The 2026–27 Federal Budget announced a 30% minimum tax on discretionary trust income from 1 July 2028. "Fixed trusts" are excluded. For anyone operating through a unit trust, that exclusion looks reassuring.

It shouldn't. "Fixed trust" is a defined statutory concept under Schedule 2F of the Income Tax Assessment Act 1936 — it requires every beneficiary to hold a vested and indefeasible interest in both income and capital. Most off-the-shelf unit trust deeds fail that test comprehensively.

What defeats fixed trust status

The ATO sets out the position in PCG 2016/16. The following clauses, all standard in commercial unit trust deeds, typically defeat indefeasibility:

  • Power to issue further units (existing entitlements can be diluted)
  • Power to redeem units
  • Power to amend the deed
  • Power to reclassify units between classes
  • Trustee discretion over income versus capital characterisation
  • Default takers and gift-over provisions

The "issue further units" clause alone — present in virtually every commercial unit trust deed — is fatal. If the trustee can dilute existing unitholders at any time, those entitlements aren't fixed.

A trust with units in it is not the same as a "fixed trust" in the legal sense. Most Australian unit trusts will be inside the new 30% measure, not outside it.

What it costs, and what to do

If a unit trust is not a fixed trust under the legislated definition, the trustee becomes liable for 30% of the trust's taxable income before any distribution reaches a unitholder. On $300,000 of trust income, that is $90,000 a year, every year, from 1 July 2028. Unitholders on marginal rates below 30% lose the excess credit entirely.

A unit trust can be drafted to satisfy the fixed trust test — but the deed has to lock down every defeasance trigger, the redrafting itself can trigger state stamp duty on the unencumbered value of any land held, and the federal rollover window for restructures closes on 30 June 2030.

This is not a problem an off-the-shelf deed amendment kit can solve. Every trust needs its own diagnostic — what the deed currently allows, what amendments are required, what the state duty position looks like, and whether the unit trust is even the right vehicle to continue with.

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