Are Family Trusts Still Worth It After the Proposed 2028 Tax Changes?
Here is the revised version with the policy timing clarified, the technical claims softened, and the client-conversion path strengthened.
For decades, family trusts have been one of the most common structures used by Australians to build wealth outside super.
They have traditionally offered flexibility over how income is distributed, access to capital gains tax concessions, potential asset-protection benefits and a way to manage wealth across generations.
For many business owners, professionals and investors, the family trust became the default choice.
But that default may now be worth reconsidering.
The Australian Government has announced proposed changes affecting discretionary trusts from 1 July 2028. As at July 2026, those changes are not yet law, and the final rules may differ.
If enacted as announced, they could reduce some of the tax advantages that made family trusts so attractive.
That raises a broader question for families building long-term wealth:
Is a family trust still the best structure, or could a private investment company now deserve a closer look?
I explore this question in this week’s episode, you can listen above.
What Are the Proposed Family Trust Tax Changes in 2028?
The government has proposed introducing a minimum tax rate of 30 per cent on the taxable income of discretionary trusts from 1 July 2028, subject to exceptions and the final legislation.
If enacted, this could reduce the benefit of distributing trust income to family members who are on lower personal tax rates.
The government has also proposed separate changes to capital gains tax from 1 July 2027.
Those proposed changes would replace the existing 50 per cent capital gains tax discount for individuals, trusts and partnerships with cost-base indexation and introduce a minimum tax rate of 30 per cent on real capital gains.
These proposals are not yet law and may change during the legislative process.
They do not mean family trusts would suddenly become unsuitable.
They do mean the difference between a trust and a company may no longer be as clear-cut as it once was.
Are Family Trusts Still Worth It?
Family trusts may still be worth using because tax is not their only potential benefit.
Depending on the circumstances, they may provide:
Flexibility over how income is distributed
Potential asset-protection benefits
Separation between beneficiaries and the underlying assets
Estate-planning flexibility
A structure for managing family wealth
The more useful question is whether the trust still suits what you want the money to do.
A trust may remain valuable when a family wants flexibility over who receives income and when.
A company may deserve consideration when the primary goal is to retain profits, reinvest them and build a larger investment pool over time.
The right structure depends on whether your priority is distributing wealth, accumulating wealth or balancing both.
Family Trust vs Company for Investing
A family trust is generally more flexible when distributing income.
A private investment company may be more useful when the aim is to retain profits and keep them invested.
A company can own shares, exchange traded funds, managed investments and other assets.
It can earn investment income, pay company tax and retain the remaining profits inside the company.
Those retained profits can then be reinvested.
For families who do not need to draw all of the income personally, this can be a significant advantage.
Rather than distributing the earnings each year, the company can continue building the investment portfolio.
This is the central reason private investment companies may deserve another look.
Their appeal is not simply the possibility of paying less tax in a particular year.
It is the ability to retain capital inside the structure and allow it to continue compounding.
Why Use a Company Instead of a Family Trust?
The main advantage of a company is its ability to retain profits.
A company does not need to distribute all of its earnings to family members each year.
It can leave after-tax profits inside the company and use that money to purchase further investments.
That gives compounding more capital to work with.
Over many years, the difference can become meaningful.
This may be particularly relevant for families who are building wealth they do not expect to spend in the near future.
A company may therefore suit families who want to create a long-term investment pool rather than maximise access to the income today.
Can a Company Own Shares and ETFs in Australia?
Yes. A private company can generally own shares, ETFs and other investments.
The company owns the investment portfolio, while the shareholders own shares in the company.
Investment income belongs to the company.
The company may retain the profits for future investment or pay dividends to shareholders.
This can make a company useful as a long-term investment vehicle, particularly when the family wants to keep building the portfolio rather than withdrawing the income each year.
However, the tax, legal and administrative consequences should be considered before establishing the structure or transferring existing investments into it.
Do Companies Get the 50% Capital Gains Tax Discount?
No. Companies do not receive the 50% capital gains tax discount.
This has traditionally been one of the main reasons investors preferred trusts over companies.
The comparison could change if the proposed capital gains tax reforms reduce the relative advantage available through trusts.
Companies would not suddenly become perfect.
Their major historical disadvantage may simply carry less weight than it once did.
The outcome will still depend on the type of investments held, how often assets are sold, the length of the investment period and how the family ultimately plans to access the money.
What Are the Disadvantages of Investing Through a Company?
The biggest challenge is getting the money out.
A company may be effective at retaining profits and accumulating wealth, but the money belongs to the company.
To transfer profits to family members, the company may need to pay dividends.
Those dividends may then form part of the recipient’s taxable income.
A company may also offer less flexibility than a discretionary trust when different family members have different income needs.
Dividend entitlements generally depend on the company’s share structure and the rights attached to each class of shares.
This means extracting money for one family member may require more planning and may not be as flexible as making a distribution from a discretionary trust.
This is the central trade-off:
A company may be an effective structure for accumulating wealth, but a less flexible structure when the family wants to access it.
Is a Company Better for Passing Wealth to Children?
A company may make it easier to keep an investment portfolio together when wealth passes to the next generation.
Imagine a company owns a substantial portfolio of shares and ETFs.
When the founder dies, the investments may remain inside the company.
Instead of transferring every underlying investment separately, ownership of the company shares may pass to the children.
The portfolio remains in place.
What changes is the ownership and control of the company.
This could help some families preserve an investment pool rather than dividing every underlying asset between beneficiaries.
A company can also potentially continue indefinitely.
The duration of a trust will depend on its deed and the law applying in the relevant state or territory. Some trusts may have a specified vesting date.
For families thinking about wealth across children, grandchildren and future generations, the expected life of the structure may be an important consideration.
However, succession is not automatically simple.
Wills, shareholder agreements, voting rights, control, tax consequences and family relationships all need to be considered carefully.
Should I Keep My Family Trust After the Proposed Tax Changes?
There is no automatic answer.
The proposed changes do not mean every family trust should be closed or replaced with a company.
For some families, the flexibility of a trust will remain extremely valuable.
For others, particularly those focused on retaining profits and building wealth over several generations, a private investment company may become more attractive.
It is also important to recognise that changing an existing structure can create its own consequences.
Moving investments from a trust to a company may trigger capital gains tax, duty, transaction costs and other legal or tax implications.
A structure that may be suitable for new investments is not automatically an appropriate replacement for an existing trust.
The bigger mistake would be assuming that a structure chosen years ago will always remain the best option.
The right question is not simply:
How can I pay less tax this year?
It is:
How do I want this wealth to be held, grown, accessed and eventually passed on?
That is the real decision behind the family trust versus company debate.
Start With the Purpose of the Structure
Before choosing between a family trust and a private investment company, consider:
Will the income be reinvested or regularly withdrawn?
How important is flexibility over distributions?
Who should control the assets now?
Who should control them in the future?
Will the wealth eventually pass to children or grandchildren?
How long is the intended investment timeframe?
What would be involved in changing the structure later?
How does the structure fit with retirement, estate planning and cash-flow needs?
A structure should not be assessed on its tax rate alone.
It also needs to work with your investment strategy, financial goals, access requirements and long-term plans for the wealth.
At Guidance Financial Services, we can help you assess how your investment structure fits with your wider financial plan, including your cash-flow needs, retirement strategy, investment goals and intended transfer of wealth.
Where specialist tax or legal advice is required, we can work alongside your accountant and lawyer.
Book an initial meeting to review whether the way you currently hold your investments still supports your long-term plans.
This article is for educational purposes only and does not take into account your individual circumstances. It discusses policy proposals announced as at July 2026. The proposed capital gains tax changes from 1 July 2027 and discretionary-trust changes from 1 July 2028 may change during the legislative process. If you would like tailored advice, we can help you work through the numbers properly.
