The 2026-27 Federal Budget was handed down on 12 May 2026 and contained a number of significant proposed tax changes that will affect business owners, investors and property owners over the coming years.
We have to stress that these measures are currently proposals only and are not yet law. Draft legislation and consultation are still to come, and the final outcome may differ from the proposals made on Budget night.
Therefore there is no need to rush out and change anything right now as it is still early in the process with over a year before the first piece of finalised legislation kicks in.
Below is a summary of the key proposed measures and what they may mean in practice if they are legislated.
Discretionary Trusts
The Government has proposed a 30% minimum tax on discretionary trust income from 1 July 2028.
The proposal also targets the use of “company beneficiaries”, which may significantly reduce the effectiveness of current trust distribution strategies that have been in place for some clients for many years where the trust distributes income to a company. This is due to the proposal explicitly denying credits to the company for the 30% tax paid by the trust. The end result is that the company would essentially be double taxed on the same income!
It does appear that fixed trusts (eg unit trusts) are unaffected by the proposal.
The Government has advised there will be capital gains tax (CGT) rollover relief for restructures out of trusts, however this is only one consideration. Restructures may still trigger stamp duty and currently the WA Office of State Revenue has not announced any specific duty relief measures following the Budget.
In summary, these proposed changes will require many existing business and investment structures to be reconsidered and possibly restructured over the coming years once all details are finalised.
Capital Gains Tax (CGT) Changes
The current 50% CGT discount is proposed to be replaced with CPI indexation and also a 30% minimum tax will be put in place for capital gains from 1 July 2027.
Getting valuations of assets at 1 July 2027 will be very important, as the new CGT rules only apply to the part of the capital gain from this date onwards. In other words, the part of the capital gain up to 1 July 2027 will still be under the 50% discount rules currently in place.
Pre-CGT assets are now going to be captured under the new rules for any capital gains accruing from 1 July 2027 as mentioned above.
We note that companies may now become more attractive than trusts for long-term investments due to the death of the 50% CGT discount.
Negative Gearing
Negative gearing is the ability to deduct losses on rental properties against other income sources such as wages.
The Government has proposed that negative gearing for residential properties will now be limited to new builds only. Losses from established residential properties acquired after 12 May 2026 will only be deductible against residential income and residential capital gains.
Most importantly, established residential properties purchased prior to 7.30pm (AEST) on 12 May 2026 Budget night will be fully grandfathered and can continue to be negatively geared.
Commercial property investments are currently proposed to remain unaffected and can continued to be negatively geared.
Other Measures
Other measures announced included:
- Making the $20,000 instant asset write-off permanent
- Company loss carry-back measures being brought back in
- Gradual scaling back of the electric vehicle FBT exemptions
- A new $1,000 standard work-related deduction for individuals
Again we must stress that the above proposals are still not yet law and the final legislation may differ from the proposals. Once we have the finalised position, we can then start to advise you on any restructuring that may be required prior to any deadlines.
If you would like to discuss how any of these proposed changes may affect your business, investment structures or long-term planning, please contact our office.
