New 30 per cent trust tax creates significant challenges for private groups
Client AlertThe announced 30 per cent minimum tax on discretionary trusts creates significant challenges for private groups.
Grant Thornton’s partners vote to join Grant Thornton Advisors multinational platform. Read more.
By: Thomas Isbell, George Bendall
11 May 2021 3 min read

The rules which will apply from the first income year after the date of Royal Assent replace the existing Australian residency rules which were first enacted 85 years ago and are becoming unfit for purpose in a global working environment.
This has been brought further into the spotlight in the past 18 months with COVID 19 leading to stranded expatriate employees caught in Australia or their home jurisdictions uncertain of their tax residency positions due to complex residency rules and contradictory case law providing inconsistent guidance.
The principal focus of the new rules is on a two-step simplified approach consisting of;
Whilst no new details were announced in today’s budget, the 2019 Board of Taxation report to Government Reforming individual tax residency rules — a model for modernisation, which has laid the foundations for today’s announcement included the following ‘factor tests’:
Importantly the framing principle of the above application of the Factor Tests is the adhesiveness principle. That is, residency is harder to cease than it is to commence.
The proposed changes to the residency rules were necessary and will provide greater certainty on an individual’s residency status and bring Australia more in line with other OECD nations’ application of tax residency tests. However, it is still important to recognise;
The announced 30 per cent minimum tax on discretionary trusts creates significant challenges for private groups.
The Government has announced revisions to several tax measures in the Budget, affecting capital gains tax treatment for small businesses, a special carve-out for start-ups, and a conditional exclusion for discretionary testamentary trusts from the 30 per cent tax on trusts.
Explore how the Federal Budget 2026–27 reshapes M&A in Australia, with CGT changes, trust tax reforms and implications for deal structuring and transaction timing.