The Property Council of Australia has issued a stern warning regarding the federal government's proposed 30 per cent minimum tax on discretionary trusts, arguing the policy is unworkable and threatens to stifle housing supply. The tax, introduced in the 2026/27 federal budget, targets a structure commonly used by family-owned and small businesses, including many property developers. Industry leaders contend that the move adds significant red tape and costs to an already burdened sector, potentially discouraging new construction projects at a time when Australia faces a critical housing shortage.
Discretionary trusts have long been a standard vehicle for small and medium-sized businesses to manage financial uncertainty and protect assets. By mandating a 30 per cent minimum tax, the government aims to ensure consistent tax contributions from these entities. However, the Property Council argues that the policy fails to account for the practical realities of the property industry, where developers often operate on thin margins and rely on these structures to manage the high costs of labor, materials, and capital.
Beyond the direct tax impact, the proposal creates a secondary financial hurdle. Businesses seeking to restructure into companies to avoid the new tax may face substantial state-based stamp duties. With no clear plan for compensation or relief for these transition costs, many firms are effectively trapped between two layers of taxation. The Property Council has criticized the government’s three-week consultation period as insufficient, suggesting it does not allow enough time to address the complex, unintended consequences of the reform.
As the government pushes forward with its broader tax reform package, the debate centers on whether these measures will achieve their stated goal of fairness or simply exacerbate the existing supply crisis. With property organizations already contributing over $130 billion in annual taxes across all levels of government, the industry warns that further financial pressure will only serve to dampen investment confidence. The long-term impact on housing delivery remains a primary concern for developers and policymakers alike.