The rollover announced in the 2026–27 Federal Budget assists clients to move out of discretionary trusts ahead of the 30% minimum tax starting 1 July 2028. The rollover is a Commonwealth measure confined to income tax and capital gains tax consequences. It does not extend to State or Territory duty.

For advisers about to be asked whether a client can amend a trust deed to convert discretionary entitlements into fixed entitlements, that gap is the binding constraint on the answer.

Victoria: the working example

Section 7 of the Duties Act 2000 (Vic) imposes duty on any transaction resulting in a change in beneficial ownership of dutiable property in Victoria, other than an excluded transaction. The change in beneficial ownership regime has applied since 19 June 2019. "Change in beneficial ownership" is defined inclusively to include the creation, extinguishment or change in extent of beneficial ownership.

The Victorian State Revenue Office's published view is unambiguous: a dutiable transaction arises where a variation to a discretionary trust creates beneficial interests in persons in whom those interests did not previously exist, or changes the default takers.

The conversion of a discretionary trust to a fixed trust is the paradigm change-in-beneficial-ownership case. It is dutiable on the full unencumbered value of the trust's land.

Quantum and surcharges

Duty applies at general transfer rates on the unencumbered value of the dutiable property. On $5 million of Victorian residential property, transfer duty at general rates is approximately $283,000. Foreign purchaser additional duty of 8% applies where the trust is a foreign trust under section 3 — which, since 1 March 2020, includes any discretionary trust without an express foreign beneficiary exclusion. That's a further $400,000 on the same portfolio. Absentee owner land tax surcharge is a separate ongoing exposure.

Other jurisdictions

NSW, Tasmania, Queensland and the remaining States and Territories have provisions to materially similar effect. Drafting and revenue office practice varies but outcomes are broadly comparable. In every case, a conversion creating new beneficial interests over land within the jurisdiction is dutiable — federal rollover or not.

Practical implications

Advisers should not advise clients on the federal rollover without separately modelling the State duty position in each jurisdiction where the trust holds land. In many cases the duty cost will be the binding constraint, and will dictate that the discretionary trust either be retained (wearing the 30% trustee tax) or be restructured through asset-by-asset transfers eligible for specific State-based concessions — rather than by in-place conversion.

General information only, current at the date of publication. Not legal advice.