From July 1 2028 they lose a key strategy for shaving tens of thousands of dollars from annual tax bills by diverting earnings to family members in lower tax brackets. Many partners see the change as painful but manageable, a final squeeze after years of escalating scrutiny from the Australian Taxation Office.
Under current arrangements, equity partners commonly route partnership income through family trusts, then distribute slices to spouses and adult children to exploit progressive tax rates. A partner earning $1 million might currently take only about half personally, then direct $150,000 to a spouse and $50,000 to each adult child through the trust.
Those family members pay tax at their own, usually lower marginal rates while the partner avoids being taxed on the full amount at the top bracket. The new 30% floor effectively neutralises much of this arbitrage for discretionary trust distributions.
Pragmatic partners accept that the arbitrage has been under pressure for years, as the Australian Taxation Office tightens rules around trust distributions and income splitting. The latest measure caps the benefit they can derive from complex trust structures, especially for those earning $1 million to $2 million a year.
Industry insiders estimate that some partners currently save around $50,000 in tax annually through trust-based splitting, a meaningful though not business-breaking sum. After 2028, much of that benefit disappears, reshaping how professional services firms and their equity partners think about remuneration structures and family tax planning.
