Australia Budget 2026: Family Trusts Face New 30% Tax Rate

The government is considering a 30% minimum tax rate for family trusts, a significant change from current practices where rates could be much lower.
By Newsroom | Finance, Australia |

Federal budget set to reveal significant shifts in taxation policies, impacting family trusts, research and development incentives, and electric vehicle benefits. The Albanese government is poised to unveil a raft of budgetary measures, with major alterations anticipated for 'family trusts', 'research and development' tax concessions, and 'electric vehicle' tax arrangements. These moves come as the administration prepares to present its fifth budget.

Trust Distributions Face Minimum Tax

The government is anticipated to implement a minimum 30 per cent tax rate on distributions from discretionary family trusts. This measure aims to curb the practice of reducing tax liabilities by channeling income through these structures, a mechanism that has historically allowed for tax burdens to be effectively lowered to zero, depending on an individual's marginal tax rate.

R&D Incentives Get a Boost

In contrast to the tightening of trust regulations, business investment in 'research and development' is slated for enhanced tax breaks. This initiative signals a governmental push to stimulate innovation and technological advancement within the corporate sector.

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EV Tax Perks Scaled Back

Owners of 'electric vehicles' may see their tax advantages diminish. The budget is expected to include a rollback of tax discounts previously available for electric cars acquired under a 'novated lease' arrangement.

Broader Fiscal Review Underway

These targeted fiscal adjustments occur against a backdrop of potential broader policy re-evaluations. Sources indicate that 'negative gearing' and 'capital gains tax' reforms, alongside possible reductions to the 'National Disability Insurance Scheme' funding, are also under consideration as the government finalizes its budgetary priorities.

Frequently Asked Questions

Q: What is the proposed tax change for family trusts in Australia's 2026 budget?
The government is expected to announce a new minimum tax rate of 30% for income distributed from discretionary family trusts. This aims to stop people from using trusts to pay very little or no tax.
Q: How will this new tax rate affect families using trusts?
Families who use trusts to manage their income may see their tax bills increase if the trust distributions are taxed at less than 30% currently. This change could affect how they plan their finances.
Q: Are there any other tax changes mentioned for the 2026 budget?
Yes, the budget might also include changes to research and development tax breaks, potentially increasing them for businesses. Tax benefits for electric vehicles bought through novated leases could also be reduced.
Q: What other financial policies are being reviewed by the government?
The government is also looking at potential reforms for negative gearing and capital gains tax. There's also a possibility of changes to funding for the National Disability Insurance Scheme.