Restructuring out of a discretionary trust: the rollover window from 1 July 2027

Alongside the proposed 30 per cent minimum tax on discretionary trusts, the Government has announced expanded rollover relief for trusts that would rather restructure than pay it. The relief is available for three years from 1 July 2027 and covers restructures out of a discretionary trust into other arrangements, such as a company or a fixed trust. It is in Schedule 2 of the Treasury Laws Amendment (Tax Reform No. 3) Bill 2026, introduced on 14 October 2026, which is not yet law.

The window opens a full year before the minimum tax starts on 1 July 2028 and stays open for two years after it. That gives family groups time to see the final law and take advice before moving anything, which matters because a restructure is far harder to reverse than an election.

Under the bill as introduced, the relief applies to transfers made between 1 July 2027 and 30 June 2030. The trustee must transfer all of the trust’s assets, apart from some excluded assets, to a single new owner, which can be a company, a fixed trust, a partnership or an individual, and that new owner must not have material discretionary features for four years. A trust that uses the rollover cannot also make the fixed distribution election. Some details are left to a ministerial determination that has not yet been made, and the bill can still change. One point is clear regardless of what the federal law ends up saying. Rollover relief under the income tax law deals with federal tax. Stamp duty on transferring assets, particularly land, is set by each state and territory, and federal relief does not remove it. Any restructure involving property needs the duty position checked in each state where the assets sit.

If the destination is a fixed trust, the deed will carry most of the weight. The package includes a new definition of a fixed trust, intended to cover commercial trusts without material discretionary elements. Many family unit trust deeds give the trustee discretions that cut against fixed status, such as power to issue special income units, to redeem units at a price the trustee sets, or to stream income to one class. A unit trust that does not meet the final definition may be treated as discretionary for the minimum tax, which would defeat the purpose of the restructure. The rights attaching to each class of units should be settled with the final definition in front of the adviser.

If the destination is a company, the usual company registration questions apply, with a few that are particular to restructures. Every director needs a director ID before appointment. The share structure needs to reflect who is meant to own what after the restructure. Share classes that let the directors choose which shareholders receive dividends or capital may put the rollover at risk, so the class rights should be settled with the adviser against the final conditions. And where a new company is to act as trustee of a fixed trust rather than as the operating vehicle, it is usually kept as a shell holding no assets of its own, which is a separate entity with its own ASIC obligations.

The practical sequence is to take advice first, settle the target structure second, and only then prepare documents. Registering a company or settling a unit trust before the adviser has confirmed the shape of the restructure tends to produce entities that have to be fixed later.

CoSec Partners registers companies from $834 and prepares unit trust deeds for $264 including GST, with deeds individually drafted and signed off by Key Legal, an independent external law firm. We can work from the adviser’s structure diagram and deliver the entities together. We do not advise on whether a restructure is the right choice or on its tax or duty consequences.