22/05/2026
2026 Federal Budget Tax Update:
What Investors, Trusts, Workers and Small Businesses Need to Know
The 2026–27 Federal Budget has delivered some of the most significant proposed tax changes in recent years. For investors, property owners, family trusts and small businesses, the changes may affect how assets are held, how profits are distributed, and how future investment decisions are made.
At E Tax Australia Pty Ltd, we recommend clients review their current structures early, especially where they own investment properties, shares, businesses or assets through discretionary trusts.
1. CGT reform: indexation returns, 50% discount removed
One of the major Budget announcements is the proposed replacement of the current 50% Capital Gains Tax discount with an inflation-based indexation system from 1 July 2027. The Government has stated that the reform will apply to gains arising after 1 July 2027, with existing gains before that date generally preserving the current treatment.
This means investors may no longer automatically reduce a taxable capital gain by 50% after holding an asset for more than 12 months. Instead, the cost base may be adjusted for inflation, so tax is intended to apply only to the “real” capital gain.
Assets likely to be impacted include:
Property investments
Shares and managed funds
Business assets
Trust-held investments
Other CGT assets held by individuals, trusts and partnerships
However, the treatment of new residential builds may be different, with investors reportedly able to choose between the existing 50% discount and the new indexation method.
For clients planning to sell major assets after 1 July 2027, timing, valuations and record-keeping will become very important.
2. Negative gearing changes: transitional rules matter
The Budget also proposes changes to negative gearing, particularly for established residential properties. Reports indicate that negative gearing deductions for established properties acquired after Budget night may be limited, while newly built residential properties may continue to receive more favourable treatment.
This could affect investors who rely on rental losses to reduce taxable income from salary, business profits or other sources.
The key planning issues include:
Whether the property was acquired before or after the relevant Budget date
Whether the property is new or established
Whether rental losses can be offset against other income
Whether losses may instead be quarantined against future rental income or property gains
Investors should obtain advice before entering new contracts, refinancing, restructuring or selling property.
3. New 30% trust tax: major impact on family trusts
Another major announcement is the proposed introduction of a minimum 30% tax on discretionary trusts from 1 July 2028, with some exceptions. The Budget papers also indicate that rollover relief may be available for three years from 1 July 2027 to assist businesses and investors who wish to restructure.
This may significantly affect family trust arrangements traditionally used for:
Investment property ownership
Share portfolios
Business trading structures
Asset protection
Income distribution to family members
Corporate beneficiary arrangements
Family trusts have been widely used in Australia because they offer flexibility. However, if a minimum 30% tax applies, trustees will need to reconsider whether the current structure remains tax-effective.
4. Corporate beneficiaries: what is the future?
Many business and investment families use a corporate beneficiary to cap tax at the company tax rate and retain profits for future investment or working capital.
With the proposed minimum trust tax, these arrangements may need to be reviewed carefully. It is not yet clear how all rules will interact with existing unpaid present entitlement arrangements, Division 7A, bucket companies and trust distribution strategies.
Before making changes, clients should consider:
The purpose of the trust
Retained profits in corporate beneficiaries
Division 7A loan exposure
Asset protection needs
Succession planning
Stamp duty and CGT costs of restructuring
Whether the proposed rollover relief may apply
A restructure should not be done only for tax reasons. Commercial, legal and asset protection issues must also be considered.
5. Small business wins: welcome relief for business owners
The Budget also includes positive announcements for small businesses, including a proposed permanent $20,000 instant asset write-off from 1 July 2026.
This is good news for small businesses planning to purchase tools, equipment, technology, office assets, vehicles or business machinery.
Other proposed small business measures include:
Loss carry back relief
Start-up refund measures
Improved cash flow support
More certainty for business investment
Potential assistance for growing and innovative businesses
For small business owners, the key is to plan purchases carefully. The asset must generally be used or installed ready for use in the relevant income year, and eligibility rules must be checked before claiming.
6. Money in workers’ pockets: $250 offset and $1,000 standard deduction
The Budget also includes measures aimed at employees and individual taxpayers, including a proposed $250 offset and a $1,000 standard deduction.
The standard deduction may simplify tax returns for many workers who have small work-related expenses. However, taxpayers with higher deductible expenses should still keep proper records, because claiming actual deductions may produce a better outcome.
Examples of records employees should continue to keep include:
Work-related travel
Uniforms and protective clothing
Home office expenses
Phone and internet use
Professional subscriptions
Tools and equipment
Self-education expenses
What should clients do now?
These Budget announcements may not affect every taxpayer immediately, but they are important enough to start planning early.
We recommend clients review:
Investment property ownership structures
Family trust and corporate beneficiary arrangements
CGT exposure on shares, property and business assets
Timing of asset sales
Small business asset purchases
Record-keeping for employee deductions
Future tax planning before 1 July 2027 and 1 July 2028
Final word from E Tax Australia
The 2026 Federal Budget signals a major shift in Australia’s tax system. Investors, business owners and trustees should not wait until the new rules commence. Early planning may help reduce tax risk, avoid rushed restructuring and identify opportunities before the changes take effect.
E Tax Australia Pty Ltd can assist with tax planning, business structuring, trust reviews, CGT advice and small business tax strategies.
This article is general information only and should not be treated as personal tax advice. The Budget measures may be subject to legislation, final rules and ATO guidance.
