The Council of Small Business Organisations Australia (COSBOA) says a newly released consultation paper does little to ease concerns over the federal government's proposed minimum tax on discretionary trusts, warning the policy will still leave many small business owners facing a costly dilemma when it takes effect in 2028.
Around 350,000 Australian small businesses currently operate through discretionary trusts, with budget papers suggesting roughly 210,000 small family businesses could face a higher tax burden once the 30% minimum tax rate applies.
The window to act isn't limited to the 2028 start date, either — the government's proposed rollover relief, allowing eligible businesses to restructure without triggering capital gains tax, is only available from 1 July 2027 to 30 June 2030, adding a firmer planning deadline for affected clients.
COSBOA CEO Skye Cappuccio (pictured) said the paper confirmed the government's approach would put many owners in a difficult spot.
"Many small businesses will face an impossible choice between a higher tax burden or a costly restructure," Cappuccio said.
She added that rollover relief outlined in the paper "will not cover accounting and legal costs necessary to restructure or state-based stamp duty," and warned that once the Medicare levy is factored in, "family members paid through a trust will effectively pay a minimum tax rate of 32%."
Cappuccio argued the change could make small business ownership less attractive at a time when the economy needs more of it, saying it "sends a clear signal about how Australia values those prepared to take the financial and legal risks" of running a business.
The government has framed the reform differently, with Treasurer Jim Chalmers describing it as an effort to make the tax system fairer by aligning trust income more closely with the rates paid by wage earners, while helping fund broader income tax relief.
Treasury's consultation paper also notes that more than 90% of small businesses are expected to be unaffected.
The unease extends beyond COSBOA — NAB's Q2 2026 survey found federal policy was already the second-biggest drag on business confidence, behind only wage costs, as sentiment hit a multi-year low.
For brokers advising business-owner clients on structuring, cash flow or lending applications tied to trust income, the proposed changes — still subject to consultation before finalisation — may be worth flagging as a factor in longer-term financial planning conversations, particularly for clients weighing whether to restructure ahead of the 2028 start date.
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