Opens in a new tab
(02) 7258 2417Book a Strategy Call

Family Trust Asset Protection: Get the Structure Right First

Mike Bell, Founder and Director of Build and Protect Financial Services

Mike Bell

October 21, 2026
Sydney commercial building exterior

Last updated 21 October 2026. General information only.

On 14 October 2026 the Treasurer introduced a bill proposing a 30% minimum tax on discretionary trusts from 1 July 2028. Most of the commentary treats it as a tax story. That reading is too small. Family trust asset protection, tax and succession are three separate jobs, and the bill re-prices only one of them.

This article walks through all three: protecting what you have built, lawfully managing the tax on it, and passing it to your family in the way you intend, including how companies and family trusts can work together. It also covers the part almost nobody writes about, which is that the order in which you set these things up decides how much each one is worth. Foundations are poured before the walls go up. Structure works the same way.

A note before we start. We are credit specialists, not accountants, lawyers or financial advisers. Build & Protect provides credit advice and works alongside a network of accountants, solicitors and financial advisers who cover the rest. Everything below is general information. Where a point depends on your own circumstances, the person who decides it is named.

What no one else is saying: The trust bill is being covered as a tax event, but tax tends to be the easiest of a structure’s three jobs to swap out. Asset protection and succession depend on timing, control and paperwork, and they are the jobs that are hard to fix later. Courts are increasingly willing to look through a trust to the person who controls it, a transfer made to put assets out of reach of creditors can be unwound with no time limit written into the section, and a personal guarantee given to a lender can quietly put the assets back on the table. So the question worth asking is not “should I keep my trust after the changes?” It is “what is each part of my structure protecting, who controls it, and what happens to it when I am not here?” It is also how our director, Mike Bell, approached his own affairs, as the real example below shows.

The short version

  • The bill is not law. A 30% minimum tax on discretionary trusts from 1 July 2028 was introduced on 14 October 2026. Until it passes, current rules apply and the bill can still change.
  • A structure does three jobs: protecting assets, lawfully managing tax, and passing wealth on. The bill re-prices only the tax job.
  • Asset protection has limits. Timing, control of the trust and personal guarantees to lenders can all weaken it.
  • Companies behave differently. A bucket company gets no offset under the proposal, while a company owned by a trust works another way.
  • Four professionals, four jobs: the accountant (tax, protection, structure), the estate planning solicitor, the financial adviser and the broker.
  • Practical first step: if your accountant has not raised the proposed changes, raise them yourself.

What the trust bill proposes, and what is still not law

As at 21 October 2026 the measure is a bill, not law. The Treasury Laws Amendment (Tax Reform No. 3) Bill 2026 was introduced on 14 October 2026, following the Budget announcement on 12 May 2026 and an exposure draft consultation held from 3 to 18 September 2026. The Opposition is understood not to support it, so the Government needs support in the Senate, and Grant Thornton notes the final form is uncertain.

The proposal in plain terms

From 1 July 2028 the trustee of a discretionary trust would pay a minimum 30% tax on the trust’s taxable income. Beneficiaries other than companies would receive a non-refundable offset for the tax the trustee paid. In the Treasurer’s words, 30% is the marginal rate paid by workers earning roughly $45,000 to $135,000.

Put simply, the bill targets the case where trust income is distributed to someone who would otherwise pay less than 30% on it. Where the beneficiary already pays 30% or more, the offset generally covers the trustee’s tax and the outcome is much the same as today. Your accountant models what that means for your family.

What is carved out

The Treasurer’s second reading speech lists several exclusions: fixed trusts, charitable trusts, special disability trusts and superannuation funds, primary production income, certain income relating to vulnerable minors, deceased estates, and discretionary testamentary trusts set up for genuine testamentary purposes. Distributions to registered charities and deductible gift recipients are also excluded.

The restructure window and the election

Two transition tools sit alongside the tax. The first is an expanded rollover relief from 1 July 2027, which the ATO describes as time-limited to three years, designed to let assets move out of a discretionary trust into something that is not a discretionary trust. The second is an election: a trust that nominates beneficiaries up front, and keeps distributing to them, would be exempt from the minimum tax without restructuring. The government says this route is not expected to trigger state and territory stamp duty. Grant Thornton observes that it restricts how freely a trust can distribute, which is the very flexibility many families value.

Important: these trust measures are not yet law. Anything built around them should be modelled by your accountant against both the current rules and the announced direction.

Proposed is not the same as law

Nothing in the trust bill changes how your trust is taxed today. Until Parliament passes a bill and it receives Royal Assent, the current rules apply, and the bill can still change on the way through. A proposal can be amended, delayed or not pass at all, so there is no reason to treat the 1 July 2028 start date as fixed, or to assume an existing structure has to change.

What the proposal does do is make this a sensible time for a conversation. If your accountant has not yet raised the proposed trust changes with you, it is reasonable to raise them yourself and ask how they might apply to your family’s structure. Your accountant knows your distributions, your beneficiaries and any companies in the structure, and can model the current rules against the announced direction before anything is decided. Acting on a proposal that is not yet law, without that modelling, can carry its own costs.

The three jobs a structure does

It helps to separate what a structure is asked to do. The same trust, company or ownership arrangement is usually carrying all three of these at once, and they do not rise and fall together.

Job one: protecting what you have built

Asset protection is about whether the assets are reachable if something goes wrong: a business failure, a professional claim, a guarantee called in, a relationship breakdown. It depends on who owns what, who controls it and when it was put in place. Your accountant works on the structure and the protection built into it, and your solicitor tests the legal exposure.

Job two: lawfully managing the tax

This is the job the bill is repricing. Structures allocate income and gains among different taxpayers at different rates, and they carry their own state taxes, set-up costs and compliance. Your accountant decides whether the arrangement still earns its keep.

Job three: passing wealth on

Succession is about who ends up with control, and with the assets, when you die or lose capacity to decide. It is where a will, a trust deed, powers of attorney and the family’s wishes all have to line up. Your estate planning solicitor drafts it and your accountant checks the tax consequences.

The reason to separate them is practical. A change to one job can leave the other two untouched, or can quietly weaken them. The 30% minimum tax changes job two. It does not change what a court thinks of your control of the trust, and it does not change what your lender will ask you to guarantee.

A real example: how our director set up his own structure

This is one family’s story, shared as an illustration and not as a template or a recommendation.

Many years ago, our director Mike Bell sat down with his accountant to design the structure behind his own business and assets. He did not start with a product or a tax saving. He started with four goals:

  1. Protect his assets from his trading business. A business carries risk that a family should not have to carry with it, so the structure was designed to keep the assets separate from the business.
  2. Lawfully manage tax. The structure was built with his accountant to work within the tax rules of the day, with the accountant modelling the numbers.
  3. Build wealth over time. The assets were arranged to grow within the structure, and retained within it where that made sense.
  4. Pass it on. The structure was set up so that, when he passes away, the assets can be passed on to his family in the way he intends.

Two things stand out when it is read against the rest of this article. The first is the order. The goals came first, and the structure was designed to serve them, which is the sequence the table above describes. The second is the timing. Because the structure was put in place a long time ago, well before any trouble could arise, it was built when everything was calm. That matters for the reasons covered in the asset protection section: a structure assembled early is a very different thing from one assembled once a problem is visible.

It has also needed looking after. Tax rules change, as the trust bill shows, so a structure built years ago is worth revisiting with your accountant from time to time, and that review is a conversation to have before any change is made. What suits one family at one stage will not suit another, which is why the accountant and solicitor, and not a template, decide the design.

Family trust tax in 2026: what is changing and what is not

A worked example of the proposed minimum tax

The table below is illustrative only. It assumes a trust distributes $60,000 of net income to a single adult beneficiary, uses the 2026-27 resident income tax rates published by the ATO, ignores the Medicare levy and other offsets, and assumes the bill passes as introduced with the offset working as described. It is a teaching example, not a forecast, and your accountant will model your own numbers.

Beneficiary’s other income Tax on the $60,000 today Tax under the minimum tax as introduced
None $8,520 $18,000 (trustee pays 30%; the beneficiary’s credit is limited to their own tax, so the rest is not refunded)
$100,000 $19,750 (the first $35,000 of the $60,000 fills the 30% band up to $135,000, and the remaining $25,000 is taxed at 37%) $19,750 (their own tax is above the trustee’s $18,000, so the credit covers it and they pay the $1,750 balance)
$250,000 $27,000 $27,000 (taxed at 45%; the credit covers the trustee’s tax)

The pattern is the point. The extra tax lands where income was being distributed to someone with little other income. It largely does not change the outcome where the beneficiary already pays 30% or more. This is general information about the proposal, not advice about what suits your family.

The capital gains change is already law

Separately from the trust bill, the negative gearing and capital gains reforms are now law. From 1 July 2027, the 50% CGT discount for individuals, trusts and partnerships is replaced by cost base indexation plus a 30% minimum tax rate on capital gains, applying to gains that accrue after that date. From the same date, negative gearing on residential property is limited to new builds, with properties held at 7:30pm AEST on 12 May 2026 exempt. Our articles on negative gearing changes in 2026 and on investment property ownership structure cover the mechanics for investors.

State taxes do not stand still

Land tax is a good example of a cost that sits outside the federal debate. Revenue NSW treats discretionary trusts as special trusts. A special trust does not receive the land tax threshold, and is taxed at a flat 1.6% up to the premium threshold, then 2%. Revenue NSW’s own example is land valued at $600,000, which gives $9,600 payable with no threshold deduction. A discretionary testamentary trust created by a will may receive the threshold for two years from the date of death, and is treated as a special trust after that. A trust can also face surcharge land tax if a beneficiary is a foreign person, and the deed must irrevocably exclude foreign beneficiaries to avoid it.

These are NSW rules and other states differ. They are the sort of detail an accountant and solicitor confirm for the actual property and the actual deed.

Moving an asset is itself a tax event

Putting an asset you already own into a trust is not a neutral step. The ATO treats creating a trust over a CGT asset, and transferring a CGT asset to a trust, as separate CGT events, each with a capital gain or loss worked out from the cost base and the capital proceeds. State transfer duty questions can also arise on a transfer. This is why structure sits on the foundation side of the ledger. Building it before the asset is acquired is generally simpler than rearranging it afterwards, and that is a question for your accountant and solicitor before anything moves.

Companies and family trusts: how the two fit together

Most families that hold assets through a trust also have a company somewhere in the picture. There are three common ways the two are combined, and the trust bill treats them very differently.

A company as the trustee

In a corporate trustee arrangement the trust’s legal owner is a company, usually with the family as directors. This is about liability and continuity rather than tax: obligations taken on as trustee sit with the company, and the trust carries on if an individual director dies, because the company continues. Bentleys describes a corporate trustee as an added layer of protection. The minimum tax does not change this role, but the court decisions above are a reminder that who controls the company is part of the control question.

A company as a beneficiary: the bucket company

A bucket company is a company named as a beneficiary, so the trust can distribute income to it and the profit is taxed at company rates rather than at a family member’s marginal rate. Under current law the company pays 25% if it is a base rate entity and 30% if it is not. The ATO’s test is that no more than 80% of the company’s assessable income is passive income, and rent counts as passive, so a company that mostly collects rent will generally pay 30%.

This is the arrangement the trust bill hits hardest. The Treasurer’s speech confirms that corporate beneficiaries do not receive the non-refundable offset for the trustee’s minimum tax. In practice, income distributed to a bucket company would be taxed at the trustee level and again in the company. Law firm Sladen, analysing the Budget announcement in May 2026 before the bill was introduced, put the combined trust and company tax at $60 on every $100 on one reading of the Treasury fact sheet, and $51 on a different reading that had circulated in the media, before any further tax when the profit is paid out as a dividend. The design details are still being tested, so those figures are an analyst’s reading and not a settled outcome. Your accountant models what the introduced bill does to any company already receiving distributions.

A company owned by the trust

The third combination turns the usual picture around. The trust owns the shares in a company, and the company holds an investment, a development or a business. The company pays its own tax at 25% or 30%, and the post-tax profit can be paid up to the trust as a franked dividend, which the trustee can then distribute with the franking credits attached. Franking credits matter more under the bill, because trustees receiving franked dividends are expected to apply the credits against the minimum tax first, with the treatment of any excess still under consultation.

The attraction is that it keeps company-level retention and reinvestment while preserving a discretionary trust’s flexibility over what is later distributed. The trade-offs are real. A company is carved out of the new capital gains regime, so from 1 July 2027 it gets neither the 50% discount nor indexation, and a long-held growth asset can therefore carry more tax in a company than in an individual’s or trust’s name. Restructuring an existing trust into a company is also what the announced rollover relief from 1 July 2027 is designed to support, and the cost of doing so is a question for your accountant and solicitor before anything moves.

Getting the money out: dividends, loans and Division 7A

Profit retained in a company is only part of the picture, because at some point families want to use it. Paid out as a dividend, it is taxed in the shareholder’s hands with a franking credit and any top-up to their marginal rate. Taken as a loan, it falls under Division 7A: the ATO explains that a private company loan to a shareholder or associate can be treated as a dividend unless it is a complying loan, with a written agreement in place before lodgment day, interest at or above the benchmark rate, and a maximum term of 7 years (25 years if fully secured by a registered mortgage over real property).

Entitlements a company holds in a trust were recently tested in the High Court in Commissioner of Taxation v Bendel [2026] HCA 18. The ATO’s position is that a company beneficiary that takes no action on its entitlement does not create a Division 7A loan, but using the funds for a payment or loan to a shareholder or associate can still engage the unpaid present entitlement rules, and section 100A remains live. The ATO is reviewing its guidance, so your accountant confirms the current position.

How this meets the lender

Layered structures add documents and guarantees at every level. A lender looking at a trust that owns a company, or a company that is a beneficiary of a trust, will usually want to see the deed, the company constitution, who the directors and shareholders are, and personal guarantees from the people behind each entity, and will assess serviceability across all of them. Lender policy on these structures varies and changes over time, which is another reason the lending conversation belongs before the structure is built, not after.

Family trust asset protection: what a structure can and cannot do

What it can do

When assets are held in a trust, the trustee is the legal owner and the beneficiaries have an expectation rather than a personal ownership right. AFSA, the bankruptcy regulator, confirms the principle that property a person holds on trust for someone else does not vest in their trustee in bankruptcy. That separation is the foundation of the protection people look for from a family trust, and it is why a trust is often discussed alongside business risk and professional exposure.

Where the protection stops

The protection has edges, and they are worth knowing before relying on it.

Timing. The Bankruptcy Act allows a trustee in bankruptcy to unwind certain earlier transactions. Section 120 covers transfers for less than the property’s value. Section 121 covers transfers whose main purpose was to keep property from creditors. Under section 121 the main purpose can be inferred where the person was, or was about to become, insolvent, and a presumption of insolvency can arise if adequate books and records were not kept. Family relationships and love and affection do not count as consideration, and the section text sets no time limit. AFSA’s own example is a house moved to a spouse three months before bankruptcy that the trustee can still pursue. The practical lesson is that a structure built when everything is calm is a different thing from one assembled once trouble is visible.

Control. Courts have been looking through trusts to the person who runs them. In Kennon v Spry [2008] HCA 56, the High Court held that a spouse’s powers over a discretionary trust could make its assets property of the marriage. More recent Family Court and Federal Court decisions, reported by Hamilton Locke, focus on who has the capacity to control the trust. Outcomes turn on the facts and the law is still developing, but the tension is real: the more control you keep, the easier it is to argue the assets are yours in substance.

Guarantees. A trust or company that borrows is usually asked to back the loan with personal guarantees from the people behind it. A personal guarantee puts personal assets behind the debt, which is exactly what the structure was meant to avoid. This is the point where a lending decision can cut across a legal one.

None of this means a trust fails to protect. It means the protection is a function of how the structure is set up, when, who controls it and what has been signed along the way. Your accountant and solicitor are the people who test that for your situation.

Passing wealth to your family: control outlasts ownership

The role that matters most

Most discretionary trusts have an appointor, a role that generally holds the power to hire and remove the trustee. Whoever holds it effectively controls the trust. That makes the question of who the appointor is, and who takes over when they die or lose capacity, central to succession. Because trust assets are not personally owned, they generally do not form part of the estate, so control passes under the deed rather than under the will. Worth checking with your solicitor: does the deed name a successor appointor and a successor trustee, and does it match what the family would want?

The vesting date

Every trust has a vesting date, the point at which beneficiaries become absolutely entitled to the assets. In NSW, under the Perpetuities Act 1984, the vesting date must be within 80 years from the date the settlement takes effect, and it cannot be extended beyond that. Some deeds set a shorter date. Vesting can trigger capital gains tax and income tax events, depending on the deed’s wording, and a vesting date that has already passed cannot be changed. It is worth knowing what the date is in your own deed.

Testamentary trusts

A testamentary trust is created by a will and takes effect on death. The tax treatment is different from an ordinary family trust. The ATO explains that trust income distributed to a minor is generally taxed at the highest marginal rate plus the Medicare levy, with exceptions, and that income from a deceased estate, including income from investing the estate’s property, is excepted income taxed at normal individual rates. The ATO adds a limit: income derived by a testamentary trust from assets unrelated to the estate does not qualify. The trust bill also carves out discretionary testamentary trusts set up for genuine testamentary purposes. Whether one suits your family is a question for your solicitor and accountant together.

The human side

A well-built structure is also a kindness to the people left to run it. Clear roles, current documents and a plan for the day you cannot decide for yourself reduce the load on a family at an already difficult time. That includes the quieter documents that sit beside a trust, such as an enduring power of attorney, which your solicitor can explain.

Why structure decides what you can borrow

This is our side of the table, and it is where a structure’s design meets real constraints.

Lender policy on trust and company borrowers differs between lenders and changes over time. When the borrower is a trust or company, lenders commonly look at five things: the deed and whether the trustee has the power to borrow and give security, personal guarantees from the people behind the structure, serviceability across the entity and the guarantors including loans they already back personally, loan-to-value limits and customer eligibility rules, and extra verification documents. Our article on APRA’s 2026 DTI rules covers why those serviceability limits matter more for larger portfolios.

Three practical consequences follow, all described here as how lending generally works rather than as a recommendation.

  • Lendability is a design question. A structure that is tax-effective on paper can narrow the lenders willing to fund it, or add guarantees that change the protection story.
  • Retrofitting usually involves the lender. Changing who owns a property that already has a loan typically means the lender’s consent or a refinance, on top of any tax and duty on the transfer.
  • Sequence matters. Settling the structure, then matching the lending to it, is generally smoother than the other way round. Our guide to strategies for scaling wealth on a high income sets out the structures commonly used to hold property and the questions to take to your accountant.

If you want a deeper look at how deductibility depends on how debt is structured, our article on deductible and non-deductible debt explains the difference. Whether any particular borrowing is deductible depends on how the funds are used, and your accountant confirms it.

Getting the order right: who does what

Structure works when a few professionals each own their part and talk to one another. The table below shows a common way the work is divided. The roles overlap at the edges and every family’s mix differs, so treat it as a guide to who to ask about what.

Professional What they work on Questions they help answer
Accountant Tax, protection and structure: which entities hold which assets, how income and gains are taxed, the cost of setting up and running the structure, and the effect of changes such as the trust bill Does the structure still earn its keep under the current rules and the announced direction? What does each entity protect, and how is income and profit moved between them?
Estate planning solicitor The estate plan: wills, powers of attorney, trust deeds and who controls them (appointor and trustee succession, vesting date), testamentary trusts and legal exposure such as family law and creditor claims Who controls the assets if I die or lose capacity? Does the deed match what the family wants?
Financial adviser Asset selection and the overall plan: what is held and why, how it fits your goals and time frame, plus super and personal risk cover Which assets suit the plan, and does the whole picture add up over time?
Mortgage broker (us) The credit side: matching the structure to lenders that suit it, loan structure, guarantees and serviceability, and sequencing the lending around what your advisers decide Is the structure lendable? How do guarantees and each entity change what can be borrowed?

As a rough order, the family sets its goals first. The accountant and solicitor then work on structure, tax and the estate plan together, the financial adviser maps the asset selection and overall plan, and we match the lending to the structure before the deed is signed or assets move. Whether any step is needed, and in what order, depends on your situation, and your advisers decide it.

Questions that tend to be useful to bring to that team:

  • What is each part of the structure protecting, and from what?
  • Who controls it today, and who controls it if I die or lose capacity?
  • Is there a company in the structure as trustee, beneficiary or shareholder, and what does the minimum tax do to it?
  • When is the vesting date, and what happens at that date?
  • What would the 30% minimum tax mean for our family’s actual distributions?
  • Which of our loans carry personal guarantees, and what would that do to the protection?
  • What would it cost, in tax, duty and refinancing, to change the structure later compared with now?

Frequently asked questions

Is a family trust still worth having after the 2026 changes?

It depends on what the trust is being used for. The minimum tax proposal affects income distributed to people who pay less than 30%, so families who rely on that effect will see the biggest change. Families who use a trust mainly for control, protection or succession are weighing different things. The proposal is also not law, so it is worth asking your accountant to model both the current rules and the announced direction.

Does a family trust protect my assets from creditors?

It can separate ownership, and AFSA confirms that property held on trust for another person does not vest in a trustee in bankruptcy. But the protection depends on timing, control and paperwork. Transfers made to keep assets from creditors can be unwound under the Bankruptcy Act, courts have been willing to look through a trust to the person controlling it, and personal guarantees can bring personal assets back into reach. A solicitor can assess your specific situation.

Can a trust protect assets in a divorce?

Not reliably. In Kennon v Spry the High Court held that a spouse’s powers over a discretionary trust could make its assets property for family law purposes. More recent decisions, reported by Hamilton Locke, show courts focusing on who has control over the trust. Outcomes turn on the facts, so a family lawyer is the right person to ask.

What is a bucket company and does the trust bill affect it?

A bucket company is a company named as a beneficiary of a trust, so trust income can be taxed at company rates. The Treasurer’s speech confirms corporate beneficiaries do not receive the offset for the trustee’s minimum tax, so distributions to a bucket company are expected to be taxed twice before any dividend is paid out. The measure is not law, and your accountant can model what it means for any company already receiving distributions.

Can a company be owned by a family trust?

Yes. A trust can hold the shares in a company that owns an investment or runs a business, so the company pays its own tax and the trust receives the profit as dividends. How that fits with the minimum tax, franking credits and Division 7A depends on the details, and it is a question for your accountant and solicitor.

Is the 30% minimum tax on trusts law?

No. As at 21 October 2026 it is in a bill introduced on 14 October 2026, with a proposed start date of 1 July 2028. The ATO states it is not yet law, and the Opposition is understood not to support the bill, so its final form could change.

What happens to a family trust when the person who controls it dies?

It depends on the deed. Control usually passes through the appointor and trustee succession provisions in the deed rather than through the will, which is why those provisions are worth checking while everyone is well. Your solicitor can review them.

Do I need a trust to pass wealth on to my children?

Not necessarily. A trust is one tool among several, along with wills, testamentary trusts, superannuation arrangements and ordinary ownership. The right mix depends on your family, your assets and your goals, and your solicitor and accountant are the ones who weigh it.

Can I buy an investment property in a trust and still get a loan?

Often yes, but lender policy varies and the loan usually requires more documents and personal guarantees from the people behind the trust. The structure and the lender are matched before the deed is signed, which is where we come in.

The bottom line

The 30% minimum tax proposal is not law, and nothing about your structure has to change today. It is still worth taking seriously, and so is the larger idea behind this article. If your accountant has not raised the proposed changes with you, that is the conversation to start. A structure carries three jobs, protection, tax and succession, and tax is the easiest one to change later. The other two depend on choices made early, and sometimes quietly, with the people around the table before assets move.

If you are building a property portfolio, holding assets through a trust or company, or weighing a restructure, we can help you work out how the lending side fits with what your accountant and solicitor recommend. Book a complimentary strategy call, or explore your numbers with our borrowing power calculator.

Important: General information only. Not personal tax, legal or financial advice. The trust measures discussed are not yet law, and the right structure depends on factors your accountant and solicitor need to assess, including income mix, existing assets, family situation and exit horizon. The worked example is illustrative, not a forecast or a recommendation. Mortgage brokers do not give personal tax advice. What we do is structure the lending so it works with whatever your advisers recommend.

Sources

Build & Protect Financial Services. Credit Representative 539491 of Australian Finance Group Ltd (ACN 066 385 822), Australian Credit Licence 389087. This article is general information only and does not constitute personal financial or credit advice. Consider your own circumstances and seek advice from a licensed professional before acting.

Before we set up your booking

A few quick questions so the call is focused from the first minute.

Book a strategy call

Book your complimentary 30-minute strategy call