The Treasury has scrapped a proposal for major changes to bucket company taxes. Also known as corporate beneficiaries, bucket companies have typically been used within discretionary trusts to lower taxes on profits gained from assets held within the trust, making them a popular tax planning strategy.

Newly drafted legislation released this week has removed a proposed 30% minimum tax on distributions, which could have led to effective tax rates of up to 70%.

Under the initial proposal announced in the May Federal Budget, bucket companies were banned from tax credits for the 30% tax on distributions, resulting in a ‘double tax’ that would have pushed the tax rates up between 55% and 70%. While the original proposal was designed to stop people using bucket companies specifically to lower their taxes, the revisions are good news for small-scale ‘mum and dad’ investors, who now avoid what could have been a massive tax hike.

A newly introduced option called Electing into an Excluded Election Trust (EET) allows for investors to bypass the new tax for any trusts created up until 1 July 2028. The win for investors comes with a caveat in that beneficiaries are nominated once only, and there are penalties for breaches.

With so many tax changes currently under proposal, having clarity around your finances is more important than ever. If you’d like a confidential review of your tax planning or investment strategy, please contact us.

General Advice Warning:

The information in this blog is general in nature and does not take into account your personal objectives, financial situation or needs. You should consider whether the information is appropriate for you and seek professional advice before making any financial decisions.
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