2026–27 Federal Budget – Key Tax & Business Measures
The Federal Budget handed down on 12 May 2026 introduces some of the most significant tax reforms in decades.
If it was supposed to make things simpler, they’ve missed the mark by a long way.
This newsletter summarises the key measures and what they mean for you.
1. Major Tax Reform – Capital Gains Tax Changes
One of the most significant announcements is the fundamental overhaul of the capital gains tax (CGT) regime.
What is changing?
From 1 July 2027:
The 50% CGT discount will be removed
It will be replaced with cost base indexation
A minimum 30% tax rate will apply to net capital gains
Applies to individuals, trusts and partnerships across most asset classes
These changes are designed to ensure only “real” gains (after inflation) are taxed, while also increasing the overall tax burden on investment gains.
Key points to note
Existing assets are protected via transitional rules
The 50% discount still applies to gains accrued before 1 July 2027
Pre-CGT assets no longer exempt from 1 July 2027
Main residences remain exempt
Investors in new residential properties have flexibility to choose between regimes (in some cases)
2. Negative Gearing Changes – Property Investors
The Government has significantly changed negative gearing rules as part of its housing policy.
From 1 July 2027:
Negative gearing will be limited to new residential properties
For established properties, losses can only be offset against other rental income or capital gains. Losses are carried forward not lost.
Important exemptions
Existing properties acquired before 12 May 2026 (Budget night) are fully grandfathered
New builds remain eligible for full negative gearing
Super funds and certain structures are excluded
This reform is intended to shift investment toward new housing supply and improve affordability.
3. New 30% Tax on Discretionary Trusts
From 1 July 2028, a new regime will apply:
Minimum tax of 30% at the trustee level
Beneficiaries (other than companies) receive non-refundable credits
Corporate beneficiaries will not receive credits
Exclusions
Fixed trusts
Super funds
Existing Testamentary trusts
Certain income types (e.g. primary production)
Planning opportunity
A 3-year restructure relief period (from 1 July 2027) will allow migration to alternative structures
This is a major structural change for wealth and business entities.
4. Individuals – Tax Relief & Simplification
New measures
$1,000 standard deduction for work-related expenses from 1 July 2026
No substantiation required up to this amount
$250 Working Australians Tax Offset (from 2028)
These measures aim to simplify compliance and provide modest cost-of-living relief.
Tax rate changes already legislated
16% tax rate reduces to:
15% from 1 July 2026
14% from 1 July 2027
Medicare levy thresholds increase
Indexation of low-income thresholds to reduce tax impact on lower-income earners
5. Small Business & Corporate Measures
Key measures
$20,000 instant asset write-off made permanent (turnover < $10m)
Loss carry-back reinstated
Ability to offset current losses against prior profits (up to 2 years)
Startup loss refundability (from 2028)
Monthly PAYG instalments with real-time calculation options
6. R&D and Innovation Incentives
From 1 July 2028, reforms will:
Increase R&D offsets by ~25%
Expand eligibility to larger businesses (up to $50m turnover)
Increase caps and simplify eligibility
This is a positive step for innovation-based businesses.
7. FBT Changes – Electric Vehicles
The current generous EV concessions will be phased down:
Up to 100% FBT exemption continues (transitional)
From 1 April 2029, replaced with 25% discount
This signals a gradual shift away from EV tax concessions.
What This Means for You
Property investors
Review current and future acquisition strategies
Organise for valuations as at 30 June 2027
Trust structures
Major review required before 1 July 2028
Consider restructure options during rollover relief period
Business owners
Take advantage of immediate deductions and loss carry-back
Review eligibility for R&D incentives
Individuals
Benefit from simplified deductions and modest tax cuts
Limited immediate cash flow impact from tax offset (starts 2028)
Next Steps
These reforms represent a significant shift in Australia’s tax landscape.
We recommend:
Reviewing your investment structures
Modelling CGT outcomes under new rules
Assessing trust restructuring options
Considering pre-30 June 2027 planning opportunities
If you would like tailored advice on how these changes affect your situation, please contact our office.