Federal Budget and the implications for Trusts

I have a trust. Do I need to restructure?

In his budget speech on the 12th May, the Treasurer announced wide-ranging changes to the taxation of trusts, including the introduction of a 30% minimum tax rate for discretionary trusts. Those announcements have proven to be very unsettling for those of us with trusts.

At the time of writing, there are a few important things to note:

No bill incorporating these changes has yet been put before Parliament.

When it is, the start date is expected to be 1 July 2028.

It has also been foreshadowed that rollover relief will be available for three years from 1 July 2027.

In other words, it’s still too early to react. And assuming these changes are eventually enacted, you will still have time on your side. So, the message for now is to keep doing what you have been doing. We will be in touch when the legislation passes Parliament, and we will provide you all the strategies and actions you need.

Do I need a valuation?

Income Tax Rates Amendment (Tax Reform No.1) Bill 2026 has passed Parliament and become Act No.49 of 2026. One of the legislated changes is the replacement of the 50% CGT discount with an indexation of your cost base, starting from 1 July 2027.

As a result, if you or your trust holds assets that are or may become subject to CGT, you will need to obtain a valuation of those assets as at 30 June 2027.

Note, that doesn’t mean the valuation needs to be carried out on that specific day. There aren’t enough valuers in the world to do that! In practical terms, the valuation might be carried out at some later date, but the valuation must be an opinion of what the asset was worth on 30 June 2027.

Do I need a 30 June 2027 valuation?

We are starting to receive questions about whether clients need to obtain valuations of assets as at 30 June 2027, following the Federal Budget tax changes.

In particular, some people are asking whether they need to arrange formal valuation reports now, especially where they or their trust hold assets that may be subject to CGT.

At the time of writing, there are a few important things to note:

The relevant legislation will determine exactly what valuation evidence is required.

Existing income tax rules generally require market value to be supportable, but they do not usually require the valuation to be prepared by a particular type of valuer.

The ATO will usually be more comfortable with valuation evidence that is objective, well documented and capable of review.

For material or difficult-to-value assets, an independent professional valuation may still be sensible as a practical risk-management step.

In other words, it is too early to assume that you need to incur valuation costs now. The important question is not simply whether a valuation exists, but whether the value adopted at 30 June 2027 can be properly supported.

Once the legislation is settled, we will be able to advise what assets need to be valued, what evidence should be kept, and whether a formal external valuation is required.

For now, our recommendation is simple: do not rush into a valuation unless there is a separate commercial reason to do so. We will be in touch when the legislation passes Parliament and will help you identify the right approach at that time.