For many Australian business owners, the structure they operate through has been an important part of their long-term business and asset strategy.

However, proposed changes to the taxation of discretionary trusts are putting these structures under the spotlight, with some businesses now considering whether their current ownership structure remains appropriate.

According to ABS data cited by the Australian Industry Group (Ai Group), around 494,000 Australian businesses — approximately 18% of registered businesses — operate through trusts. The majority are small businesses.

With proposed tax reforms on the horizon, business owners may need to consider whether restructuring could be beneficial — and importantly, what other consequences a restructure could create.

What are the proposed changes?

The Federal Government has proposed introducing a minimum 30% tax rate on discretionary trusts from 1 July 2028, subject to certain exceptions.

The proposed changes could have a significant impact on some businesses that currently use discretionary trusts as part of their ownership and tax structure.

As a result, some business owners may be considering whether they should restructure before the proposed changes take effect.

However, restructuring a business isn’t necessarily straightforward.

Rollover relief may help

To support businesses that decide to restructure, the Government has proposed federal rollover relief for three years from 1 July 2027.

Rollover relief can potentially allow eligible businesses to restructure without immediately triggering certain tax consequences.

However, Ai Group has raised concerns about the potential for state-level taxes and costs to make restructuring more expensive.

It has called for state governments to provide corresponding relief so that businesses aren’t unfairly exposed to additional costs simply because they are changing their ownership structure.

Restructuring involves more than tax

One of the biggest considerations for business owners is that changing a business structure isn’t just a tax decision.

A restructure could affect the ownership of:

• Property and other business assets
• Existing business contracts
• Company and trust arrangements
• Personal guarantees
• Existing lending facilities
• Security arrangements with lenders
• Future borrowing and funding requirements

For example, a business may own commercial property through its existing structure and have finance secured against that property. Changing the ownership structure could require the lender to review the existing loan arrangements.

Similarly, if the restructure creates a new entity, the business may need to consider whether existing finance can be transferred or whether new lending arrangements are required.

Don’t overlook the finance implications

For business owners considering restructuring, it is important to look at the bigger picture.

A change in structure could potentially affect how a lender assesses the business, including the entities responsible for existing debts, guarantees and security.

If additional funds are required as part of the restructure — for example, to acquire assets, refinance existing debt or fund business expansion — the proposed changes may also be an opportunity to review the business’s overall finance strategy.

This is where early discussions with your finance or mortgage broker can be useful.

A broker can help you understand how a proposed change may interact with existing lending arrangements and what documentation or lending considerations may need to be addressed.

Get advice before making changes

While the proposed reforms may encourage some business owners to reconsider their current structure, restructuring should not be undertaken based on tax considerations alone.

Before making any changes, business owners should speak with their accountant and legal adviser to understand the tax, legal and asset-ownership implications.

It is also worth considering the finance implications early, particularly where the business has existing loans, commercial property or plans to borrow in the future.

The key takeaway

The proposed trust tax reforms could prompt many Australian business owners to review their current structures.

But changing a structure can have consequences well beyond tax.

Before making any decisions, consider the tax, legal, asset ownership and finance implications together.

If restructuring could affect your existing loans or create a need for new business or property finance, speaking with a broker early can help you understand the potential lending considerations and plan ahead.

General information only. Proposed tax and legal changes may be subject to further amendments. You should obtain professional tax and legal advice based on your individual circumstances before making any decisions.