What is a bucket company?
A bucket company is a company set up to receive — to “bucket” — distributions from a discretionary trust. When a family’s trust earns more income than its members want to draw at their personal marginal rates, the surplus can be distributed to the company and taxed at the corporate rate instead, capping the tax on profits the family is retaining.
Reviewed by Justin Porrins, CFP® · SMSF Specialist Advisor™ · Last reviewed 31 August 2026
Why it’s used
The company tax rate — 30%, or 25% for an eligible base rate entity — is often well below a high personal marginal rate. Distributing surplus trust income to a bucket company lets the after-tax profit be retained and reinvested at that lower rate, rather than taxed at the top of an individual’s scale.
The catches
Money in the company is the company’s, not yours. Getting it out later — as a dividend, or through a Division 7A-compliant loan — has its own tax consequences. A bucket company only helps when income is genuinely being retained and the wider structure supports it; the order and ownership matter as much as the entity.
Rule changes worth watching
A bucket company exists to receive trust distributions, so the announced trust measures matter here: a 30% minimum tax on trust distributions has been announced from 1 July 2028 but is not yet law, and a three-year restructure rollover for discretionary trusts has been proposed alongside it. If they are legislated, the arithmetic that justifies a bucket company changes — worth reviewing before the start date rather than after. We update this page as measures pass.
Common questions
What tax rate does a bucket company pay?
Generally the company tax rate of 30%, or 25% if it qualifies as a base rate entity (ATO). The appeal is that this is often lower than the top personal marginal rate the income would otherwise be taxed at.
How do you get money out of a bucket company?
Usually as a franked dividend, or through a compliant loan under the Division 7A rules. Each route has tax consequences, which is why the exit is planned at the same time as the structure, not after.
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