Labor’s new trust tax plan was sold as a fairness measure. The bigger fight may now be over who pays when families, small businesses and property investors try to get out of the structure.
The federal government wants a new 30 per cent minimum tax on discretionary trust income from 1 July 2028. The same broad reform package is also expected to change the tax treatment of capital gains.
That already changes the maths for many families using trusts.
But here’s the part that could turn a tax reform into a property cost shock: moving assets out of a trust may trigger stamp duty.
For property investors, small business owners and families with land-rich structures, that is not a side issue. It could be the bill that decides whether restructuring is even worth doing.
Australian Property Review has already covered how the same budget reform is rattling estate planning in Labor’s Trust Tax Shock Has Estate Planners Rattled. The stamp duty problem adds another layer. It is not just about income tax anymore. It is about transaction costs, state rules and timing.
The policy changed, but the state tax system did not
The federal change is aimed at discretionary trusts, often called family trusts.
In plain English, a discretionary trust lets the trustee decide how income is distributed among beneficiaries. That flexibility is one reason trusts have become common in family businesses, professional practices and property structures.
The government’s argument is that some high-income households use that flexibility to reduce tax. The proposed fix is a minimum 30 per cent tax at the trustee level.
What did not change is just as important.
Stamp duty is controlled by states and territories. If a trust transfers property, land or some business assets into a company, that transfer may be treated like a dutiable transaction.
That means a family could be pushed by a federal tax change into a restructure that creates a state tax bill.
That is where the politics get messy.
Why property investors should care
For property investors, the issue is simple: land is usually dutiable.
If a discretionary trust owns an investment property and the family decides a company structure now makes more sense, shifting that property may not be clean or cheap.
Depending on the state, duty rates can run into several percentage points of the asset value. On a $1 million property, even a partial duty hit can quickly become a five-figure cost.
That matters because tax planning normally works on trade-offs.
A company may offer a lower headline tax rate than some individuals pay. But if the move into that company triggers stamp duty, legal costs, accounting costs, lending reviews and possible refinancing friction, the savings may take years to justify.
Now, the part most people miss: the tax rate is not the only number that matters. The cost of changing the structure can be just as important as the structure itself.
Australian Property Review explored the broader tax trade-off for investors in Property Tax Changes Could Reshape Investors. The same rule applies here. A tax advantage is not useful if the transition cost eats it.
The catch
A trust restructure may reduce one tax problem while creating another. Before moving property or business assets, owners need to model the duty, CGT, legal, accounting and lending costs together.
Queensland shows why this is not uniform
One problem is that Australia does not have one stamp duty system.
Queensland has a limited small business restructure exemption that may help some transfers from a discretionary trust to a company. But it is not universal. It depends on the assets, the value, ownership continuity and how the restructure is done.
Other states have corporate reconstruction concessions, but those rules often work better for company groups than discretionary trusts.
That distinction matters.
A company-to-company restructure may receive different treatment from a trust-to-company restructure. Unit trusts may be treated differently again. Land, goodwill, plant and equipment, intellectual property and trading stock can all be caught differently depending on the jurisdiction.
So a family in Brisbane, Sydney and Melbourne could face very different outcomes even if the federal tax change is the same.
This is why a national tax reform can create a state-by-state compliance headache.
The second-order effect is decision paralysis
The direct impact is the possible stamp duty bill.
The second-order effect is slower decision-making.
Some owners may delay sales. Others may hold assets in structures that no longer suit them. Some may pause business succession planning until the federal rollover relief details are clearer.
That matters for property because frozen decisions can affect listings, investment activity and refinancing.
If owners are unsure whether moving a property will trigger a tax bill, they may do nothing. Doing nothing is still a decision, and sometimes an expensive one.
Australian Property Review has seen a similar pattern in investor behaviour around tax uncertainty. In Why investors are freezing property buys before budget night, the issue was not only the final policy. It was the uncertainty before the policy landed.
The trust debate now has the same risk.
Who is most exposed?
The biggest exposure is likely to sit with three groups.
First, families with property held inside discretionary trusts. If land has to move, stamp duty is the key risk.
Second, small businesses that hold operating assets in trusts. The problem can extend beyond land in some states, depending on the duty base.
Third, families using trusts for succession planning. Testamentary and family trust arrangements may now need closer review, especially where the next generation is expected to inherit or control assets through a structure.
This does not mean every trust is broken.
Some trusts may still make sense for asset protection, succession planning, business continuity or family flexibility. Some beneficiaries may receive credits under the proposed federal design. Some structures may qualify for relief.
But the old assumption that a trust is simply the flexible option now needs pressure-testing.
The government’s relief plan is the swing factor
The federal government is expected to offer rollover relief for some restructures. That would help with federal tax consequences, including capital gains tax, where eligible.
But rollover relief for federal tax does not automatically remove state stamp duty.
That is the critical gap.
If the Commonwealth designs a pathway out of trusts but the states still charge duty on the asset transfer, owners may still face a major cost. If the Commonwealth wants restructures to happen smoothly, it may need the states to cooperate or it may need to help cover the cost.
That sets up the next fight.
The federal government wants the revenue from tighter trust rules. The states may not want to give up stamp duty revenue from transactions triggered by those rules. Taxpayers do not want to be caught between both.
What could change from here
There are three realistic scenarios.
The base case is that the federal government finalises limited rollover relief, while state duty outcomes remain uneven. In that world, advice becomes essential and some owners still face large costs.
The better case is coordinated relief between Canberra and the states, at least for genuine small business and family restructures. That would reduce the shock but may narrow the budget gain.
The worse case is a confused transition where owners rush, advisers are overloaded and families discover too late that the restructure has created a state tax bill.
The timeline matters. The trust tax is expected to start from 1 July 2028, but the restructuring window and relief design may begin earlier. Owners should not wait until the final months to review deeds, asset ownership and tax exposure.
The practical take
If your trust owns property or business assets, start with a structure map.
List the assets, which entity owns them, the state they sit in, debt attached to them and who benefits from the trust. Then ask your accountant or lawyer to model three options: keep the trust, restructure, or sell.
Do not only compare tax rates. Compare total costs.
That means stamp duty, CGT, accounting fees, legal costs, loan changes, land tax consequences and future flexibility.
The budget may have changed the tax equation. Stamp duty could decide whether the answer is worth acting on.
Start here: ask your adviser for a written restructure cost estimate before moving any asset.
General info, not financial advice.
