether you need a comprehensive review of your trust's distribution strategy, advice on the 2028 minimum tax changes, or help managing UPEs and Division 7A obligations, the right accountant can provide clarity and confidence in a complex regulatory environment.

Post a Brief on MyMoney® to receive proposals from specialist accountants, or Browse Accountants to find a trust and tax planning expert near you.