Family businesses face 47% tax trap in trust lock-in plan
Lock in to avoid tax now, but face a 47% penalty later if distributions change.
From July 2028, a new 30% minimum tax on discretionary trusts will apply. Existing trusts can lock in distributions to eligible beneficiaries to avoid the new tax, but if things change and they need to adjust, they face 47% tax for that year.
Family businesses change often. Children are born, the next generation joins, or succession plans shift.
For many, that penalty makes the lock-in choice pointless. About 350,000 small businesses work through discretionary trusts and will need to choose.
- 30%
- New minimum tax rate
- July 1, 2028
- Effective date
- 47%
- Penalty tax rate for changes
- About 350,000
- Businesses using discretionary trusts
Why it mattersMany family businesses may find the 47% penalty trap makes both choices hard for long-term planning.
AustraliaAustralian family businesses face a critical tax choice in 2028: lock in rigid distributions or risk 47% penalties if circumstances change.
✓ Claims checked against the source. checked 7 d ago
