Following the recently announced Federal Budget, please see our summary of the relevant tax changes and what they may mean for you below.
Whilst much of the media commentary has focused on negative gearing and capital gains tax, the more significant impact from a planning perspective is the proposed structural reform to trusts, capital taxation and investment income.
The Treasurer described this as one of the most significant tax transformations in decades, and for many business owners and investors, it represents a substantial shift in how wealth, structures and investment strategies are taxed.
Key proposed changes (not immediate)
Importantly, none of the major measures apply immediately. Most commence from:
- 1 July 2027 (CGT + negative gearing changes).
- 1 July 2028 (trust reforms).
Given the timing and expected political debate, these measures are not yet law and may change.
1. Capital Gains Tax – fundamental rewrite
From 1 July 2027:
- The 50% CGT discount will be replaced with indexation.
- A minimum 30% tax will apply to realised capital gains.
- Pre-CGT assets (pre-1985) will become taxable on future gains.
What this means:
- The current advantage of holding assets in personal names/trusts is significantly reduced.
- There is a potential shift toward holding appreciating assets in companies.
- Transitional rules mean gains up to 1 July 2027 remain under current rules.
2. Discretionary trusts – major reform
From 1 July 2028:
- A minimum 30% tax applies to trust income.
- This is paid by the trustee regardless of who receives the income.
- Beneficiaries receive non‑refundable credits (except companies).
- Corporate beneficiaries do not receive a credit.
What this means?
- Traditional income splitting benefits are significantly reduced.
- Bucket company strategies largely lose effectiveness.
- Some existing structures may become less tax efficient than alternatives.
The Government will also allow a 3‑year restructuring window from 1 July 2027 to move out of discretionary trusts.
3. Negative gearing – restricted to new builds
From 1 July 2027:
- Negative gearing will generally be limited to newly constructed properties.
- Existing properties held at Budget night are grandfathered.
- Losses on new acquisitions of established property will be quarantined.
What this means:
- A move toward new residential development investment.
- A two-tier system depending on when property was acquired.
- Reduced ability to offset rental losses against salary or business income.
4. Business measures – some positives
The Budget does include several supportive business measures:
- Loss carry-back reintroduced (cash refunds of prior tax paid).
- $20,000 instant asset write‑off made permanent.
- Refundability of losses for eligible start‑ups.
- Changes to the R&D incentive (more targeted, less generous in some areas).
What this means:
- Improved cashflow support during downturns.
- Greater certainty around capital expenditure decisions.
5. Personal tax measures (relatively modest)
- Reduction in lower tax bracket rates (already legislated).
- New $250 Working Australians Tax Offset from 2027.
- $1,000 instant deduction for work expenses.
What this means:
- Some relief for individuals, but;
- Overall limited change to the tax burden on salary earners.
Our initial view
At a high level, this Budget represents a shift toward taxing capital and structures more heavily, with a focus on:
- Reducing the benefits of income splitting and investment strategies.
- Bringing effective tax rates on capital closer to those on labour income.
- Reshaping how family groups and private structures are used.
However:
- The measures are not yet legislated.
- There is already political opposition, and outcomes may change.
- Detailed drafting will be critical (particularly for trust credits, CGT calculations and valuation rules).
What you should do now
At this stage, we recommend a “monitor and prepare” approach:
You may want to consider:
- Reviewing trust structures and distribution strategies.
- Assessing long‑term ownership of key assets.
- Identifying opportunities before 1 July 2027 (if reforms proceed).
- Reviewing succession and intergenerational planning.
We will continue to monitor developments and provide more specific guidance once legislation is released.
If you would like to discuss how these proposed changes may impact your specific circumstances, please feel free to contact us.