Venture in a family trust

What is changing for family trusts, and when?

From 1 July 2027 trusts lose the 50% CGT discount on growth after that date, which became law in June 2026.1 From 1 July 2028 the trustee of a discretionary trust would pay a 30% minimum tax, with a rollover open from 1 July 2027 to 30 June 2030 for trusts that restructure.9,2

Treasury released four exposure draft bills on 3 September 2026, with submissions closing on 18 September.10,9 The Treasurer introduced the Treasury Laws Amendment (Tax Reform No. 3) Bill 2026 and a companion rates bill on 14 October 2026. The rates bill has gone to the Senate Economics Legislation Committee, due to report on 13 November 2026.2,11 The bills keep the drafts' main design, so the detail below follows the drafts unless noted. Collection, CGT interactions and further integrity rules are left to a later tranche.12,4

What is the proposed minimum tax on discretionary trusts?

The trustee pays 30% on the trust's taxable income, whoever it's distributed to. Non-corporate beneficiaries still declare their share and get a non-refundable credit for the trustee's tax; corporate beneficiaries get none.3,2 The NTAA puts the total at about $69.71 of tax on $100 of trust income by the time a top-rate shareholder receives it as a franked dividend.4

The credit is only worth as much as the beneficiary's own tax; the NTAA calculates full use needs taxable income above $229,320. The trustee uses franking credits against the minimum tax and may get a refund of any excess relating to minimum tax income, but the credits no longer pass to beneficiaries.4,8

For a trust holding venture, these parts matter most.

• Fixed and widely held trusts, complying super funds, special disability trusts, deceased estates and charitable trusts are out. Testamentary trusts are largely out, with tighter conditions for those set up from 1 July 2028.3,8,14
• A new definition of fixed trust turns on whether there are "material discretionary elements". The NTAA warns that a unit trust deed that merely allows units to be issued or redeemed could fail it, which would make that unit trust a minimum tax trust.4
• An existing trust can instead elect to distribute fixed, matching shares of income and capital to nominated beneficiaries. The election has to be made in the 2028-29 year and can be varied only on a death or relationship breakdown. An inconsistent distribution revokes it and taxes that year's net income at 47%, although the bill adds a Commissioner's discretion to preserve the election where automatic revocation would be unreasonable.8,4,12
• A trust can use the election or the rollover, not both.14,7

How does the 2027 CGT change hit family trusts?

For CGT purposes, an asset a trust has held since before 1 July 2027 is treated as sold just before that date and reacquired on 1 July 2027. The price is its market value, or an amount under an apportioning method the government is still developing, at the trustee's choice. The rule applies where at least one beneficiary could get a discount gain from the asset, and pre-CGT assets have their own version.1,13

Nothing is taxed at that point. The gain or loss on the deemed sale is deferred until the asset is actually sold, and the trustee can make the choice as late as the return for that year. Growth up to 1 July 2027 keeps the discount; growth after it is indexed for inflation with no discount.1,13

The 30% minimum rate on capital gains applies to Australian resident individuals, including gains they receive as trust beneficiaries. Companies are outside it.1 How it interacts with the trustee-level minimum tax is left to a later tranche.4

In a venture allocation this bites on anything that isn't an eligible ESVCLP gain, such as units in a manager's parallel unit trust. The manager's 30 June 2027 statement is the usual starting point for the market value route. The 2027 CGT changes has the general rules.

How do ESVCLP gains and the offset flow through a trust?

The trust, as limited partner, is exempt on eligible gains, and the matching losses are disregarded.5 Exempt amounts aren't part of the trust's net income, which is the base for the beneficiaries' assessments and the trustee's minimum tax. The explanatory memorandum to the bill says so directly: minimum tax income is built on net income and doesn't include amounts that aren't assessable income.6 So an eligible ESVCLP gain is outside the minimum tax as the bill stands. The bill isn't law, and that could change before it passes.11

Who receives the exempt amount still matters. Paid to a bucket company, it generally reaches the shareholders later as an unfranked dividend.15 In a unit trust, a tax-free payment can reduce the cost base of the units.16

The 10% offset follows its own rules. The trustee decides each beneficiary's share, separately from how income or capital is distributed. A beneficiary with a fixed entitlement to a share of the gains on the underlying investments must get the same share of the offset, and where the trustee is taxed on some of the trust's income it can keep the part it hasn't allocated.5 The trustee must give beneficiaries written notice of their share.17

Two more points affect the offset. If an election gives beneficiaries fixed shares of the trust's gains, the offset allocation has to follow those shares, because the offset rules require it for any beneficiary with a fixed entitlement to the gains.5 And from 2028 an individual beneficiary may hold two non-refundable amounts, the ESVCLP offset and the minimum tax credit, against one tax bill; the ESVCLP offset carries forward, but carried-forward amounts are first reduced by net exempt income.5 Both are worth modelling with the client's accountant.

Should a family trust restructure before 2028?

BDO and the NTAA both suggest waiting for the final law, since the rollover only opens on 1 July 2027 and key eligibility rules are still to be set by ministerial instrument.8,4 What can be done now is to list what each trust holds and which assets need someone else's consent to move.

As drafted, the rollover defers income tax and CGT on transfers to a single eligible transferee, such as a company with one class of shares, a fixed trust, an individual or a family partnership. Every required asset has to go by 30 June 2030, or relief is reversed on all of them. State duty and GST aren't covered.14,7,4,8

A venture fund interest is awkward to move under those rules.

• Moving a limited partnership interest needs the manager's consent. The draft excludes assets that can't be transferred at all, but gives no relief where a third party simply doesn't consent in time.4,7
• The transferee takes on the uncalled commitment and will usually need to be a wholesale investor in its own right.
• An eligible ESVCLP gain is exempt in a company or fixed trust too, so the minimum tax may not be a reason to move the fund interest. The trust's other assets are more likely to drive the decision, and the fund interest has to go with them.5
• The election avoids moving anything, but it fixes the beneficiaries' shares for as long as it's in force, which with a new commitment means most of a ten-year fund.8

What should the trust deed allow?

Before a trust commits, it's worth checking that the deed:

• lets the trustee invest in limited partnership interests and meet capital calls over the fund's whole term
• has a vesting date comfortably after the fund term plus any extensions
• allows tax offsets and capital gains to be allocated separately from income
• names a successor appointor, since that person controls the trust for the life of the fund
• won't conflict with a fixed-proportion election, as the NTAA notes default beneficiary and vesting clauses can.4

The wholesale investor test covers how a trust qualifies, including through the person who controls it.18 After your client commits covers signatories and call notices.

Unit trust, discretionary trust, company or SMSF?

Complying super funds are outside the trust minimum tax, but large balances now face the tax on super balances over $3 million.3,19 Venture in an SMSF covers that, and Which entity should invest? compares the entities side by side.

Frequently asked questions

Talk to us about Fund III

Tall Order is a Melbourne seed fund. Fund III is a registered ESVCLP for wholesale investors. Justine Lum, our Head of IR, works with advisers and their clients.

Contact Justine Fund III