When we wrote on the 2026 Budget’s CGT and trust changes, the trust measure was committed but Treasury was still consulting on how it would actually work. On 3 September 2026, Treasury released exposure draft legislation for the 30% minimum trust tax. The core architecture is unchanged, but the draft adds one thing that materially changes the decision for founders holding startup shares in a trust.

This article covers where the measure now stands, how the new election works and what it locks in, why it suits most founders better than restructuring, what it doesn’t bring back, and what’s still open on the CGT side.

Where things stand

The 30% minimum tax on discretionary trusts is still committed from 1 July 2028. Consultation on the exposure draft closes 18 September 2026, and Treasury has flagged this as the first tranche of legislation, with later tranches covering administrative, integrity and interaction measures.

The base measure is as announced. From 1 July 2028, discretionary trust income faces a 30% floor at the trustee level, and corporate beneficiaries don’t receive the non-refundable credit that individuals get.

The new election mechanism

The significant addition in the exposure draft is an elective regime. A discretionary trust in existence on 1 July 2028 can elect to nominate fixed beneficiary entitlements and sit outside the minimum tax regime entirely, without restructuring.

How it works. The trustee nominates specific beneficiaries and their fixed percentage entitlements to both the income and the capital of the trust. Each nominated beneficiary takes the same share of both. There’s no limit on how many beneficiaries you can nominate, and they can include individuals, trusts and certain companies, but not partnerships or complying super funds. Future trust income is then distributed to those nominated entities and taxed in their hands, rather than at the 30% trustee level.

The trade-off. The nominated beneficiaries and their entitlements are largely locked in. Changes are only permitted in limited circumstances, such as the death of a beneficiary or a family breakdown. The trustee can revoke the election, but revocation triggers the top marginal rate for that year, with loss of the CGT discount and indexation, and the trust falls into the minimum tax regime in subsequent years.

Why this matters for founders

For a founder holding startup shares in a discretionary trust as the sole or major beneficiary on the top marginal rate, the election is genuinely attractive:

• Locking yourself in as the fixed beneficiary probably reflects what’s already happening
• It avoids the stamp duty, legal cost and complexity of restructuring
• The trust survives, so you keep it for asset protection
• Your total tax outcome is unchanged from today, because you were already the sole distribution point

The same logic applies to trusts that have always simply split distributions between spouses. Nominating the two spouses as fixed 50/50 beneficiaries continues what the trust was already doing, without a restructure and without the trustee-level 30% tax. You can nominate a different split – 60/40, 70/30 and so on – but the same split has to apply to both income and capital, and once fixed the entitlements are locked.

Where the election is less attractive is where you have genuine distribution flexibility you want to keep. Adult children whose income comes and goes, or family circumstances you expect to change, are reasons to think harder, because the election locks that flexibility away.

The decision tree now has three options

Before this exposure draft, an existing trust holder had two paths: do nothing and accept the tax, or restructure using the rollover relief window. Now there are three.

1. Do nothing. Accept the 30% minimum tax from 1 July 2028.
2. Elect fixed beneficiaries. Avoid the minimum tax with no restructure, but give up future distribution flexibility. Best suited to sole beneficiaries, and to couples whose distribution mix is already effectively fixed.
3. Restructure into a company or fixed trust. Use the rollover relief window from 1 July 2027 to 30 June 2030, avoid the minimum tax, and bear the restructure costs including any state stamp duty.

For most founders we work with, option 2 is likely the right answer. The flexibility being given up wasn’t being used, and you avoid the cost and disruption of a restructure.

What the election doesn’t bring back

It’s a fair question once you see that companies can be nominated: is this a way back to a bucket company? It isn’t.

A bucket company worked because you could choose, year by year, how much income to stream to it. A nominated entitlement works the other way round: the percentage is fixed, it applies to capital as well as income, and it’s locked outside of limited circumstances. Nominating a company also means that company takes its fixed share of any capital gain on exit, and companies get neither the CGT discount nor indexation. Nominating a company is a structural decision with consequences at exit, not a way to defer tax.

Other changes worth knowing

The exposure draft also broadens the definition of a fixed trust to take in many commercial unit trust structures where there are no material discretionary elements. It confirms that testamentary trusts, meaning deceased estates and discretionary testamentary trusts established for genuine testamentary purposes, remain outside the regime. And it preserves existing rollover provisions such as the 122-A rollover from a trust to a wholly-owned company, alongside the new three-year rollover window.

What’s still uncertain

The CGT picture hasn’t moved. The exposure draft for the Innovative Business CGT Concession still hasn’t been released, so whether existing founders get the concession through transitional rules remains the single biggest unknown for what an exit actually costs. Our earlier CGT and trusts analysis still applies there.

How the regime interacts with franking credits, foreign income tax offsets and the international tax provisions will be dealt with in later tranches of legislation.

The next milestone

Consultation on the trust exposure draft closes 18 September 2026, with a Treasury response and further tranches to follow. The IBCC exposure draft is still expected ahead of the 1 July 2027 CGT commencement, though the timing is genuinely uncertain. We’ll keep updating as the picture clarifies.

This is general information, not advice. The rules are technical, the legislation is still in draft, and the right move depends heavily on your own structure. Electing fixed beneficiaries is difficult to unwind, so it isn’t a decision to make off the back of a general article – talk it through with someone who knows your numbers (hey, that’s us!).