If you operate through a discretionary (family) trust, you've probably heard that the federal government is planning to tax trust distributions at a minimum rate of 30%. What's had far less attention, but could matter just as much to your bottom line, is a gap in the government's own consultation paper: it doesn't say whether restructuring out of a trust to avoid the new tax will attract state-based stamp duty, and if so, how much.

What's actually being proposed

Under the government's plan, distributions from discretionary trusts would be taxed at a minimum rate of 30%, with the measure slated to start on 1 July 2028. Treasury has now released a consultation paper seeking feedback, with submissions open until 31 July. Nothing here is law yet; this is a proposal at the consultation stage, and the details (including the start date) could still change before, or if, legislation is introduced.

The good news: no cap on rollover relief, and no CGT

For trusts that decide to restructure their affairs in response to the new rules, the consultation paper confirms two welcome points:

• There will be no cap on the size of the federal rollover relief available to trusts restructuring out of the new regime.
• Restructuring under this relief will not trigger Capital Gains Tax (CGT).

Tax professionals have described both as sensible, practical inclusions.

The problem: stamp duty is a state matter and the paper is silent on it

Stamp duty is a state and territory tax, and the federal consultation paper doesn't address whether (or how) restructuring a trust to escape the 30% minimum tax will be treated for stamp duty purposes. That matters, because stamp duty rules vary significantly by state:

• Queensland and Western Australia generally charge duty on the transfer of both real property and business assets, which could make restructuring in these states the most expensive.
• South Australia does not charge duty on the transfer of business assets or non-residential property, making it comparatively cheaper to restructure there.
• Other states and territories typically charge duty on property transfers but generally not on business asset transfers.

In practice, this means two trusts holding similar assets could face very different costs to restructure, purely because of which state they're based in. Tax bodies have flagged this as a serious inconsistency, and it's driven home by the fact that some restructures could carry a stamp duty bill running into the hundreds of thousands, or even millions, of dollars, while an equivalent restructure interstate might cost very little.

Why this leaves trustees in a bind

For anyone weighing up whether to restructure out of a discretionary trust before the new tax applies, the cost of restructuring is central to that decision, but right now, that cost can't be properly calculated without knowing the stamp duty treatment. Industry bodies have called for urgent negotiation between federal and state governments to resolve the uncertainty before the rules are finalised, and it isn't yet clear whether state governments will offer any concessions, given the revenue at stake for them.

Other issues Treasury is still consulting on

A couple of other unresolved points are worth knowing about if they're relevant to your circumstances:

Distributions to charities and other tax-exempt entities

These entities are excluded from the minimum trust tax itself, but under the current proposal, if a charity receives a distribution from a trust that has already paid the 30% tax, the charity won't be able to claim that tax back. Treasury is seeking feedback on this treatment.

The mechanics of rollover relief

Treasury is asking for input on exactly how the rollover relief for trusts choosing to wind up will work in practice.

There's also a broader point raised by some practitioners: discretionary trusts are used for a wide range of purposes beyond income splitting, and any relief package built around a single "restructure and roll over" model may not suit every trust's circumstances and because trusts are flow-through vehicles, income is still taxed each year at the beneficiary level regardless; the new measure changes the minimum rate at the trust level, not the underlying flow-through nature of the structure.

What this means for you

Nothing has changed yet

It's important to note that this is a consultation paper, not legislation. The 30% minimum tax, the 1 July 2028 start date, and every detail discussed above could shift before any bill is introduced.

Don't restructure on the back of assumptions about stamp duty

Until there's clarity, either from Treasury or your state revenue office, it's not possible to reliably compare the cost of restructuring against the cost of remaining in the current structure and paying the new minimum tax. Location matters. If you hold assets in a discretionary trust in Queensland or Western Australia, restructuring could be materially more expensive than for an equivalent trust in South Australia.

Now is the time to model your options, not execute them

With submissions open until 31 July, there's a window to understand how the proposal might affect your specific structure before decisions need to be made.

Talk to us before you act

Every trust structure is different, and the right move for one client won't be the right move for another. If you'd like to understand how this proposal — and the stamp duty uncertainty around it — could affect your trust, get in touch with your client manager at Causbrooks. We're monitoring the consultation process closely and will keep you updated as the position becomes clearer.

This article is general in nature and does not constitute financial, tax, or legal advice. It is based on a consultation paper that has not yet been legislated and may change before, or if, it becomes law. Please contact Causbrooks before making any decisions based on this information.