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1.
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Bill introducing 30% minimum tax on discretionary trusts passes House
A Bill to enact the 2026–27 Federal Budget measure imposing a 30% minimum tax on the net income of certain discretionary trusts has passed the House of Representatives.
Schedule 1 to the Treasury Laws Amendment (Tax Reform No 3) Bill 2026 and the Income Tax Rates Amendment (Minimum Tax on Discretionary Trusts) Bill 2026 establishes a minimum tax on the net income of discretionary trusts for income years commencing on or after 1 July 2028. The new tax is payable by the trustee and operates as a "top-up" to ensure a minimum rate of at least 30% applies to relevant trust net income. The minimum rate applies only to discretionary trusts, and does not apply to fixed trusts (including most widely held trusts, MITs and AMITs), complying superannuation entities or charitable trusts. Primary production income, income relating to vulnerable minors, charitable and not-for-profit beneficiary income, amounts subject to non-resident withholding tax, and genuine testamentary trust income are excluded. The definition of "fixed trust" is also being amended so that a trust qualifies where there are no material discretionary elements affecting beneficiaries' entitlements to income or capital.
Schedule 2 provides three years of rollover relief from 1 July 2027 for trusts wishing to restructure out of the minimum tax regime into a company or fixed trust, relieving the direct income tax consequences of transferring trust assets and issuing membership interests in the transferee, subject to conditions including that all assets go to the same transferee within the relief period, continuity requirements are met, and there are no material discretionary elements in the transferee. The rollover does not compel a trust to restructure or vest, and trustees must still have regard to the trust deed and general trust law duties when considering a restructure.
Schedule 3 introduces an electable regime allowing a discretionary trust to become an "excluded election trust" by nominating beneficiaries to receive specified shares of income and capital gains each year. Where an election is in force and the trustee exercises its discretion consistent with the nomination, the 30% minimum tax will not apply to that trust's income and non-income earnings for the relevant year. The election applies to income years starting on or after 1 July 2028.
Exposure draft legislation on the minimum tax measure was released on 3 September 2026, and the Bills now proceed to the Senate.
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Treasury Laws Amendment (Tax Reform No. 3) Bill 2026 – Parliament of Australia
Income Tax Rates Amendment (Minimum Tax on Discretionary Trusts) Bill 2026 – Parliament of Australia
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2.
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Bills on tranche 2 CGT indexation and negative gearing changes, and Payday Super transitional relief, pass House
Further legislation implementing the second tranche of the government's CGT indexation and negative gearing reforms, together with transitional relief for excess concessional contributions arising from the move to Payday Superannuation, has passed the House of Representatives.
Schedule 4 to the Treasury Laws Amendment (Tax Reform No 3) Bill 2026 refines the CGT reforms replacing the 50% discount with cost base indexation, extending them to AMITs and clarifying their operation for trusts, including an election out of indexation where no beneficiary benefits from it and continued access to the CGT discount for new residential dwellings and affordable housing. The Bill also adjusts the loss-ordering rules to protect complying superannuation entities investing through trusts, exempts testamentary trusts, deceased estates, special disability trusts and minor beneficiaries' capital gains from the 30% minimum tax on capital gains, and pro-rates CGT discount and indexation outcomes for foreign and temporary residents by residency days. Exposure draft legislation on this tranche was released on 4 August 2026.
Schedule 5 preserves favourable treatment for new residential dwellings and affordable housing, exempting them from the general quarantining of negative gearing losses and retaining the 50% CGT discount unless the investor elects cost base indexation and the minimum tax on capital gains.
Schedule 6 amends the Income Tax (Transitional Provisions) Act 1997 to give transitional relief for individuals who receive additional superannuation contributions because of the move to Payday Superannuation (commenced 1 July 2026), disregarding specified June 2026 quarter employer contributions when calculating concessional contributions for the 2026–27 income year so no one is penalised purely for the timing shift caused by the transition.
All measures commence on the first 1 January, 1 April, 1 July or 1 October after Royal Assent.
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Treasury Laws Amendment (Tax Reform No. 3) Bill 2026 – Parliament of Australia
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3.
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Draft ruling on whether an individual is carrying on a business issued
The ATO has released provisional guidance for individuals to determine whether they are carrying on a business for the purposes of sections 6-5 and 8-1 of the ITAA 1997.
Draft Taxation Ruling TR 2026/D2 sets out the indicators the Commissioner considers relevant to determining whether an individual's activity is a business, as opposed to an investment or a hobby, a distinction that affects the taxation treatment of the activity. The indicators are consistent with those in Taxation Ruling TR 97/11 (which deals with carrying on a business of primary production), and the new draft ruling is intended to be read alongside TR 97/11 and other existing rulings on the topic rather than replace them.
Where an individual carries on a business, amounts received are generally assessable as ordinary income under s 6-5, and losses or outgoings necessarily incurred in carrying on the business for the purpose of gaining or producing assessable income are deductible under s 8-1. The term "carrying on a business" is not defined in the ITAA 1997. The term "business" is defined broadly in s 995-1(1) to cover any profession, trade, employment, vocation or calling, but excludes activity undertaken as an employee. The draft ruling notes that whether activities amount to carrying on a business is a question of fact, assessed by the overall impression formed against the established indicators, consistent with the High Court's description of a business as a course of conduct carried on for profit involving continuity and repetition.
The draft ruling lists the following indicators of carrying on a business:
- significant commercial purpose or character;
- intention to carry on a business;
- purpose and prospect of profit;
- not a hobby or recreation;
- organised and carried on in a business-like and systematic manner;
- size and scale; and
- repetition and regularity.
Examples in the draft ruling illustrate application of each of the individual indicators, while more comprehensive case studies applying appear in Appendix 2.
Comments on the draft ruling are due by 27 November 2026, and the final ruling is proposed to apply both before and after its date of issue.
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TR 2026/D2 | Legal database
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4.
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CGT reforms: valuations not required by 1 July 2027
The ATO has clarified that taxpayers do not need to have market valuations of their CGT assets in place on 1 July 2027, even though the CGT reforms replacing the 50% discount with cost base indexation may require valuations as at that date.
Under transitional rules in the Treasury Laws Amendment (Tax Reform No 1) Act 2026, CGT assets acquired before 1 July 2027 and sold on or after that date may be treated as disposed of immediately before 1 July 2027 and reacquired on 1 July 2027. This allows gains accrued before and after 1 July 2027 to be calculated separately. The market value of the asset immediately before 1 July 2027 is used both as the capital proceeds for the deemed disposal and as the first element of the cost base for the post-1 July 2027 gain. Any gain or loss on the deemed disposal is deferred and only reported when the asset is actually disposed of or another CGT event happens.
The ATO has stated that taxpayers should not obtain a valuation before 1 July 2027, because a valuation cannot be forward-looking.
Taxpayers may also choose not to obtain a market valuation and instead use the alternative "apportionment method" to calculate capital gains on these assets. The government has released an exposure draft legislative instrument prescribing this method, and ATO guidance is expected in due course.
The ATO is also considering further guidance, tools and calculators on valuing particular types of assets, choosing appropriate experts, and the documentation and records needed to support a valuation.
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CGT reform – guidance and market valuations | Australian Taxation Office
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5.
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Bill to incentivise innovation, introduce monthly PAYG instalments and transition FBT treatment of electric cars passes House
The Treasury Laws Amendment (Tax Reform No 4) Bill 2026 has passed the House of Representatives without amendments. It introduces an Innovative Business CGT Concession (IBCC), refines the Research and Development Tax Incentive (R&DTI), expands venture capital tax incentives, introduces an option to pay PAYG instalments monthly and phases out the FBT exemption for electric cars.
Schedule 1 gives early investors in eligible innovative start-ups a 50% CGT discount on gains from CGT events on or after 1 July 2027. These gains are also excluded from the new minimum tax on capital gains. To qualify, the investor must choose the discount instead of cost base indexation and must not be a company, complying superannuation entity or foreign resident. The equity interest must have been issued directly by the company and held at risk for at least 3 years. An IBCC company must:
- be an Australian company incorporated for less than 15 years;
- be unlisted, with aggregated turnover under $50 million;
- have a predominant activity of developing or commercialising genuinely innovative products, processes, services or methods; and
- register with the Industry Secretary and meet annual reporting requirements.
Schedule 2 refines the R&DTI. It increases the expenditure thresholds, the refundable offset turnover threshold and the offset rates. It also limits the refundable offset to an entity's first 10 years (15 years for therapeutic goods R&D), removes eligibility for supporting R&D activities and lets the Minister determine eligible R&D activities.
Schedule 3 increases the entity value caps for investees eligible for the VCLP tax exemption (from $250 million to $480 million) and the ESVCLP tax exemption (from $50 million to $80 million) from 1 July 2027. It also lifts the maximum committed capital for ESVCLPs from $200 million to $270 million.
Schedule 4 lets entities choose to pay PAYG instalments monthly from the start of their next income year. The Commissioner may also require monthly instalments where an entity has a history of non-compliance. That decision can be objected to under Part IVC of the TAA 1953.
Schedule 5 replaces the FBT exemption for eligible electric cars with an FBT discount:
- commitments made from 1 July 2022 to 31 March 2027 remain exempt under s 8A of the FBTAA;
- commitments made from 1 April 2027 to 31 March 2029 receive a 100% or 25% discount, depending on the car's base value; and
- commitments made from 1 April 2029 receive only a 25% discount, depending on base value.
Transitional rules keep the existing treatment for earlier commitments until each commitment ends.
Most measures start on the first 1 January, 1 April, 1 July or 1 October after Royal Assent. The FBT reduction for benefits provided on or after 1 April 2029 starts on that date.
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Treasury Laws Amendment (Tax Reform No. 4) Bill 2026 – Parliament of Australia
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6.
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ATO extends family trust distribution tax GIC remission offer to mid-2027
The ATO has confirmed it will extend the general interest charge (GIC) remission offer for family trust distribution tax (FTDT) liabilities by a further 6 months, to 30 June 2027.
Broadly, FTDT is payable where a trustee has made a family trust election (or an entity has made an interposed entity election to join the family group) and the trust or interposed entity confers a present entitlement to, or distributes, income or capital to an entity outside the specified individual's family group. GIC applies to any FTDT that remains unpaid 60 days after it is due.
Under the offer, where trustees, electing entities and their tax agents proactively self-review, notify the ATO and pay an FTDT liability, the ATO will favourably consider remitting up to 80% of the GIC, where it is fair and reasonable to do so. The ATO notes that many taxpayers have already taken up the offer.
The extension gives trustees and electing entities more time to review past distributions against their family group and deal with any FTDT exposure on favourable terms. The ATO encourages taxpayers to seek advice and act promptly, and to put steps in place to reduce the risk of FTDT liabilities arising in future.
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Extension of GIC remission offer for FTDT liabilities | Australian Taxation Office
Family trusts | Australian Taxation Office
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