24 September 2026
For many Australian business owners, choosing between a company and a discretionary trust has traditionally come down to what best suits the business and family at the time.
Discretionary trusts have been popular with family businesses for many years, offering flexibility around income distributions, asset protection and tax planning. But the 2026–27 Federal Budget has brought that decision back into focus.
The Government’s proposed 30% minimum tax on discretionary trusts from 1 July 2028 could change the way some businesses approach their existing structures. Proposed restructuring concessions may also make it easier for eligible businesses to move to another structure where their current arrangement is no longer the right fit.
The legislation is still being developed, so this is not a case of rushing into a restructure. It is, however, a good time to ask whether the structure that worked well several years ago is still the right one today.
Why have discretionary trusts been so popular?
There is a reason discretionary trusts have been a common choice for Australian family businesses. They can provide flexibility in how income is distributed between beneficiaries, while also supporting asset protection and longer-term succession and wealth planning.
As Anthony Ricciardone, Principal at AR & B Advisors explains, discretionary trusts have traditionally offered “a combination of flexibility, asset protection and tax planning benefits”. That flexibility can be valuable where family circumstances change over time. Different beneficiaries may have different income levels, roles in the business or plans for the future.
The challenge is that business structures can easily become a case of “set and forget”. Once a structure is established and appears to be working, it can be easy to leave it alone, even as the business, family and owner's goals change.
What does the 2026 Federal Budget change?
The key proposal is a 30% minimum tax on discretionary trust income from 1 July 2028. While the headline figure is simple, the way the proposed tax interacts with trust distributions and beneficiaries is more complicated.
This is one area Anthony believes business owners need to consider carefully: “The way the proposed 30% minimum tax on discretionary trust flows through to beneficiaries isn’t straightforward and needs to be carefully considered,” he says. “It’s not refundable to the beneficiaries so if wrongly applied, means there can be tax leakage.”
There are proposed exclusions and transitional arrangements, and the final rules may continue to evolve as the legislation progresses. The Government has also proposed concessions to assist eligible businesses that want to restructure from discretionary trusts into other structures, including companies and fixed trusts.
The message, then, is not that trusts are no longer suitable. Rather, the proposed changes are a reason to revisit why the trust was chosen in the first place and whether it still fits.
Does this mean a company is now better?
Not necessarily. A company and a trust have different strengths, and the better option depends on what you want the business to do with its profits and where you see it heading.
Anthony puts the distinction simply: “A trust is good for flexibility and distributing income across a family group. A company retains profits at a lower tax rate and reinvests capital back into the business.”
That difference can be particularly relevant for growing businesses. If profits are regularly distributed across a family group, the flexibility of a trust may continue to be valuable.
If the business is retaining profits to fund expansion, invest in equipment, employ more staff or pursue acquisitions, a company may provide a more suitable structure for those objectives.
So the decision is not simply about which structure has the lower tax rate. It is about how the structure supports the way you actually run and grow the business.
What are you trying to achieve?
This is where the conversation becomes more important than the structure itself. A business owner focused on growth may have very different priorities from someone preparing to hand the business to the next generation.
Anthony explains: “The best structure depends on what you're trying to achieve. A family focused on succession may want something different from an owner focused on growth, asset protection or building long-term wealth.” That is why there is no one-size-fits-all answer to the company versus trust question.
The right structure should reflect not only today’s tax position, but also your plans for growth, ownership, succession, asset protection and long-term wealth.
When should you revisit your structure?
The Federal Budget may prompt a review, but there are plenty of other reasons to take another look. It may be worth reviewing your structure if the business has grown significantly, you are retaining more profits to fund growth, family or ownership circumstances have changed, or you are planning for the next generation to become involved.
A change in your business or personal risk profile, plans to bring in a new owner or investor, or thoughts of selling or partially exiting the business can also be good reasons to revisit the structure. None of these automatically mean you should move from a trust to a company. They are simply signs that the original decision deserves another look.
As Anthony points out, there is often an element of “set and forget” once a structure has been established. Changing it is also not always straightforward.
“There are costs of changing structures, which can include CGT/duty that prevent owners from changing structures.” That is one reason it is better to understand your options before a change becomes urgent.
Why early planning matters
Restructuring can involve tax, duty, legal and commercial considerations, as well as questions around ownership and existing assets. Depending on the circumstances, concessions or transitional arrangements may also be relevant.
Starting the conversation early gives you time to understand the numbers, weigh up the alternatives and avoid making a rushed decision when a deadline is approaching. As Anthony explains: “Early planning can enable access to concessions, avoids rushed decisions and allows changes to be implemented before deadlines arise.”
Reviewing your structure does not mean you have decided to change it. It simply means you know what your options are.
Look beyond the tax outcome
The 2026 Federal Budget has understandably made tax the focus of the company versus trust discussion. But tax has never been the only consideration. Asset protection and succession planning can be just as important, particularly for established family businesses.
A structure that suited a business when it was smaller may not be the best fit once the business has grown, accumulated assets or started planning for a change in ownership.
Anthony’s view is clear: “Tax is a factor, but also asset protection and succession planning need to be considered.”
The broader question is whether your structure supports the business you are building, not simply the business you had when the structure was first established.
The opportunity in the Federal Budget
The proposed changes may create additional considerations for businesses operating through discretionary trusts, but they also create an opportunity to step back and look at the bigger picture. Rather than asking whether a company is now better than a trust, the more useful question is whether your current structure still supports what you are trying to achieve.
For some businesses, the answer may be to retain the existing trust. For others, it may be worth considering a company or another structure.
Anthony’s advice to anyone thinking about putting the conversation off is simple: “It’s better to do it too early, than too late.” The proposed changes are not necessarily a reason to act immediately. They are a reason to start the conversation.
For business owners, the question is ultimately not just “Company or trust?”
It is “Which structure is right for where my business and family are going?” Getting that question on the table early gives you more time to consider your options and decide with confidence.
How AR & B Advisors can help
At AR & B Advisors, we work with business owners to look beyond the immediate tax outcome and consider the broader commercial, asset protection and succession implications of their business structure. If you’re unsure whether your current structure is still the right fit, contact our team to discuss and plan ahead.