2026-27 Federal Budget and What It Means for You

This year’s Federal Budget, handed down on 12 May 2026, includes some significant tax changes that are likely to affect you directly — so we’ve pulled together the key points in the tables attached.

The headline changes are around property investment and family trusts. If you own investment properties purchased before Budget night, you’re protected — the existing negative gearing rules are grandfathered for those properties. But any established residential property bought after 12 May 2026 will face new restrictions from 1 July 2027. Capital gains tax is also changing for everyone from that date, with the 50% discount replaced by a new indexation and minimum tax approach.

If you run your business through a discretionary trust, often referred to as a family trust, a new 30% minimum tax will be applied from 1 July 2028 — but there’s a three-year window to restructure if that makes sense for your situation.

On the upside, there are some genuine wins for small business: permanent $20,000 instant asset write-offs, loss carry-back for companies, and a new $1,000 standard work deduction.

No doubt you will have questions about how these proposed changes will impact on your situation – please call a member of our team to discuss or make a time for a meeting.  In any case, we will be in touch as more information comes to hand, so that we can plan any next steps that you should be considering.

Testamentary trusts have since been carved out of the minimum tax. Read more about the testamentary discretionary trust changes.

2026-27 - Key Changes for Property Investors

Area	Change	Who Is Affected	Start Date	Action Required	Key Exemptions
Negative Gearing — New Purchases	Losses on established residential properties purchased after 7:30pm AEST 12 May 2026 can only offset rental income or capital gains from residential properties — NOT other income (wages, business etc). Excess losses carry forward.	Individual investors, companies, partnerships, most trusts buying established property after announcement	1 July 2027	Review investment strategy before buying established property. Model cashflow impact of losing ability to offset losses against salary.	New builds fully exempt. Properties owned before announcement grandfathered. SMSFs & widely-held trusts exempt. Build-to-rent & govt housing programs exempt.
Negative Gearing — Existing Properties	Properties owned before 7:30pm AEST 12 May 2026 (incl. contracts exchanged but not settled) remain fully grandfathered — negative gearing against all income continues until sold.	All existing property investors with established properties	No change	No immediate action required. Consider timing of any sale in light of CGT changes below.	Full grandfathering for all pre-announcement properties.
Capital Gains Tax — New Regime	50% CGT discount REPLACED by: (1) Cost base indexation (CPI-adjusted cost base) and (2) 30% minimum tax on net capital gains accruing from 1 July 2027. Applies to all CGT assets — shares, property, pre-CGT assets.	Individuals, trusts and partnerships selling assets after 1 July 2027. Taxpayers already paying ≥30% on gains are unaffected.	1 July 2027	Review planned asset sales. Consider realising gains before 1 July 2027 where 50% discount is more favourable. Obtain valuations of assets at 1 July 2027.	Gains to 1 July 2027 still get 50% discount. Age/Disability pension & JobSeeker recipients exempt from 30% minimum tax in the year of sale. Gains already taxed at ≥30% unaffected.
CGT — New Residential Builds	Investors in new residential properties can CHOOSE between the old 50% discount OR the new cost base indexation + 30% minimum tax — whichever is more beneficial.	Investors in newly built residential property	1 July 2027	Model both methods at time of sale to select the better outcome.	Choice available only for new residential builds — not established properties or other asset classes.
Foreign Buyer Ban (Housing Supply)	Ban on foreign persons purchasing established residential dwellings extended by 2 years and 3 months.	Foreign investors (minimal direct impact on Australian resident investors — may support local demand)	To 30 Jun 2029	No action required for Australian resident investors.	Permanent residents and NZ citizens remain exempt.

Disclaimer: This summary is prepared for general information purposes only and does not constitute tax advice. Individual circumstances vary — please consult your adviser before making investment decisions.

2026-27 - Key Changes for Small Business Owners

Area	Change	Who Is Affected	Start Date	Action Required	Key Exemptions
Discretionary Trust Minimum Tax	Trustees must pay 30% minimum tax on all taxable income of discretionary trusts, regardless of how income is distributed to beneficiaries. Non-corporate beneficiaries receive non-refundable credits for tax paid by trustee.	All discretionary (family) trusts — over 1 million trusts in Australia	1 July 2028	Review trust structure when changes legislated. Consider whether to restructure into a company or fixed trust before 1 July 2028. Roll-over relief available for 3 years from 1 July 2027.	Fixed & widely-held trusts exempt. Super funds & special disability trusts exempt. Deceased estates & charitable trusts exempt. Primary production income excluded. Income of vulnerable minors excluded.
Trust Restructure Roll-over Relief	Expanded roll-over relief allows businesses to restructure from a discretionary trust into a company or fixed trust without triggering a CGT event.	Discretionary trust operators wanting to restructure	Jul 2027 – Jun 2030	Engage adviser early — 3-year window to restructure. Model tax outcomes of company vs fixed trust vs staying in discretionary trust.	Must restructure into a company or fixed trust to access relief.
Instant Asset Write-Off — $20,000	The $20,000 instant asset write-off threshold for small businesses (turnover <$10m) is PERMANENTLY extended. Assets costing $20,000+ go into the simplified depreciation pool.	Small businesses with annual turnover under $10 million	Permanent from 1 Jul 2026	Plan asset purchases to maximise write-offs. Each individual asset must cost less than $20,000.	Turnover threshold: under $10 million. Each asset must be individually under $20,000.
Loss Carry-Back (Companies)	Companies with global turnover <$1 billion can carry back revenue losses and offset against tax paid in the previous two years, subject to franking account balance.	Companies with annual global turnover under $1 billion making losses	1 July 2026	Identify current-year losses and review prior-year tax paid. Ensure franking account is maintained to maximise carry-back refund.	Revenue losses only (not capital losses). Limited to franking account balance. Turnover must be <$1 billion.
Loss Refundability (Start-ups)	Small start-up companies (turnover <$10m) in their first two years can convert tax losses into a refundable tax offset — limited to FBT and withholding tax on wages paid to Australian employees.	Start-up companies with turnover under $10 million in their first 2 years of operation	1 July 2028	Ensure start-up company structure is in place before losses are incurred. Offset is limited to FBT and PAYG withholding amounts.	Turnover must be <$10 million. Only applies in first 2 years. Offset limited to FBT + withholding tax on Aust. employee wages.
$1,000 Instant Work Deduction	All Australian resident workers (including sole traders) automatically receive a $1,000 deduction for work-related expenses without needing to keep receipts or itemise claims. Those with >$1,000 in expenses can still claim actual amounts.	All workers including sole traders earning assessable labour income	2026–27 income year	Sole traders should assess whether their actual deductions exceed $1,000. If not, the standard deduction applies automatically — no records needed.	Charitable donations, union fees and professional memberships can still be claimed on top of this deduction.
$250 Working Australians Tax Offset	A permanent $250 tax offset (WATO) for all Australian workers — including sole traders — increases the effective tax-free threshold to ~$19,985 (or ~$24,985 with LITO).	All workers with assessable labour income, including sole traders. ~13 million beneficiaries.	1 July 2027	Applied automatically on tax return lodgement — no action required.	Available to sole traders as well as salary/wage earners.
Personal Income Tax Rate Cut	The 16% tax rate on income $18,201–$45,000 drops to 15% from 1 July 2026, then to 14% from 1 July 2027 (already legislated).	All individuals including business owners and sole traders in this income bracket	15% Jul 2026 / 14% Jul 2027	Already legislated — apply when lodging 2026–27 return.	Already law — no action required.
PAYG Instalments — Monthly Option	Small and medium businesses can opt in to reporting and paying PAYG instalments monthly (instead of quarterly), using ATO-approved calculations embedded in accounting software.	Small and medium businesses wanting better cash-flow management	1 July 2027	Consider whether monthly PAYG better suits your cash flow. Useful for businesses with volatile income. Non-compliant businesses may be required to pay monthly.	Opt-in (voluntary) for most businesses. Compulsory for businesses with poor compliance history.
Payday Super	Employers must pay superannuation guarantee at the same time as salary and wages (currently quarterly). Late or missed payments attract updated penalties.	All employers with staff	1 July 2026	Update payroll systems NOW to pay super with every pay run. Review cash flow to fund super payments more frequently.	New penalties apply for late or missed payments from 1 July 2026.
Electric Vehicle FBT Discount	Full FBT exemption for EVs ≤$75,000 continues until 1 April 2029. From 1 April 2029, a permanent 25% FBT discount applies to all EVs below the fuel-efficient luxury car tax threshold.	Employers providing EVs as a fringe benefit to employees	25% from 1 Apr 2029	Lock in EV novated leases or company cars before 1 April 2029 to secure 100% exemption on sub-$75k EVs.	EVs above luxury car tax threshold not eligible. PHEVs excluded since 1 April 2025.

Disclaimer: This summary is prepared for general information purposes only and does not constitute tax advice. Individual circumstances vary — please consult your adviser before making investment decisions.