Second Mortgage in the Trust Restructure Rollover Window
Second Mortgage Trust Restructure 2026 | Switchboard Finance
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Second Mortgage · Trust Restructure · Rollover Relief
Second Mortgage in the Trust Restructure Rollover Window
The 1 July 2028 trust tax clock is ticking, but the proposed measure is not yet law and the rollover window runs 1 July 2027 to 30 June 2030. For self-employed property owners whose accountant has flagged a restructure, a second mortgage is one way to fund the cost without touching the first loan.
Quick Answer
The proposed minimum tax on discretionary trusts is not yet law, but the restructure rollover window is approaching. A second mortgage can fund the cost of restructure inside that window where your registered tax agent has confirmed restructure is appropriate. The decision is your accountant's.
The 1 July 2028 trust tax clock and why finance is the smaller half of the question
The Federal Budget 2026-27, delivered on 12 May 2026, proposed a 30 per cent minimum tax on discretionary trusts from 1 July 2028. The Australian Taxation Office is explicit about the legislative status: "This measure is not yet law." If legislation passes as announced, trustees of affected discretionary trusts will pay tax at the trustee level on the taxable income of the trust, and non-corporate beneficiaries will receive non-refundable income tax credits for the tax already paid by the trustee.
Sitting alongside that headline is the part of the package that drives most of the planning work: a three-year restructure rollover providing "expanded relief from income tax consequences, including capital gains tax" (Treasury verbatim), available from 1 July 2027 to 30 June 2030. For self-employed property owners whose accountant has flagged a likely restructure, that window is the planning horizon. The cost of executing the restructure, accounting and legal fees, stamp duty where applicable, and any transactional tax owed on assets moving between entities, is the part this article is about. The decision itself is not.
Switchboard does not provide tax advice
Switchboard does not provide tax advice. Whether to restructure your discretionary trust is a decision for your registered tax agent and accountant, not for a finance broker. This article only covers how a second mortgage can fund the cost of restructure if your accountant has determined restructure is appropriate for your situation. From 1 January 2027, the Australian Small Business and Family Enterprise Ombudsman will also be available to help small businesses understand the options available to them and where they can get further advice.
Everything that follows assumes that decision has already been made by your tax adviser. Our role starts when the accountant says "we are restructuring, here is the projected cost, here is the timing", and the question becomes how to fund it without disturbing the existing first mortgage on a property you already own.
What lenders weigh first on a trust restructure file
The lender's first question is not about the trust. It is about the property used as security and the equity sitting behind the first mortgage. A second mortgage ranks behind the first registered mortgage on the same property, so the first mortgagee's written consent is typically the earliest step on the file. After that, the underwriter weighs the borrower's serviceability picture and the clarity of the accountant's narrative about the restructure: a clean file moves quickly, a tangled one stalls.
Passes the Lender Read
- BAS-validated trading income wrapper, illustrative, with a steady 12-month track record across the trust
- Accountant declaration on the rebuilt income picture, naming the destination entity
- First mortgagee consent letter received before the second mortgage application is lodged
- Restructure scope documented as a single accounting engagement with a defined cost estimate
- Property security clean on title with no caveats or other registered interests
- Exit strategy named in writing, typically refinance into a single first mortgage post-restructure
Stalls the Lender Read
- Trust distributions splintered across multiple beneficiaries without a clear accountant narrative
- Mixed personal and trust borrowings on the same security with no clean separation
- First mortgagee silence on consent, leaving the second mortgage in registration limbo
- Restructure scope described as "exploratory" rather than a costed engagement
- BAS gaps or recent income disruption with no explanatory letter from the accountant
- Property security with unresolved family disputes or pending legal interests
Once your tax agent has costed the restructure and the first mortgagee consent path is clear, check eligibility on the second mortgage so the funding lines up with the accountant's timing.
How a second mortgage funds the cost of restructure
A second mortgage draws working capital out of an existing property without refinancing the first loan. That matters when the first loan is already on a competitive rate, or when the borrower is mid-cycle on a fixed term and would pay break costs to disturb it. Pricing on a second mortgage is typically 10 to 16 per cent p.a., varies by lender and security. Funding is usually 8 to 21 days, indicative. The second mortgage LVR ceiling typically sits at 75 to 80 per cent combined with the first mortgage, varies by lender.
Restructure costs a second mortgage typically funds
- 1Legal advice and entity setup, including the new company or fixed trust deed.
- 2Accountant restructure fees covering asset transfer mapping and CGT calculations.
- 3Document execution and ASIC lodgement for the new entity, plus deed amendments where required.
- 4State-level transition costs that fall outside Commonwealth rollover relief, indicative and varies by state.
- 5Working capital cover during the restructure window where trading entity changeover affects receivables timing.
Where this commonly comes unstuck is timing. The restructure work runs on the accountant's calendar; the second mortgage funds on the lender's. The two timelines do not need to match to the day, but the borrower has to be holding the equity at the point the accountant invoices. That is why getting the first mortgagee consent process started early matters more than chasing the lowest headline rate.
How the franking-credit mechanism works under the proposed minimum tax
Treasury sets out a two-pronged franking-credit mechanism inside the proposed measure. The leading clause is verbatim: "To ensure the use of refundable franking credits does not undermine the minimum tax:" the two prongs that follow are "trustees that receive franked dividends will be required to use their franking credits to pay the minimum tax", and "corporate beneficiaries will not receive non-refundable credits for tax payable by the trustee, to avoid them converting these to refundable franking credits to avoid the minimum tax". All three phrases are reproduced verbatim from the Treasury factsheet on the minimum tax on discretionary trusts.
For self-employed property owners, the practical read is that franked income inside an affected trust will not produce the same after-tax outcome as it does today. Whether that changes the case for restructure is, again, a tax-agent decision. The financing question is simpler: if your accountant projects a meaningful annual after-tax difference and recommends restructuring inside the rollover window, the cost of that restructure has to be funded from somewhere.
How many discretionary trusts are expected to be affected
The proposed measure is targeted at the upper tail of discretionary trust income, not at all trusts. According to Treasury, "Around 350,000 active small businesses (less than 15 per cent of all active small businesses) operate through a discretionary trust structure". According to Treasury, "More than 95 per cent of individual taxfilers will not be affected by these changes in any given year". According to Treasury, "40 per cent (140,000) are not expected to pay additional tax or need to restructure in any given year". These figures sit in the Treasury factsheet linked above.
The carve-outs reinforce this. Entity-level exclusions cover fixed and widely held trusts, complying superannuation funds (SMSFs are complying superannuation funds for these purposes), special disability trusts, deceased estates and charitable trusts. Income-type carve-outs cover primary production income, certain income relating to vulnerable minors, amounts to which non-resident withholding tax applies, and "income from assets of testamentary trusts existing at announcement" (Treasury verbatim, the announcement being on 12 May 2026). The net effect is that many borrowers reading this will be told by their accountant that no restructure is required at all. The borrowers this article is for are the smaller cohort whose accountant has determined that restructure is the appropriate response inside the rollover window. This measure is not yet law.
The 1 July 2028 trust tax clock and the three-year rollover relief window from 1 July 2027 are the planning horizon. Whether to restructure is a registered tax agent decision, not a broker decision. If your accountant has determined restructure is appropriate, a second mortgage is one way to fund the cost without touching the existing first loan, pricing typically 10 to 16 per cent p.a. varies by lender, funding usually 8 to 21 days indicative, LVR ceiling typically 75 to 80 per cent combined varies by lender. The Treasury factsheet sets out the carve-outs, and Treasury's own figures put more than 95 per cent of individual taxfilers outside the measure in any given year.
Key takeaway: Decide the restructure with your tax agent first; sequence the second mortgage to fund the cost inside the 1 July 2027 to 30 June 2030 window.Frequently Asked Questions
No. The ATO is explicit on this: "This measure is not yet law." The Government announced the 30 per cent minimum tax on discretionary trusts on 12 May 2026 as part of the 2026 to 27 Federal Budget. It is proposed to commence from 1 July 2028. Switchboard does not provide tax advice; speak to your registered tax agent or accountant about whether and how the measure may affect you.
According to Treasury, the proposed rollover relief is available for three years from 1 July 2027. That gives the window 1 July 2027 to 30 June 2030 to restructure out of a discretionary trust into another entity such as a company or a fixed trust. The relief provides "expanded relief from income tax consequences, including capital gains tax" (Treasury verbatim). From 1 January 2027, the Australian Small Business and Family Enterprise Ombudsman will be available to help small businesses understand their options. This measure is not yet law. Switchboard does not provide tax advice; speak to your registered tax agent or accountant about whether restructuring is appropriate for your situation.
A second mortgage funds the cost of trust restructure by drawing equity from a property you already own, ranking behind the first mortgage and leaving the existing loan untouched. Restructure costs typically include accounting and legal fees, stamp duty where applicable, and any transactional tax owed on assets moving between entities. Funding is usually 8 to 21 days, indicative and varies by lender. See our second mortgage glossary entry for the structural detail, and the second mortgage rates guide for current pricing context.
The second mortgage LVR ceiling typically sits at 75 to 80 per cent combined with the first mortgage, varies by lender and the security profile. Specialist non-bank funders may stretch slightly further on strong files. The first mortgagee usually needs to give written consent before a second mortgage registers, which is one of the earliest steps brokers handle on a second mortgage file. For the interest deductibility question that often follows on tax-driven second mortgages, see second mortgage interest and EOFY deductibility timing.
The proposed minimum tax includes a set of carve-outs at both entity and income-type level. Treasury lists entity-level exclusions for fixed and widely held trusts, complying superannuation funds (SMSFs are complying superannuation funds for these purposes), special disability trusts, deceased estates and charitable trusts. Income-type carve-outs cover primary production income, certain income relating to vulnerable minors, amounts to which non-resident withholding tax applies, and "income from assets of testamentary trusts existing at announcement" (Treasury verbatim, the announcement being on 12 May 2026). This measure is not yet law; speak to your registered tax agent. For working capital while you plan, see our caveat loan page or the caveat loan glossary entry.
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