New Trust Tax Reforms Could Hurt Australian Small Business, Warns Halo Advisory
UR Digital Pty Ltd
Key Facts:- Australia's proposed discretionary trust tax reforms, outlined in the 2026–27 Federal Budget, introduce a 30% minimum tax on trust distributions from July 2028, alongside a transitional rollover relief period beginning in 2027.
- More than 840,000 Australian entities currently operate through discretionary trusts, the majority being small and medium-sized businesses across construction, retail, agriculture and professional services.
- Business advisory firm Halo Advisory warns the reforms could disproportionately impact family-run businesses by replacing income distributions taxed at individual marginal rates with a flat 30% upfront tax, potentially increasing costs for families distributing income to lower-earning members.
- Beyond tax, the reforms may force SMEs to reconsider trust structures built around asset protection and succession planning, with the 2027 rollover relief window becoming a critical period for businesses weighing a move to corporate structures.
FOR IMMEDIATE RELEASE
Australia’s proposed discretionary trust tax reforms could significantly increase financial pressure on small and family-run businesses, according to Greg Bartels, Director of business advisory firm Halo Advisory, which has today released a new opinion piece examining the broader impact of the changes on the SME sector.
Outlined in the 2026–27 Federal Budget, the reforms introduce a proposed 30% minimum tax on discretionary trust distributions from July 1, 2028, alongside a transitional “rollover relief” period beginning in 2027.
While the policy has been positioned as a measure aimed at improving tax fairness among high-wealth individuals, Bartels says the practical impact may fall far more heavily on everyday Australian business owners.
“Discretionary trusts are not just used by high-income earners or large investment structures,” he says. “They are a standard part of how many Australian small businesses operate — particularly family-run businesses trying to manage risk, protect assets and plan for the future.”
More than 840,000 Australian entities currently operate through discretionary trusts, the majority of them small and medium-sized businesses across industries including construction, retail, agriculture and professional services.
According to Bartels, one of the most significant changes under the reforms is the introduction of a non-refundable 30% tax floor on trust distributions.
Under the current system, trust income is generally distributed to beneficiaries and taxed at their individual marginal tax rates. Under the proposed framework, trustees would effectively pay a flat 30% tax upfront, with beneficiaries receiving non-refundable tax credits.
Bartels says this could disproportionately affect family-run businesses where income is distributed across spouses or adult children who fall into lower tax brackets.
“For many small business families, the concern is not just about tax — it’s about cash flow,” he explains. “Businesses could end up paying materially more tax despite earning exactly the same income.”
Halo Advisory’s analysis suggests the reforms may force many SMEs to reconsider long-standing business structures designed around asset protection and succession planning.
“Operating through a trust structure has often been about protecting the family home or separating business risk from personal assets,” Bartels says. “The challenge now is that maintaining those protections may come with a significantly higher ongoing tax cost.”
The firm also warns that the proposed 2027 rollover relief window may become a critical planning period for Australian SMEs considering whether to restructure into corporate entities.
However, Bartels cautions that restructuring is rarely straightforward.
“Moving out of a trust structure can involve legal work, valuations, accounting changes and long-term strategic considerations,” he says. “These are not decisions business owners should leave until the last minute.”
Halo Advisory is encouraging SME owners to begin reviewing their structures well ahead of the proposed implementation date and to model how the reforms may affect long-term cash flow, growth and succession planning.
Read the full opinion piece here.
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About us:
About Greg Bartels
Greg Bartels is the Director of Halo Advisory and the founder of Halo Tax + Accounting. With 25+ years of experience running his own businesses and working in senior roles in large organisations, he brings a practical, grounded approach to helping business owners make confident, forward-looking decisions.
About Halo Advisory
Halo Advisory is a business advisory firm specialising in restructuring, insolvency and turnaround strategy for Australian businesses navigating financial pressure and change. Led by Director Greg Bartels, the firm provides practical, commercially focused advice to help business owners make confident decisions and plan for long-term stability.
Contact details:
Pulkit Agrawal
0468 376 022
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