And while many farming families initially feared the trust changes would destroy traditional farming structures, there is one critically important carve out.
Primary production income distributed through discretionary trusts currently appears excluded from the proposed 30% minimum trust tax.
That is extremely important. Because for many farming groups, discretionary trusts remain one of the most important tools for succession, asset protection, intergenerational ownership, and operational flexibility.
But while the trust income carve out provides some relief, the broader CGT and succession issues remain very real.
The Important Distinction Farming Families Need to Understand
There are really two separate tax issues being proposed, and they affect farming families very differently.
Issue 1: Trust Tax Changes
The Government proposes a 30% minimum tax on discretionary trust income from 1 July 2028. However, primary production income currently appears carved out. Many farming businesses may still distribute operating farming income under the existing trust framework. This is critically different from professional firms, investment groups, and non-primary production SMEs.
Issue 2: Removal of the 50% CGT Discount
From 1 July 2027, the general 50% CGT discount is proposed to be removed and replaced with an inflation indexation model, with a minimum effective 30% tax rate on gains. Farming land does NOT currently appear broadly exempt. Land, water entitlements, business assets, and farming structures may all ultimately be impacted.
Why Farming Families Are Particularly Exposed
Over the last 15 to 20 years, rural land values have increased dramatically. Many farming groups have become extremely asset rich, but often remain cash flow constrained. That creates a dangerous position.
Because many farming families assume they automatically qualify for Small Business CGT concessions. But in reality, rising land values, multiple entities, passive assets, and complex family ownership structures may push groups outside key concession thresholds.
Being asset rich does not automatically mean you qualify for the concessions that protect those assets on sale or transfer.
Why Succession Planning Now Becomes Critical
For many farming families, the biggest risk is not immediate tax. The biggest risk is an unplanned generational transition.
Historically, many farming groups relied on discretionary trusts, concessional CGT treatment, rollover assumptions, and pre-CGT land positions. The proposed changes place pressure on all of those areas simultaneously.
Common Farming Succession Problems
The Budget changes now force families to confront difficult questions including:
- Who actually owns the land?
- Is the land held personally, in trusts or companies?
- Are all farming assets active assets?
- Are there passive or leased assets creating problems?
- What happens if Mum and Dad retire?
- What happens if one child farms and another does not?
- How are estates equalised fairly?
- Can the next generation actually fund succession?
- What tax arises if land needs transferring?
- Are current structures still appropriate?
These are no longer "future problems." For many farming groups, they are now immediate strategic issues.
The Transition Rules Create a Major Planning Window
The current proposals indicate gains accrued up to 30 June 2027 remain under existing rules, while gains after 1 July 2027 move into the new regime. This makes 30 June 2027 a potentially critical valuation date for farming families.
Example: Transitional Rule
Assume: farmland purchased years ago for $2 million. Value at 30 June 2027 = $8 million. Later sold for $10 million.
| Gain Component | Tax Treatment |
|---|---|
| First $6m gain | Existing rules |
| Additional $2m gain | New rules |
Valuations before 30 June 2027 may become extremely important, particularly for succession and future transfer planning.
Small Business CGT Concessions Become Even More Important
Importantly, the Small Business CGT concessions currently remain. That includes the 15-year exemption, retirement exemption, active asset reduction, and rollover relief. For farming families who fully qualify, those concessions may still provide enormous protection.
But the danger is assuming qualification without proper testing. Many farming groups may face issues including:
- exceeding net asset thresholds;
- connected entity exposure;
- passive investment assets;
- leased land arrangements;
- or non-active assets inside structures.
Why "Do Nothing" Is Now Risky
Historically, many farming families delayed succession planning because there was no urgency, structures broadly worked, and tax outcomes remained relatively predictable. That environment may now be changing rapidly.
Because once laws change, values move, or a triggering event occurs, many planning opportunities may disappear.
What Farming Families Should Review Now
Every farming group should now review:
Ownership Structures
- Land ownership
- Trading entities
- Discretionary trusts
- Companies
- Water entitlements
- Equipment ownership
CGT Exposure
- Unrealised gains
- Pre-CGT assets
- Active asset eligibility
- Concession qualification
- Connected entities
Succession Planning
- Intergenerational transfers
- Estate equalisation
- Retirement timing
- Governance
- Ownership transition plans
Valuations
- Land valuations
- Water licence values
- Business goodwill
- Livestock and infrastructure values
The Most Important Point
The trust carve out for primary production income is critically important. It means discretionary trusts are still likely to remain central to farming structures. But that does NOT mean farming families are protected from the broader tax reforms.
The real issue now is succession, CGT exposure, structure suitability, and whether families properly prepare before the transition window closes.
The farms that successfully transition across generations will not necessarily be the biggest farms. They will be the farms that planned early.
Questions Every Farming Family Should Be Asking Now
- Who legally owns our land and operating assets?
- Do our assets qualify as active assets for CGT concession purposes?
- Does our group satisfy the Small Business CGT concession tests?
- Do we have passive or leased assets creating concession problems?
- Is our succession plan documented and stress-tested?
- Have we obtained formal valuations before 30 June 2027?
- What happens tax-wise if land needs transferring to the next generation?
- Are our trust and company structures still appropriate?
- Have we planned for estate equalisation fairly?
This article is general in nature and does not constitute financial, legal, or taxation advice. The proposals discussed are subject to legislative change and have not yet been passed into law. Please consult a qualified adviser before making any decisions regarding your farming structure, succession planning, or CGT position.
