My business trades through a family trust. What does the 30% minimum tax mean for my borrowing?

Mr says: don’t panic and don’t restructure on a hunch. The 30% minimum tax on discretionary trusts is still a draft, it’s proposed to start on 1 July 2028, and nothing about it stops a trustee borrowing for the business. But if your café, practice or trade business runs through a family trust and carries a loan, the next three years involve decisions where the finance needs a seat at the table.

Plenty of Australian owners set up a trading trust years ago because the accountant recommended it, and haven’t thought about the trust deed since. The May Budget changed that. Here’s the borrowing side of the story, in plain English.

What is the minimum tax on discretionary trusts, in one paragraph?

From 1 July 2028, the trustee of a discretionary trust would pay 30% tax on the trust’s net income. Beneficiaries are still taxed on their share as they are now, but individual beneficiaries get a non-refundable tax offset for the trustee’s tax on their share. So the tax is collected at the trust first, then credited down to the people. The ATO is clear that this is a proposal “not yet law” (ATO).

Where it’s up to:

Date	Step
12 May 2026	Announced in the 2026–27 Budget
8 July 2026	Treasury consultation paper released
3 September 2026	Four exposure draft bills released
18 September 2026	Submissions closed
1 July 2027	Proposed start of three-year roll-over relief window
1 July 2028	Proposed start of the minimum tax

The government says fewer than 10% of Australia’s 2.7 million active small businesses would be affected in any given year (Treasurer’s release). Fixed trusts, super funds, deceased estates, special disability trusts and primary production income are among the things left out.

Does it change whether my trust can borrow?

No. The trustee still borrows for the trust, the lender still reads the deed, and the corporate trustee’s directors still usually sign guarantees. If you want a refresher on how that works, Mr covers it in can my family trust borrow for the business? and do I need a personal guarantee?.

What changes is the money. Three things in the draft matter to anyone who services a loan through a trust.

1. Tax would sit at trust level. Today, a trust that distributes everything usually pays no tax itself; the beneficiaries pay. Under the proposal, the trustee pays first. Treasury’s July paper flagged that the minimum tax would be brought into the PAYG instalment system, though the administrative detail is still to come. Either way, cash that used to leave the business through distributions and personal tax would now need to be held back in the trust account. Lenders reading trust bank statements will expect to see it provided for, the same way they look for BAS and PAYG set-asides.

2. Bucket companies get hit hardest. A company beneficiary gets no offset for the trustee’s tax. Commentators have estimated the combined effective tax on income distributed to a company at around 60% (Holding Redlich summary). Many trading trusts park profit in a bucket company precisely so the group keeps cash to repay debt. If that strategy stops working, the cash left to service a loan shrinks.

3. Corporate trustee directors may carry the bill personally. The consultation paper proposed making directors of corporate trustees jointly and severally liable for the minimum tax. If you’re already guaranteeing the trust’s loan, that’s one more personal exposure to keep in view.

Running the business through a trust and wondering how this year’s numbers would look to a lender? Check your options with Mr. Asking doesn’t touch your credit file.

What are my three options, and what does each do to my loan?

The exposure draft gives trustees three broad paths. Mr’s view of each from the lending chair:

Path	What it means	What it does to your loan
Stay in the regime	Keep the discretionary trust, pay the minimum tax	The loan stays as it is. Your cash flow forecast needs the new tax built in.
Restructure	Move the business to a company or fixed trust using roll-over relief	The borrower changes. Expect consent, new documents, fresh guarantees or a refinance.
Make the election	Lock in fixed shares for nominated beneficiaries	The loan usually stays put, but the lender may ask for the amended deed.

Staying in the regime

The least disruption to finance. The lender sees the same borrower and the same deed. The work is in your forecast: if the trustee pays tax through the year, that’s a new outflow your repayments compete with.

Restructuring into a company or fixed trust

The roll-over relief is proposed for transfers between 1 July 2027 and 30 June 2030, and is meant to let the business move without an immediate income tax or CGT bill. Two traps for borrowers:

• Your loan doesn’t move by itself. A loan to “XYZ Pty Ltd as trustee for the Smith Family Trust” is a loan to that trustee, in that capacity. A new company is a different borrower. Most lenders will want to approve the change, re-paper the facility or refinance it, and take guarantees from the new company’s directors.
• Stamp duty isn’t covered. The roll-over is an income tax measure. It doesn’t switch off state and territory transfer duty, which can be the biggest cost when the trust holds land or a commercial premises.

There’s also a quieter issue. A new company has no trading history in its own name. Lenders who know the story will usually look through to the trust’s track record, but you’ll want your accountant’s restructure notes and the trust’s financials ready to show the connection. Mr’s list of what to have on hand is in what documents do I need for a business loan?.

Making the election

The draft includes an election for a trust to sit outside the minimum tax by making fixed distributions to pre-nominated beneficiaries. The Treasurer’s release says it “would not require a restructure” and isn’t expected to trigger stamp duty. The catches, from the draft as summarised by advisers: the trust must exist on 1 July 2028, the election is only available for the first year, income and capital shares must match and total 100%, changes are limited to events like death or relationship breakdown, and a revoked election can never be remade.

For lending, this path is usually the gentlest. The borrower doesn’t change. But a lender will want the current deed and any variation, and may ask who the nominated beneficiaries are, especially if any of them are guarantors.

A worked example: two cafés, one trust, one decision

Illustration only, with made-up numbers. Not a real client.

A couple in Newcastle run two cafés through a family trust with a corporate trustee. The trust has a property-secured loan of about $400k over their commercial kitchen premises and an equipment loan on the coffee machines and fit-out. Each year, they split distributions between themselves and a bucket company, which holds cash as a buffer.

Their accountant flags the minimum tax in mid-2026 and lays out the options. Restructuring into a company in 2027–28 looks tidy on paper, but the kitchen premises sit in the trust, so transfer duty would be a large cost, and both loans would need lender approval or refinancing. The election looks simpler, but their adult children are also beneficiaries and the family hasn’t agreed fixed shares.

So they do three things in late 2026, long before anything is due:

1. Ask their lender early what it would need if the business or premises moved to a new entity, and when the current facility is up for review.
2. Rebuild the forecast with tax paid at trust level from 2028–29, and with less retained in the bucket company.
3. Line up a buffer. A modest line of credit beside the term loan gives them room for the first year of the new tax pattern. Mr explains the difference in line of credit or term loan?.

None of that commits them to a structure. It simply means the finance won’t be the thing that forces their hand in 2028.

Mr’s checklist for trust borrowers, starting now

Mr’s rule of thumb: sort the loan questions before the tax decision is locked in, not after.

• Find your trust deed and every variation. Lenders ask for it anyway, and your accountant will need it to test whether the trust is “fixed” or “discretionary” under the new definitions.
• List every loan in the trustee’s name. Term loans, equipment finance, overdrafts, cards, guarantees. Note which ones have consent clauses about changing structure or ownership.
• Ask what happens on a restructure. Change of borrower, refinance, or a simple novation. Get the answer in writing. Mr’s 14 questions to ask before you sign a business loan offer are handy here too.
• Don’t sign a new long facility blind. If you’re refinancing in 2027, check how easily the loan can move to a new entity, and what break or exit costs apply.
• Keep the trust’s books current. A restructure is far smoother when the latest financials and tax returns are lodged. Do I need financials for a business loan? explains what different lenders ask for.

And remember the obvious one: it’s a draft. Treasury’s consultation material is on its consultation hub, and the mechanics may still shift before Parliament votes.

Whatever structure wins, the business still needs room to move

A change to how your trust is taxed is exactly the kind of moment when owners discover their loans were set up for a structure that’s about to change. The good news is you have time, and a lender who understands trusts can help you plan the finance around whatever your accountant recommends.

If you’d like to see where your trust stands today, the enquiry takes about 60 seconds and won’t affect your credit score. Mr doesn’t hand your details to a pile of lenders, so your phone stays quiet. A real person reads your enquiry, looks at how your trust, trustee and loans are set up, and calls you to talk it through. Please fill the form in accurately, including that you trade through a trust and any loans already in the trustee’s name, so we can point you to the right option first time.

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