Five Australian property and construction bodies released industry-commissioned polling on September 21 showing that more than 60% of small and medium developers expect the government’s proposed discretionary trust tax changes to affect the timing or viability of their projects, Elite Agent reported. Among the developers who expect an impact, 37% said one or more projects would be cancelled entirely. The polling was carried out by Accent Research for the Housing Industry Association (HIA), Master Builders Australia (MBA), the Property Council of Australia (PCA), the Real Estate Institute of Australia (REIA) and the Urban Development Institute of Australia (UDIA).
The delay figures come from a chart based on 95 developers who expected an impact over the next 12 months: 17% expected delays of six to 12 months, 13% expected delays of under six months and 7% expected delays of more than a year. Elite Agent noted that the results measure developers’ expectations rather than confirmed cancellations, and that the chart’s question refers more broadly to the Federal Budget changes, although the joint release attributes the findings to the trust reforms. The survey also canvassed almost 1,200 small and medium business owners: almost three in 10 use discretionary trusts to operate their business, hold assets and manage risk, and 77% of those trust users reported reduced confidence because of the proposed changes.
The industry groups argue that property businesses commonly use discretionary trusts to hold ownership interests and to separate development land and real estate assets from commercial risk. PCA Chief Executive Mike Zorbas said almost one in four property and development companies believe one or more of their projects will be cancelled, a wider group than the developers behind the 37% figure. HIA Managing Director Jocelyn Martin said new home sales have fallen for the last four months following the federal budget’s tax changes for investors, and REIA President Jacob Caine said policy that undermines smaller developers’ confidence has consequences well beyond their own businesses.
The government proposes a 30% minimum tax on the taxable income of discretionary trusts from July 1, 2028, with trustees responsible for paying it. Treasury says the aim is to bring the taxation of trust income closer to the rates paid by wage earners while keeping trusts available for legitimate purposes, and the government says fewer than 10% of Australia’s 2.7 million active small businesses would be affected in any given year. Draft legislation released on September 3 lets discretionary trusts elect to make fixed distributions to pre-nominated beneficiaries and be exempt from the minimum tax without restructuring. It also lists exclusions, including charitable and special disability trusts, superannuation funds, primary production income, deceased estates and genuine discretionary testamentary trusts, and offers expanded rollover relief for three years from July 1, 2027 for those who restructure. Consultation on the exposure draft closed on September 18, and the measure has not yet been legislated.
The trust tax is a separate measure from the capital gains tax (CGT) reform that takes effect on July 1, 2027. According to Baker McKenzie, the CGT changes, which replace the 50% CGT discount with cost base indexation and add a 30% minimum tax on capital gains, were carried in the Treasury Laws Amendment (Tax Reform No. 1) Bill, which passed the Senate on June 25, 2026, while the trust minimum tax was not incorporated in that bill. Corrs Chambers Westgarth’s analysis of the Bill as introduced said foreign and temporary residents retain their existing CGT treatment under that reform. Neither the developer polling nor the Elite Agent report addresses overseas buyers or investors.
References
Elite Agent – Developers warn of project cancellations over trust tax changes / Australian Treasury – Minimum tax on discretionary trusts: exposure draft legislation / Treasury Ministers – Exposure draft legislation: Minimum tax on discretionary trusts / Baker McKenzie – Australia: Major Changes to CGT and Negative Gearing / Corrs Chambers Westgarth – Capital gains tax and negative gearing amendments: key changes and implications
