Commercial finance brokers welcome new trust tax concessions but warn the 30% minimum rate remains fundamentally flawed
The Commercial & Asset Finance Brokers Association of Australia (CAFBA) has welcomed new concessions in the government's discretionary trust tax regime while maintaining that the underlying 30% minimum tax policy remains flawed.
Treasury released draft legislation last week that will wind back some of the punitive tax obligations on discretionary trusts that were first announced in the May Budget.
When Labor confirmed the reforms, the plan was for a flat 30% minimum tax on discretionary trust income, levied at the trustee level, without exemptions – a measure the government projected would raise approximately $4.5 billion annually by the end of the decade.
Draft amendments released last week will allow trustees to nominate fixed distribution beneficiaries to sidestep the minimum tax without restructuring and without triggering stamp duty. The trade-off: once a trust makes that election, it's largely locked in, able to change nominated beneficiaries only if one dies or there's a family breakdown.
What hasn't changed is the treatment of corporate beneficiaries, still denied the tax offset, or the penalty for trusts that walk away from the new election, which reverts to the top marginal rate plus the Medicare levy rather than the 30% floor.
CAFBA chair of advocacy David Gandolfo (pictured) said the exposure draft was a meaningful improvement on the original Budget proposal, but stopped well short of endorsing the policy itself.
"We welcome the fact that the Government and Treasury have listened and provided a pathway that may allow many established businesses to retain their existing trust structures without being subjected to the proposed 30% minimum tax," Gandolfo said. "This exposure draft is therefore a better outcome than the original proposal, but a better version of a bad policy doesn't make it good policy."
Gandolfo believes the requirement to fix distribution patterns comes at the cost of the flexibility that makes discretionary trusts useful for succession and risk management in family businesses.
CAFBA is also concerned about how automatic revocation is treated. "That appears unnecessarily punitive," Gandolfo said. "A business should not face a significant tax penalty simply because its circumstances change and an arrangement that was appropriate at one point in time is no longer appropriate."
CAFBA isn't alone in that view. The Council of Small Business Organisations Australia (COSBOA) has struck a similar note, with chief executive Skye Cappuccio calling the revised approach an improvement but not a fix, arguing the penalty structure fails to account for how family business circumstances change over time and calling on the government to amend it before the legislation proceeds.
Consultation on the draft closes on 18 September 2026, with the government aiming to pass the legislation before the end of the year.
Why restructuring hits brokers
For brokerages themselves, Gandolfo has previously pointed out that the cost of the original proposal was never just the tax bill.
A brokerage restructuring out of a discretionary trust doesn't just change its tax status. It can unravel every commercial relationship the trust structure sits underneath – starting with lender accreditation.
"Any disruption to that accreditation network ultimately affects the small businesses relying on brokers to access the capital they need to purchase equipment, invest and grow," Gandolfo said.
"For a midsized broking firm, this could mean the cost and disruption of renegotiating up to 50 separate lender accreditation agreements without any assurance that the new agreements will be accepted."
He added that clients themselves would likely wear flow-on costs too, warning that "assistance will also be needed for business clients to assign or restructure loans, often resulting in significant break costs if loan assignments are impossible”.
'A menu with two bad options'
Joseph Daoud, founder of It's Simple Finance and an outspoken critic of Labor’s new tax regime, also welcomed the government's partial retreat but stopped well short of calling it a win.
"It's a menu with two bad options," Daoud told MPA. "Lock in your family trust distributions forever, and the only way out is a funeral or a divorce. Or unwind the trust entirely and pay stamp duty for the privilege of leaving. Get it wrong once as a trustee and you cop the top marginal rate plus the Medicare levy. That's not a safety valve, that's a trapdoor."
Daoud said the uncertainty was already generating real costs for brokers navigating the choice. "Every broker I talk to is asking the same question: 'do I need to blow up a structure I've spent years building?' And their accountants are charging by the hour to answer it. Nobody grows a business in an environment where you're punished for changing your mind," he said.
He argued the government's willingness to soften the policy at all was itself telling. "The Government has admitted the policy was wrong," Daoud said. "Now it just needs to admit it a bit more."
A concern flagged since the Budget
CAFBA's caution is consistent with the position chief executive David Bushby put to MPA when the reforms were first confirmed at Budget time in May.
Bushby then described the government's property tax package as a source of real risk for commercial clients, warning that "these complex new rules and valuation requirements will adversely impact our members and their commercial clients, leading to unintended consequences and possibly encouraging avoidance behaviour in the market”.
