13/05/2026
ππππ-ππ ππππππ β πππ πππππππ
Last night the Federal Government delivered the 2026-27 Budget, and it included major changes for investors, small business owners and taxpayers generally.
The budget is clearly trying to increase the tax burden on accumulated wealth and investments, and reduce tax advantages enjoyed by investors, as well as discretionary trusts used by many small business owners.
The budget is intended to improve first home-buyer access and reduce the burden on the younger generation, and while the extra burden placed on the older generation is apparent, itβs more difficult to identify any tangible benefits to those itβs supposedly designed to assist.
The key changes announced are as follows:
ππππππππ πππππππ
Negative gearing (deduction of rental property losses) will be limited to new residential builds only from 1 July 2027. The change will however apply to properties purchased after budget night (12 May 2026).
Existing properties owned before 7.30pm on 12 May 2026 are exempt from the changes to negative gearing.
Existing investors should be largely unaffected, and new investors will be pushed toward new builds rather than established housing.
Potentially good for first-home buyers looking to buy an established property, possibly not so much for those looking to buy a new property.
πππππππ πππππ πππ
Currently, investors receive a 50% discount on Capital Gains for assets held for more than 12 months.
Last nightβs budget effectively abolishes the CGT discount. From 1 July 2027, the CGT discount will be replaced with an indexed inflation model, designed to tax the real gain after the cost base is adjusted for inflation.
This is similar to the CGT calculation method used prior to 1999.
Existing assets will still enjoy the CGT discount up to 1 July 2027, with any gain after that date calculated using the new method.
Assets acquired prior to September 1985, previously fully exempt from CGT, will now be subject to CGT on and gains accrued from 1 July 2027.
Assets such as property will need to be valued at 30 June 2027 to allow the different CGT calculation methods to be applied.
Perhaps more controversially, a minimum 30% tax will apply to any Capital Gains. This means that for example, a retiree with no income who sells an investment property would pay tax on the taxable gain at a flat 30%, ignoring their unused tax-free threshold and lower marginal tax rates.
The proposed changes to both negative gearing and Capital Gains Tax will not apply to assets held in Self-Managed Superannuation Funds, potentially increasing the attractiveness of using a SMSF as an investment vehicle.
ππππππππ ππ
πππππππππππππ ππππππ
Many small businesses operate through a Discretionary (Family) Trust structure, allowing them to distribute income to family members on lower incomes, meaning they can take advantage of that beneficiaryβs tax-free threshold and lower marginal tax rates.
From 1 July 2028, discretionary trusts will face a minimum tax of 30%. This means that trust income can no longer be streamed to family members on lower marginal rates.
Under the new regime, the Trustee of the Trust will pay tax of 30% on all distributions. Any amounts then distributed to a beneficiary will include a credit for tax paid by the Trustee. The tax credits will be non-refundable, meaning that a distribution to a beneficiary with final taxable income below $45k may see some of that credit not utilised, and not refunded.
The changes also eliminate the use of corporate βbucket companiesβ that are often used to take advantage of the 25% corporate tax rate. Tax credits for tax paid by a Trustee will not flow to corporate beneficiaries, eliminating the benefit currently enjoyed by bucket companies.
πππ ππ
π
ππππ πππ ππππππππππ
The Budget included a new annual tax offset of $250 for workers commencing from around 2027-28 - surely coincidental that it will take effect close to the next scheduled election!
The Government also reiterated their plan of introducing a simplified $1,000 work-related expenses deduction for taxpayers, which was announced in the 2025-26 Budget.
As with any Budget, any announced changes are subject to Parliamentary approval. However, given the Governmentβs large majority, any approvals appear a formality.
Given the key changes weβve covered donβt take effect until 1 July 2027 or later, we urge investors and small business owners not to panic and to seek appropriate advice from their accountant or financial advisor.
Please contact the team at BCV if you have any queries regarding these changes.
