Last night’s 2026–27 Federal Budget gives accountants, business owners and investors plenty to think about. While the Budget included broader measures across areas such as defence, aged care, fuel security and cost-of-living relief, the tax announcements are likely to be the most relevant for many of our clients. In particular, the proposed changes to negative gearing, capital gains tax and discretionary trusts could have a significant impact over the next few years. We summarise some of the key proposed changes below.
Capital gains tax (CGT) changes – removal of the 50% CGT Discount
From 1 July 2027:
- the current 50% CGT discount method will be replaced with a cost base indexation method for assets held longer than 12 months for individuals, trusts and partnerships.
- A minimum 30% tax on net capital gains that accrue after 1 July 2027 will also apply, when the asset is sold.
Importantly:
- Grandfathering rules apply to preserve the current 50% discount for gains accrued before 1 July 2027.
- Pre-CGT assets will remain exempt for gains accrued before 1 July 2027, but capital gains accrued after that date will fall in line with the new method
- Investors in new residential property may choose between:
- the existing 50% discount method, or
- the indexation method and the 30% minimum tax.
- The new rules apply to all capital gains tax assets, including commercial property, shares and business assets.
Negative gearing changes
From 1 July 2027, losses from established residential properties acquired after Budget night will only be deductible against rental income or future capital gains from residential property. Excess losses will be carried forward.
The new rules will not apply to:
- existing properties acquired before 7:30pm AEST on 12 May 2026,
- eligible new builds,
- superannuation funds,
- widely held trusts,
- certain build-to-rent developments and private investors supporting government housing programs
Discretionary Trust (Family Trust) Taxation Changes
The Budget announced a proposed 30% tax rate on discretionary trust taxable income, expected to commence from 1 July 2028.
Under the proposal:
- trustees will pay a 30% tax on trust taxable income
- beneficiaries other than corporate beneficiaries will receive non-refundable tax credits
The measure will not apply to:
- fixed and widely-held trusts,
- complying superannuation funds,
- deceased estates,
- charitable trusts,
- special disability trusts,
- certain primary production and vulnerable beneficiary arrangements.
Expanded rollover relief will be available for three years from 1 July 2027 to assist businesses restructuring out of discretionary trusts.
Many private groups may need to reconsider long-term business and investment structures before the commencement date.
Personal Income Tax
The main items in the personal tax space include the following announcements:
- reaffirmed the previously legislated reduction in the lowest marginal tax rate from 16% to 15% from 1 July 2026 and a further reduction to 14% from 1 July 2027
- introduced a new $250 Working Australians Tax Offset(WATO) commencing in 2027–28.
- Eligible workers claiming less than $1,000 of work-related expenses will not need to itemise those expenses. Workers with higher claims can continue to claim actual expenses in the usual way.
- The age-based uplift of the Private Health Insurance Rebate will be removed from 1 April 2027
Permanent instant asset write-off
From 1 July 2026, the $20,000 instant asset write-off will be permanently extended for small businesses with aggregated turnover up to $10 million. Assets valued at $20,000 or more will continue to be placed into the small business simplified depreciation pool.
Company Loss Carry Back Returns
Companies with turnover below $1 billion will again be able to carry back revenue tax losses for up to two years from 1 July 2026.
For eligible companies, this provides:
- improved cash flow support,
- access to refunds of prior year tax paid where there are losses in current years, limited by the franking account balance
Electric Vehicle (EV) Fringe Benefits Tax (FBT) Concession Changes
The EV FBT concession will be wound back under transitional rules. Eligible electric cars will retain the FBT discount rate that applied when the arrangement commenced. Electric cars valued up to and including $75,000 and provided before 1 April 2029 will continue to be eligible for a 100% FBT discount. Electric cars valued above $75,000 and up to the fuel-efficient luxury car tax threshold, provided between 1 April 2027 and 1 April 2029, will be eligible for a 25% FBT discount. From 1 April 2029, a permanent 25% FBT discount will apply to eligible electric cars valued up to and including the fuel-efficient luxury car tax threshold.
Businesses and employees using novated lease arrangements may wish to review vehicle procurement timing before concession reductions apply.
As always, the devil will be in the detail. Some of these measures are still proposals and we expect more legislation, consultation and ATO guidance before they become law. For most people, the best move is not a rushed move. However, property investors, discretionary trust groups and business owners considering restructuring should start reviewing their position before the 1 July 2027 and 1 July 2028 start dates. If any of the above may affect you, please contact us before making any major decisions.
– Brad Sheaves
13.05.26
