CGT discount and indexation for trusts
The tax treatment of capital gains in a trust is more complex than for individual investors. Whether your trust can access the CGT discount — or indexation under proposed changes — depends on the type of trust, the type of beneficiary, and the final legislative design.
Current law: the 50% CGT discount via pass-through
Under current law, a discretionary trust that sells an asset held for more than 12 months generates a capital gain eligible for the 50% discount. However, the trust itself does not apply the discount — instead, the discount is passed through to the individual beneficiary who receives the distribution.
How it works:
This pass-through mechanism means individual beneficiaries get the discount; companies (which do not qualify for the discount) do not get it when they receive trust distributions.
What changes under proposed indexation
Under the proposed replacement of the CGT discount with indexation, the position for trusts is unclear as of mid-2026. Key questions include:
- Will trusts be able to index the cost base of property before distributing gains to beneficiaries?
- Will individual beneficiaries still apply indexation to their trust-sourced gains?
- How will the 30% minimum tax apply to trust distributions of capital gains?
Companies as beneficiaries
A company that receives a capital gain distribution from a trust does not qualify for the 50% CGT discount (companies are excluded). Under indexation, whether companies can index gains is also not yet confirmed. This is a consideration if your trust has a corporate trustee or beneficiary intended to receive capital gain distributions.
Summary
- Individuals receiving trust capital gain distributions: currently get 50% discount, future uncertain
- Companies receiving trust capital gain distributions: no discount, future uncertain
- Trust losses (including from negative gearing): quarantined, cannot be distributed