Proposed changes to the way capital gains and trust income are taxed could reshape how Australian business owners, investors and family groups hold, grow and pass on their wealth.
While much of the discussion has focused on higher taxes and greater complexity, these reforms may also create a valuable opportunity: the chance to review structures that have been in place for years and decide whether they are still right for the future.
The key is to prepare, not panic. The rules are still developing, and there is no single answer that will suit every family or business. Acting early, however, may give you more time to understand your position and preserve your options.
What should you be considering?
A valuation as at 30 June 2027 may help establish how much of an asset’s growth occurred before the new capital gains rules apply. Even if a full valuation is not required, keeping reliable financial records, forecasts and other supporting information could prove important later.
Where you hold new investments
The traditional choice between a trust and a company may no longer be straightforward. The right structure will depend on the asset, your plans, family circumstances, financing needs, asset protection and how long you expect to hold the investment.
Whether your trusts remain fit for purpose
Discretionary trusts could be affected by the proposed minimum 30% tax, potentially changing the benefits of distributing income among family members. Unit trusts may be treated differently, but their position will depend on their terms and whether they genuinely provide fixed rights to investors.
Your bucket company arrangements
Bucket companies are not necessarily disappearing, but existing strategies may need to change. Ownership, retained profits, future distributions, franking credits and succession plans should all form part of the review.
The value of any franking credits
One of the more interesting aspects of the current discussions is the possibility that trusts may be able to derive greater value from franking credits than they could previously. For some family groups and business this could represent a meaningful planning opportunity.
Your wider business and family plans
This is about more than tax. It is also an opportunity to consider asset protection, succession, estate planning, control of family wealth and whether older structures have become unnecessarily complicated. In some cases, the best outcome may be restructuring or simplifying. In others, keeping the current structure may be entirely appropriate.
Start the conversation now
The biggest risk may be waiting until decisions become urgent. Understanding what you own, why you own it that way and what options may become available is the first step.
Visit our Tax Reform webpage to explore the key issues and read the full article series.
Important: This article is based on legislation and draft rules as proposed at the time of writing. Future government policy, legislation and the outcome of the next Federal Election may result in changes. The information provided is general in nature and should not be relied upon as a substitute for professional advice. Please seek advice tailored to your individual circumstances.
