Tax rules are constantly evolving, and proposed reforms announced for 2026 may change how some Australians approach trust structures, property investments and broader ownership structures.
While the final legislation is still subject to consultation and change, the proposed reforms are a reminder that good structuring is about more than achieving a particular tax outcome.
The right structure should consider your broader goals, including asset protection, succession planning, business ownership and long-term financial flexibility.
Trusts will still have an important role
The proposed 30% minimum tax rate may reduce some of the tax planning flexibility traditionally associated with discretionary trusts.
However, trusts are not used solely for tax purposes. They can continue to play an important role in:
- protecting personal and business assets
- managing business ownership
- supporting succession planning
- providing flexibility as family and financial circumstances change
The right response may therefore not be to move away from trusts altogether, but to review how your trust interacts with your broader business, investment and ownership structure.
Trusts, companies and franking credits
One flow-on effect of the proposed 30% minimum tax rate relates to franking credits held by trusts. At this stage, it is likely that franking credits received by a trust would first be used to offset the trustee’s own liability for the minimum tax, with only the remaining, non-refundable credits flowing through to beneficiaries.
Partly as a result, some advisers are discussing a new way of holding company shares: the ordinary shares continuing to be held by a trust, with separate dividend-only shares issued directly to individuals. The appeal is twofold:
- shares held personally can carry more limited rights, which supports asset protection
- dividend-only shares can be structured to be redeemable on agreed terms, making them easier to deal with than ordinary or class shares, and can also assist with eligibility for small business concessions
While this type of structuring may become more common, it is not without risk. Issuing new classes of shares, particularly where a company already holds significant retained profits, can raise value shifting, debt/equity and dividend streaming issues, and may attract scrutiny under the general anti-avoidance rules (Part IVA). As with the property strategies discussed below, the right approach will depend on your specific circumstances, and we would recommend speaking with us before taking any steps.
Be cautious of perceived loopholes
Whenever tax rules change, new strategies quickly emerge that appear to work around them.
Another example currently being discussed is using a company structure to acquire residential property, with the borrowing attached to the company shares rather than directly to the property.
While certain strategies may appear technically possible under the current wording, that does not necessarily make them appropriate or low risk. The ATO may consider the broader purpose and substance of an arrangement, and further legislation may be introduced to address structures that operate against the policy’s intent.
What should you do now?
There may be legitimate opportunities to restructure your affairs, whether before the changes take effect or within the rollover relief window flagged to run from 1 July 2027 to 30 June 2030, subject to the final legislation and consultation outcomes. Either way, this should be based on your wider circumstances rather than a desire to preserve a particular tax outcome at any cost.
Before making changes, it is important to consider:
- asset protection
- tax implications
- existing retained profits and franking credits
- financing arrangements
- succession and estate planning
- future business or investment plans
- the cost and complexity of restructuring
We are reviewing the proposed changes and considering how they may affect our clients. Where appropriate, we will raise the implications with you as part of your ongoing tax and planning conversations with us.
Our take
Attempting to front-run the 2026 reforms using aggressive dividend-access share structures is, in our view, a high-risk strategy. The combination of imminent, targeted legislation (the flagged second tranche of changes) and the ATO’s existing hostility towards dividend stripping arrangements means this type of structure is unlikely to hold up as a safe, long-term tax planning tool.
The strongest structures are those that continue to make sense even when tax rules change.
Before establishing a new structure or making significant changes, speak with our team so we can help assess the risks, opportunities and long-term implications.
