Discretionary trusts — often called family trusts — have been a popular structure for Australian families and businesses for many decades, commonly used to operate family businesses, hold investments and assist with succession planning. Their flexibility, together with asset protection and estate planning benefits, has made them an attractive option for many groups.

In the 2026–27 Federal Budget, the Government announced that from 1 July 2028, trustees of discretionary trusts would generally be required to pay a minimum tax of 30% on the trust's taxable income.

How the proposal is expected to work

The trustee would generally pay the minimum 30% tax. Where trust income is distributed to individual or certain non-corporate beneficiaries, those beneficiaries would receive a non-refundable tax offset for the tax already paid by the trustee — intended to prevent double taxation while maintaining the 30% floor.

A number of trusts would be excluded from the rules, including:

• Fixed trusts and widely held trusts
• Complying superannuation funds and charitable trusts
• Deceased estates, special disability trusts and genuine testamentary trusts
• Primary production income and income relating to vulnerable minors

The corporate beneficiary problem

Many family groups distribute some trust income to a company for cash flow flexibility and profit retention. Under the proposed rules, a corporate beneficiary would not receive a tax offset for tax already paid by the trustee — meaning income distributed to a company could face double taxation.

The 3-year restructure window

Restructuring is rarely straightforward. Depending on the circumstances it may involve stamp duty, loan approvals, financing arrangements, contract changes and licensing requirements. Even relatively simple restructures can involve significant time and cost — careful planning is essential.

The rules are not yet final

The proposal remains subject to consultation. Treasury released a consultation paper in July 2026 seeking feedback on design issues and final legislation has not yet been introduced. Most groups should avoid making major structural decisions based solely on the announcement — it is sensible to monitor developments while considering whether existing structures remain appropriate if the proposal proceeds.

The ATO has released its updated reasonable travel and overtime meal allowance rates for 2026–27 in Taxation Determination TD 2026/4. The overtime meal allowance has increased to $40.00, while domestic and overseas travel rates have also been updated based on salary levels and travel destinations.

Although these figures are widely publicised, they are often misunderstood — applying them incorrectly could lead to deductions being denied as well as interest and penalties.

A travel allowance is the starting point

The ATO's reasonable amounts only become relevant if an employee receives a genuine travel or overtime meal allowance. Generally, an allowance should:

• Be paid specifically to cover work-related travel or overtime meal expenses
• Relate to particular work trips or overtime — not be a general top-up payment
• Be shown separately from normal salary or wages on payslips
• Be intended to help cover expenses the employee is expected to incur

The reasonable rates are not an automatic deduction

Employees can only claim the amount they actually spend. The ATO's reasonable amounts simply mean that in certain circumstances employees may not need a receipt for every specific expense — but the expenses must still have been genuinely incurred and relate to work-related activities.

Good records are still essential

Useful records include: a travel diary, bank or card statements, a representative sample of receipts, and — where travel involves six or more consecutive nights away from home — a formal travel diary recording dates, locations and purpose.

Four practical steps

1. Check your payslip — confirm the allowance is separately identified, not rolled into salary.
2. Keep records during the year — a simple travel diary is far easier than reconstructing evidence later.
3. Claim only what you spend — the ATO's rates are not a target; they are a substantiation threshold.
4. Extra care on longer trips — six or more consecutive nights triggers formal travel diary requirements.

A penalty unit is the building block used under Commonwealth law to calculate many ATO fines and administrative penalties. Rather than specifying fixed dollar amounts, the legislation refers to a number of penalty units — as the unit value rises, so do all penalties that rely on it. The new $364 value applies to breaches occurring on or after 1 July 2026.

Where the increase is felt

What makes this sting more

ATO penalties are not tax deductible — they must be paid from after-tax income. The good news is that the ATO will often consider remitting penalties (in part or full) where there are genuine mitigating circumstances or where a voluntary disclosure is made before the issue is identified. Addressing problems early typically results in a better outcome.

Four steps to reduce your risk

1. Lodge on time — provide documents to us well before due dates.
2. Keep good records — accurate records support your tax positions if questions arise.
3. Review compliance regularly — periodic reviews catch issues before they become costly.
4. Seek advice early — if you've made a mistake or fallen behind, speaking with us promptly provides more options than waiting for the ATO to contact you.

For many SMSF trustees, property is one of the most significant assets held by the fund. There is a legal requirement that all SMSF assets are valued at market value each 30 June. For listed shares this is straightforward, but for property the process can be more involved.

Trustees are responsible for determining market value. After annual financial statements are prepared, your fund auditor will need to see objective and supportable evidence backing up how you arrived at that value.

Valuation evidence — what auditors expect

Trustees may use a qualified independent valuer — this is recommended where the property is a significant part of the fund's value or is difficult to value. Where trustees choose not to use an independent valuer, they will need evidence from multiple sources. For property this typically includes:

• Recent comparable sales — at least three genuinely comparable properties (similar size and location)
• A real estate agent appraisal that also includes comparable sales evidence
• Net income yields (commercial property only) — not sufficient as standalone evidence

Related-party leases — arm's length is non-negotiable

Where an SMSF holds business real property (BRP), it may be leased to a business operated by a fund member or related party. However, the arrangement must be on fully commercial terms at all times.

Key test: would all the lease terms — including rent, term, outgoings and conditions — reflect what an unrelated third-party tenant would agree to?

To satisfy an auditor that a related-party lease is on arm's length terms, you should have:

• A properly documented lease agreement
• A rent appraisal obtained when the lease was first entered into
• Evidence the arrangement is operating per its terms (e.g. rent receipts, bank records)
• A new rent appraisal whenever a prior lease term expires — rental terms must be reset to current market value