The Story

Paul Keating (Treasurer 1983–1991, Prime Minister 1991–1996) oversaw substantial modernisation of the Australian tax system, including the introduction of capital gains tax (1985), fringe benefits tax, and dividend imputation. His government's structural decisions established the foundations of modern Australian personal and corporate taxation. John Howard (Prime Minister 1996–2007) subsequently introduced the GST and, in 1999, halved the CGT rate on assets held over 12 months by individuals and trusts (the 50% CGT discount). Combined with existing negative gearing provisions and franking-credit rules, the Keating/Howard-era framework substantially shaped Australian wealth accumulation patterns.

Both leaders used the standard structures — discretionary trusts, corporate structures, superannuation — that Australian professionals and business owners had used for decades. Periodic media commentary during each period noted their use of standard planning tools, but no legal issues arose in either case.

Keating's Piggery and the ATO Question

The most publicly-scrutinised element of Paul Keating's personal financial affairs during and after his political career was his ownership interest in a New South Wales piggery business: Brown & Hatton Pty Ltd, operating near Scone in the Hunter Valley, held in partnership with Sydney businessman Achilles "Kerry" Constantinidis.

Keating held the interest through much of his time as Treasurer and into his Prime Ministership. In 1991, shortly before he became Prime Minister, Keating sold his interest in the piggery to an Indonesian business consortium (associated with businessman Danny Ho) for a reported price in the low millions of dollars. The transaction generated sustained media investigation and political controversy, partly because of the identity of the overseas purchasers, partly because of the size of the reported price relative to the operating business, and partly because of the timing so close to his ascent to the prime ministership.

The ATO's specific engagement with the piggery transactions was not publicly detailed (Australian tax authority proceedings are typically not made public), but various aspects of the arrangement - including the valuation methodology, the payment structure, and the source and disposition of proceeds - were subject to investigation, reporting requirements, and repeated parliamentary questions. Keating consistently maintained that all applicable tax obligations had been met, and no formal adverse ATO findings were publicly reported against him.

The matter escalated in the mid-1990s when Keating pursued Constantinidis in the New South Wales courts, alleging that his former partner had improperly diverted piggery profits during their partnership. Keating won that litigation and was awarded a substantial judgment (reported at approximately $2.4 million in the initial decision), which was upheld on appeal. The successful outcome vindicated Keating's characterisation of the arrangement but kept the piggery in the news for years after he had left politics. The enduring lesson from the piggery episode is not a specific tax finding (none was publicly reported against Keating) but the general point that senior political figures with meaningful private business interests attract intense scrutiny of transactions that ordinary business owners would conduct without notice.

The optics of a Treasurer and later Prime Minister holding a private piggery interest, selling it to overseas buyers, and litigating his former partner played out publicly across newspapers, parliamentary questions, and the courts for the better part of a decade. Cross-border and privately-structured business interests carry both tax and political risk when the beneficial owner is a public figure; a point that has proved durable across every jurisdiction and every political generation since.

The Albanese-Era Narrowing and Neutering of the Trust Framework

Since 2022, the framework established under the Keating and Howard reforms has faced systematic narrowing under the Albanese Labor government's tax-administration and legislative direction. Several changes together have materially reduced the practical utility of discretionary trust structures for Australian HNW clients.

1. 30% minimum tax on discretionary trusts (2026–27 Federal Budget, effective 1 July 2028). In the 2026–27 Federal Budget delivered on 12 May 2026, the Government announced a 30% minimum tax on discretionary trusts, to apply from 1 July 2028. The measure imposes the tax at the trustee level on covered trust income. Non-corporate beneficiaries who are presently entitled to a share of the trust's net income will be permitted a non-refundable income tax credit for the trustee-level tax attributable to their share. The measure has not yet been legislated at the time of writing but represents a decisive shift in the framework: the historical planning outcome of streaming income to lower-marginal-rate family beneficiaries to produce combined effective rates below 30% is directly bounded from below. Combined with the Section 100A enforcement direction above and the Division 7A tightening below, discretionary trust streaming as a family-tax-arbitrage mechanism is materially compressed. See ATO guidance: Tax reform – introducing a minimum tax on discretionary trusts. Alongside the minimum tax, the Government announced a time-limited three-year restructure rollover, available from 1 July 2027, which will facilitate the transfer of assets out of discretionary trusts into non-discretionary entities without triggering the CGT consequences such restructures would ordinarily generate. The window is therefore approximately 1 July 2027 to 30 June 2030 — with a one-year lead-in (1 July 2027 to 30 June 2028) in which restructures can be executed before the minimum tax itself takes effect.

2. Section 100A enforcement (Taxation Ruling TR 2022/4 and PCG 2022/2). The ATO's 2022 guidance on "reimbursement agreements" targets one of the discretionary trust framework's central mechanics — the ability to distribute income to adult beneficiaries (often adult children with lower marginal rates) where the beneficiary does not, in substance, receive the economic benefit. Historically these arrangements were widespread and largely tolerated. Under the current enforcement posture, distributions to adult children who then "gift" the money back to parents, or where the trustee retains actual control of the distributed funds, are increasingly treated as void for tax purposes — with the income instead taxed at 47% at the trustee level. This has substantially narrowed the family-income-streaming benefit that made discretionary trusts so effective.

3. Division 7A and unpaid present entitlements (UPEs) to corporate beneficiaries. ATO guidance treats UPEs owing to corporate beneficiaries as loans requiring Division 7A-compliant repayment terms. This has substantially restricted the "bucket company" strategy under which trust income was capped at the corporate tax rate and accumulated in the corporate beneficiary indefinitely. Without proper Division 7A-compliant loan arrangements, the funds attract deemed dividend treatment at high personal rates.

4. Division 296 additional superannuation tax. The proposed additional 15% tax on earnings attributable to superannuation balances above $3 million — effectively 30% on those earnings once fully in effect — substantially reduces the after-tax advantage of superannuation as an HNW wealth-accumulation vehicle. Combined with the trust narrowing above, the standard Australian HNW planning combination (family discretionary trust + bucket company + maximised superannuation) has lost material effectiveness.

5. Broader enforcement direction. The ATO's expanded HNW Compliance Program, Serious Financial Crime Taskforce activity, and enhanced data-matching capabilities have contributed to a materially higher enforcement environment than the Howard-era baseline. Multinational tax reforms, thin-capitalisation tightening, and proposed beneficial-ownership register requirements add further to the compliance load. The cumulative practical effect: the standard Australian HNW architecture that had operated as the default for decades no longer produces the outcomes it did five years ago. The structures remain legal; the tax outcomes they generate have compressed significantly.

How FTR Helps Australians Structure Offshore as a Legal Alternative

For Australian High Net Worth clients whose planning was built around the now-narrowed domestic trust framework, offshore restructuring offers legitimate paths to comparable (and often superior) tax outcomes, provided the personal residency question is addressed properly. The 2026–27 Budget's three-year restructure rollover (available 1 July 2027) also creates a specific, time-limited legislative window in which existing discretionary-trust wealth can be transferred out of the compressed Australian trust framework without triggering the standard CGT consequences of such a restructure.

For families weighing structural change, this window is likely to be the single most important planning opportunity of the decade.

The core insight is straightforward:

→ Australian discretionary trusts derived most of their benefit from being onshore, within a framework that has now been substantially compressed and that from 1 July 2028 will floor trust-level income at 30%.

→ As the Australian trust benefits narrow, the analysis shifts toward whether the beneficial owner should remain Australian tax resident at all, and, whether or not full relocation is on the table, whether the existing trust wealth should be restructured out of the framework using the 2027–2030 rollover window.

For Australians whose life and business circumstances allow relocation, FTR's frameworks include:

• Full emigration with proper Australian exit. Establishing genuine tax residency in a favourable jurisdiction — Panama, UAE, Cyprus (60-day route), Uruguay, Malaysia (MM2H), or comparable options — removes the Australian tax base entirely on post-exit income. Done properly, the effective ongoing tax rate falls dramatically from Australia's 47% top marginal to whatever the new jurisdiction imposes (0% in UAE, 0% on foreign source in Panama, and so on). Executing this properly requires coordinated handling of:

• CGT Event I1 — the deemed disposal of most CGT assets on ceasing Australian residency, which is often the largest single tax event of the client's life if not properly planned

• Superannuation transition — including consideration of Division 296 exposure and access rules for non-residents

• Trust residency — Australian discretionary trusts do not simply follow the founder offshore; residency of trustees and control matters

• Defensible severance of Australian residential ties under the "resides" test and the domicile-plus-permanent-place-of-abode test

• Family-branch offshore structuring for multi-generational Australian families. Where the primary earner remains Australian, adult children or family branches emigrating to lower-tax jurisdictions can legitimately hold parts of the family wealth in structures aligned with their own residencies. Coordinated Australian and destination-country planning ensures that Section 100A and CFC/foreign-trust attribution exposures are managed properly.

• Panama Private Interest Foundation for succession. Where multi-generational wealth transfer is the priority, Foundation structures can serve the succession and governance functions that Australian discretionary trusts historically provided, without the compressed Australian trust-tax framework applying.

• UAE Free Zone corporate structures for internationally-earning business owners. Australian business owners with substantial online, consulting, IP-based, or genuinely internationally-mobile revenue can restructure operating activity through UAE Free Zone entities — subject to genuine relocation and full CFC compliance.

• Cyprus non-dom plus 60-day residency for clients wanting EU access. For Australian HNW seeking a European base with meaningful tax efficiency, Cyprus's 17-year non-dom exemption on foreign dividends and interest combined with the 60-day residency route provides a genuinely competitive alternative.

The critical requirement across all offshore alternatives is that personal residency ties drive the ultimate tax effectiveness of the outcome. Offshore structures held by Australians who remain Australian tax residents attract CFC (Controlled Foreign Company) and foreign-trust attribution rules that pull income back into the Australian tax base for distributions/personal income.

Legitimate offshore structuring therefore requires that the beneficial owner either genuinely relocates or that the offshore structure holds assets falling outside Australian attribution rules (which needs specific architecture).

FTR's Australian-client work usually coordinates the departure planning (CGT Event I1, superannuation, trust residency, exit ties) with the destination-country setup (residency, banking, corporate structure, substance, ongoing compliance).

Australian tax planning executed entirely within Australia has narrowed materially over the past three years and will narrow further from 1 July 2028. Australian tax planning executed via proper cross-border relocation (or using the 2027–2030 restructure rollover to move existing trust wealth into more durable structures) remains one of the highest-value services FTR provides.

Related articles: Leaving Australia as an Online Business Owner (A14), Australian Digital Nomads (B15), Multi-Country Families (57).