Status at 13 October 2026: this is draft legislation. Treasury's consultation closed on 18 September 2026 and the rules could still change before they become law.
Many doctors hold investments, a practice interest or a service entity in a family trust. Treasury has now released draft law for a minimum 30% tax on family trust income from 1 July 2028. Here is what it says and what it means for you.
From income years starting on or after 1 July 2028, income of a discretionary (family) trust would carry a minimum tax of 30%. The trustee would pay a top-up so the trust's income is taxed at no less than 30%.
Individual beneficiaries get a credit for that tax, so the same dollar isn't taxed twice. The credit is not refundable. If everyone receiving the income already pays 30% or more, very little changes. The change bites where income goes to someone on a low rate, such as a spouse who isn't working or an adult child at university. From 2028 that distribution carries 30%, and the saving disappears.
Companies that receive trust distributions get no credit at all, so distributing to a "bucket company" becomes materially more expensive unless the trust makes the election described below.
The draft excludes several trusts and types of income, including:
A point for practice owners: many practices are owned through unit trusts shared between doctors. Whether a unit trust is excluded will depend on whether it meets the new fixed trust definition, so don't assume a unit trust is safe.
If income from your own clinical work is attributed to you under the personal services income rules, it is already taxed in your hands. The new tax matters most for investment income and business profits held in a trust.
The draft offers two alternatives to paying the minimum tax. You can use one or the other, not both.
1. Restructure with roll-over relief. From 1 July 2027 to 30 June 2030, a trust can move its assets to another entity, such as a company, without an immediate income tax or capital gains tax bill. The tax is deferred rather than removed. State stamp duty is not covered. A restructure completed in the 2027–28 year can avoid the minimum tax entirely.
2. Make a fixed entitlement election. A trust that exists on 1 July 2028 can elect, once, in its first year under the new rules, to fix who receives its income and capital and in what percentages. The minimum tax then doesn't apply. The catches are significant:
Don't restructure yet. The rules are still in draft, and both pathways are effectively permanent once taken. The useful work now is understanding your position, so you can decide well before 2028:
For practice owners, the effect on an eventual sale matters most. We cover that in Practice owners: choose your trust structure for the sale. For background, see Family Trusts: Benefits and Disadvantages.
If you hold investments or a practice interest in a trust, now is a good time to understand your position. Book a call or read about our tax advice for doctors.
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