The Discretionary Trust Rewrite: What Queensland Families Must Do in 2026

Discretionary family trusts have long been used by Queensland families to hold business assets, manage investments, protect wealth and distribute income among family members.

In 2026, however, the legal and tax environment surrounding these structures is changing significantly.

Queensland’s new Trusts Act 2025 commenced on 28 April 2026, replacing the Trusts Act 1973 and modernising the statutory rules governing trustees and beneficiaries. At the federal level, the Australian Government has also announced a proposed minimum 30 per cent tax rate for discretionary trusts from 1 July 2028, together with a temporary restructuring rollover commencing one year earlier.

These reforms do not mean that every family trust must immediately be wound up. They do mean that families should no longer assume that an older trust deed, an informal approach to record keeping or a familiar annual distribution strategy will continue to produce the same legal and tax outcomes.

1. The trust deed is no longer the only document that matters

The trust deed remains the foundation of a discretionary trust. It ordinarily identifies the trustee, appointor and beneficiaries and sets out the trustee’s powers to manage assets and distribute income and capital.

However, the Trusts Act 2025 now provides a modern statutory framework that applies to trusts created both before and after its commencement. The Act also states that it applies despite a contrary intention in a trust instrument, except where the legislation itself permits the deed to alter or exclude a particular provision.

This is an important distinction.

The new legislation does not completely displace the trust deed, nor does it make every statutory provision incapable of modification. A number of provisions expressly recognise that the trust instrument may indicate a contrary intention. Nevertheless, trustees can no longer safely assume that the deed alone contains all the rules governing the administration of the trust.

For Queensland families, the practical question is now:

How does the existing trust deed operate together with the Trusts Act 2025?

A deed drafted many years ago may contain terminology, administrative procedures or trustee protections that need to be reconsidered in light of the new Act. Even where an amendment is not required, trustees should understand which provisions of the deed remain effective and which statutory provisions now apply regardless of the deed’s wording.

2. Trustee duties are clearer and liability clauses have limits

The new Act places greater emphasis on proper trustee conduct and accountability.

The statutory framework identifies core standards requiring trustees to act honestly and in good faith, act in the interests of beneficiaries or in furtherance of the trust’s purposes, and exercise reasonable care, diligence and skill when administering the trust.

These duties are particularly relevant to family trusts where the trustee may be a parent, sibling or family-controlled company and administration has historically been informal.

A family relationship does not reduce the standard expected of a trustee.

Trustees should be able to demonstrate that they have:

• identified the assets and liabilities of the trust;
• maintained proper financial records;
• considered the interests of the relevant beneficiaries;
• made distribution decisions within the terms of the deed;
• managed conflicts of interest;
• documented significant decisions; and
• obtained professional advice where appropriate.

Many older deeds also contain clauses that seek to excuse or indemnify trustees for losses arising during the administration of the trust. Those clauses should not be treated as complete protection.

The new statutory regime confirms limits on the extent to which a trust deed can protect a trustee from responsibility for dishonest or grossly negligent conduct. It does not simply invalidate every trustee indemnity or exoneration clause, but broad clauses should be reviewed carefully rather than assumed to provide an absolute defence.

The Act also preserves the Court’s power to relieve a trustee from personal liability in appropriate circumstances where the trustee has acted honestly and reasonably. That relief is discretionary and should not be regarded as a substitute for careful administration.

3. Beneficiaries now have clearer rights to trust accounts

One of the most practically significant reforms concerns access to trust information.

Section 65 of the Trusts Act 2025 gives a beneficiary a statutory right to inspect the trust’s accounts and request copies. The trustee must ordinarily provide the copies within a reasonable period, although the beneficiary may be required to pay the reasonable cost of producing them. A trustee is not required to comply with an unreasonable request.

This is an important transparency measure, but it should not be overstated.

The Act does not necessarily give every person named within a broad discretionary beneficiary class an unlimited entitlement to every trust document, legal advice, trustee deliberation or confidential family communication. Questions may still arise about whether a person is a beneficiary for the purpose of the provision, the scope of the accounts to be produced and whether a particular request is unreasonable.

Nevertheless, trustees should proceed on the basis that the trust’s financial administration may be scrutinised.

That can become contentious where:

• adult children are members of the beneficiary class;
• family members are estranged;
• one branch of the family believes another has received preferential treatment;
• trust property is used by the trustee or a related party;
• distributions are recorded but not actually paid;
• substantial loans are owed by beneficiaries or associated entities; or
• the trustee has not maintained clear accounts.

Trust privacy has not disappeared, but informal or undocumented administration is now considerably more difficult to defend.

Trustees should ensure that the accounts accurately record distributions, loans, payments, asset use and related-party transactions. Minutes and resolutions should also be prepared contemporaneously rather than reconstructed after a dispute arises.

4. A proposed 30 per cent minimum tax could change distribution strategies

The Queensland reforms concern trust administration and trustee accountability. A separate and potentially more significant development is occurring at the federal tax level.

As part of the 2026–27 Federal Budget, the Australian Government announced its intention to introduce a minimum tax rate of 30 per cent for discretionary trusts from 1 July 2028, subject to exceptions. The Government has also announced three years of rollover relief from 1 July 2027 for small businesses and others wishing to restructure.

The proposal is directed at reducing the tax advantages that can arise when discretionary trust income is allocated to beneficiaries taxed at lower marginal rates.

Under existing arrangements, a trustee may, subject to the deed and tax law, distribute income among members of the beneficiary class. This has historically allowed some families to allocate income to adult children or other family members with lower taxable incomes.

The proposed minimum rate would not necessarily prohibit those distributions. However, it could prevent the relevant trust income from ultimately being taxed below 30 per cent.

Treasury has indicated that some exceptions will apply. Public materials released to date identify primary production income as exempt and indicate that other trust structures, including fixed trusts, will not be subject to the discretionary trust measure.

The final scope of the proposal will depend on the legislation ultimately introduced and enacted. Important matters still requiring close attention include:

• which trusts will be classified as discretionary trusts;
• how the minimum rate will interact with beneficiary marginal tax rates;
• the treatment of capital gains, franked distributions and foreign income;
• the position of deceased estates and testamentary trusts;
• integrity rules for distributions routed through companies or fixed trusts; and
• whether transitional or grandfathering rules will apply.

Families should therefore avoid making irreversible structural decisions solely from the Budget announcement. At the same time, the proposal is sufficiently significant that it should be incorporated into planning now.

5. The three-year rollover may create a restructuring opportunity

The Government has announced that rollover relief will be available for three years from 1 July 2027 to assist businesses and other taxpayers who wish to restructure before or during the introduction of the minimum trust tax.

Subject to the final legislation, the rollover may allow eligible assets to be moved from a discretionary trust into another structure without immediately crystallising some federal capital gains tax liabilities.

Possible alternative structures might include:

• a company;
• a fixed or unit trust;
• a combination of operating and asset-holding entities; or
• retention of the existing trust with a revised distribution and investment strategy.

However, a federal tax rollover does not automatically eliminate every cost of restructuring.

Moving assets may still raise issues involving:

• Queensland transfer duty;
• landholder duty;
• GST;
• existing finance arrangements;
• lender consent;
• employee entitlements;
• licences and registrations;
• contracts with customers and suppliers;
• asset-protection consequences;
• succession planning;
• Division 7A;
• trust losses;
• retained earnings; and
• control of the replacement entity.

Queensland transfer duty is particularly important where a trust holds land or interests in entities that hold land. A transaction that receives federal CGT rollover treatment may still trigger a state duty liability unless a separate exemption or concession applies.

The correct response is therefore not simply to transfer every trust asset into a company.

A company may offer a 25 or 30 per cent corporate tax rate, depending on its circumstances, but extracting profits from the company can produce additional tax consequences. A fixed trust may fall outside the announced discretionary trust measure but provide less flexibility and may create different control, asset-protection and duty issues.

The most appropriate structure will depend on the nature of the assets, the family’s objectives, the beneficiaries’ circumstances and the intended succession plan.

What Queensland trustees should do during 2026

Families do not need to wait until 2027 or 2028 to begin reviewing their position.

A sensible 2026 trust review should include:

Review the deed

Confirm when the deed was prepared, whether it has been validly amended and whether its trustee, appointor, beneficiary and succession provisions remain suitable.

Review control of the trust

Identify who controls the trustee and who holds the power to appoint and remove trustees. Consider what happens on death, incapacity, bankruptcy, relationship breakdown or disagreement within the family.

Review the trustee entity

Where individuals act as trustees, consider whether a corporate trustee would provide better continuity, administration and separation of trust assets.

Review accounts and record keeping

Ensure financial statements, tax returns, distribution resolutions, loan accounts and supporting records are complete and consistent.

Review related-party dealings

Document loans, private use of trust property, payments to family members and transactions involving associated entities.

Model the proposed tax changes

Ask the trust’s accountant or tax adviser to compare the current structure with possible outcomes under a 30 per cent minimum tax.

Identify assets that may be difficult to transfer

Land, goodwill, licences, intellectual property and financed assets may require substantial lead time and careful consideration.

Coordinate legal and tax advice

Changes to a trust deed, trustee, appointor or ownership structure can produce tax and duty consequences. Legal documents should not be amended independently of taxation advice.

The trust may remain useful—but it should not remain on autopilot

The Trusts Act 2025 does not abolish discretionary trusts. Nor does the Federal Government’s proposal necessarily mean that every Queensland family trust will become unsuitable.

Discretionary trusts may continue to provide important benefits, including asset separation, succession flexibility, management of family wealth and the ability to respond to changing family circumstances.

What has changed is the level of scrutiny.

Trustees now operate within a clearer statutory framework, beneficiaries have express rights concerning trust accounts, and the proposed federal tax reforms may materially reduce the benefit of distributing income to low-tax beneficiaries.

For Queensland families, 2026 should be treated as a review year.

The objective is not to restructure prematurely. It is to ensure that the trust deed, trustee arrangements, financial records and tax strategy remain appropriate before the transitional opportunities begin and before the proposed minimum tax takes effect.

This article provides general information only and does not constitute legal, taxation or financial advice. The announced federal discretionary trust tax measures remain subject to the passage and final terms of legislation. Advice should be obtained having regard to the particular trust deed, assets, beneficiaries and objectives of the family.