Trust income and borrowing: what the proposed 30% minimum tax could mean for your loan
Current as at 22 October 2026. This article describes a proposed law that has not passed Parliament. We will update it as the bills progress.
On 14 October 2026 the Government introduced bills for a minimum 30% tax on discretionary trusts, applying from the 2028-29 income year. It is not law yet, and the final rules may change.
How it affects your tax is a matter for your accountant. This article covers the part that sits with your broker: how lenders treat trust income when you apply for a loan, and why a change in your distributions or structure can change what you can borrow.
The proposal in brief
- Trustees of affected discretionary trusts would pay at least 30% tax on trust income, with individual beneficiaries receiving a non-refundable offset.
- Fixed trusts, super funds, special disability trusts, deceased estates and primary production income are among the exclusions.
- Wages paid to beneficiaries who work in the business are not affected.
- Roll-over relief for restructuring out of a discretionary trust is proposed from 1 July 2027 to 30 June 2030.
- The bills are the Treasury Laws Amendment (Tax Reform No. 3) Bill 2026 and the Income Tax Rates Amendment (Minimum Tax on Discretionary Trusts) Bill 2026. They have been referred to a Senate committee due to report on 13 November 2026, and the Government will need Senate support to pass them.
For how any of this applies to you, speak to your accountant.
Why it matters for borrowing
Lenders do not assess income the way the ATO does. They look for income they can verify and expect to continue. For many business owners and families, trust distributions are a large part of that income.
If the amount distributed, the amount you receive after tax, or the pattern of distributions changes from one year to the next, the income a lender is prepared to use can change with it. That can happen even when your overall position is just as strong as it was.
How lenders assess trust income today
- Most ask for the last two years of personal and trust tax returns. Some also want the latest financial statements and the trust deed.
- Many average the two years. Where income has dropped, many use the lower, more recent year instead.
- Some lenders only count distributions you have actually received. Others, where you control the trust, will consider the trust's net profit with certain add-backs.
- Income distributed to people or companies not on the loan application is often excluded.
- A small number of lenders will work from one year of returns in limited circumstances.
- Unpaid entitlements and loans between you and the trust are looked at closely.
Because policy varies this much, the same returns can produce very different borrowing figures from one lender to the next.
What we don't know yet
Lenders have not published how they will treat trust income under the proposed rules. Questions such as whether a distribution is assessed before or after tax paid at trust level, or how a year with a structural change is viewed, will be settled in credit policy over time, if the bills pass. Until then, no one can give you a definitive answer.
Two things are already clear. Lenders assess returns you have lodged, so any effect would show up gradually as new returns come through. And if a business or investments move into a new entity, some lenders want to see a trading history in that entity before they will use its income, while others are more flexible where the underlying business is unchanged.
Worth raising early
- If you plan to buy, refinance or restructure lending in the next few years, the returns a lender sees will be the ones you lodge in that period.
- Decisions about distributions or structure are tax decisions. Make them with your accountant, and let your broker know before anything is lodged or finalised so the lending side is considered at the same time.
- If a restructure is on the table, it can be easier to put lending in place, or review it, while you still have two consistent years of returns in your current structure.
- If you are applying now, nothing changes today. The proposal would not apply until the 2028-29 income year.
How we help
We work with business owners and families whose income comes through trusts, across more than 40 lenders. We look at how each lender would read your returns, compare borrowing under different policies, and work alongside your accountant so the tax and lending sides line up.
If trust income is part of your next application, book a time with us before you lodge. We are on Days Road in Grange and also meet by phone or video.
General information only. This is not tax advice and does not take into account your objectives, financial situation or needs. Speak to your accountant or registered tax adviser about how the proposed changes apply to you. Information on the proposed changes is current as at 22 October 2026 and may change. Fundfin Pty Ltd ABN 33 673 272 378, Credit Representative #527192 authorised under Australian Credit Licence #389328.
Frequently Asked Questions
Is the 30% minimum tax on trusts law yet?
No. The bills were introduced to Parliament on 14 October 2026 and referred to a Senate committee. They need to pass both houses, and the final rules may change.
Does the proposed trust tax change how much I can borrow?
It might, depending on how your distributions and after-tax income change and how each lender assesses them. Lenders have not yet set policy for the proposed rules.
How many years of tax returns do lenders need for trust income?
Most ask for two years of personal and trust returns. Some will consider one year in limited cases.
Should I change my trust distributions or structure before applying for a loan?
That is a tax decision for your accountant. Talk to us before anything is lodged or finalised so we can show how different lenders would read the result.
