The 2026/2027 Federal Budget introduces some of the most significant tax reforms in recent years, particularly impacting investment strategies, property, and wealth structures.
Changes to capital gains tax, negative gearing and the taxing of discretionary trusts have been a key to this budget, and likely to negatively impact many of our clients. At the same time, they reinforce the importance of structured advice and long-term planning, particularly within superannuation as it continues to be the most effective investment vehicle, and these tax reforms reaffirm this.
Below is a summary of the key changes most relevant to our clients, along with what they mean in practice.
key takeaways
- The tax treatment of investments outside superannuation is becoming less favourable.
- Residential property investment strategies will shift, particularly for existing residential assets.
- Discretionary trusts will become less flexible from a tax perspective over time.
- There are still planning opportunities, but they will require a more deliberate approach.
- Pre-CGT free assets will no longer be tax free in the future.
- Minimum 30% CGT tax rate will impact retirees.
Investment and residential property changes
Capital Gains Tax (CGT)
WHAT’S CHANGING
WHAT YOU NEED TO KNOW
- Transitional rules will apply. Gains accrued before 1 July 2027 will continue to receive the 50% discount.
- Gains arising post 1 July 2027 will be calculated under the new CPI indexation method.
- Pre-1985 CGT-exempt assets will continue to remain exempt until 1 July 2027, after which future gains will be subject to the new CGT rules on gains post that date.
- Investors in new residential properties will retain access to the 50% CGT discount. New properties are defined as those built on vacant land, or those existing properties knocked down and replaced with multiple properties increasing the property supply.
- Income support recipients will be exempt from the minimum 30% tax rate on gains.
- Small business CGT concessions remain unchanged.
WHAT THIS MEANS
Overall, these changes are likely to result in higher tax being paid on investment gains outside of superannuation. The relative attractiveness of holding investments outside of superannuation may reduce.
Negative Gearing
WHAT’S CHANGING
From 1 July 2027, there will be no negative gearing on existing properties purchased from 12 May 2026 (7:30pm AEST). Any losses on these properties can only be offset against rental income or capital gains from the same residential property.
New residential builds will continue to be eligible for negative gearing.
WHAT YOU NEED TO KNOW
- The removal of negative gearing only applies to investment in existing residential property.
- However, if an investor has excess losses, these can be carried forward and used to offset against future residential property income.
- The rules apply across individuals, partnerships, companies and most trusts.
- Most managed investment trusts and superannuation funds are excluded.
WHAT THIS MEANS
This reduces the tax effectiveness of investing in established properties and may shift investor demand towards new developments. Existing holdings are not directly impacted but future strategy will need to adapt.
structures and trusts
Minimum tax on discretionary trusts
WHAT’S CHANGING
From 1 July 2028, trustees will pay a minimum tax of 30% on the taxable income of discretionary trusts. Beneficiaries (excluding corporate beneficiaries) will then receive non-refundable credits.
WHAT YOU NEED TO KNOW
- The minimum tax rate will not apply to other trust types, including fixed trusts, widely held trusts, fixed testamentary trusts, special disability trusts, deceased estates and charitable trusts.
- Certain income types are excluded, including:
- Primary production income of farms.
- Certain income relating to vulnerable minors.
- Amounts to which non-resident withholding tax applies.
- Income from assets of discretionary testamentary trusts existing at time of announcement.
- Expanded rollover relief (income tax and CGT consequences) will apply for 3 years after 1 July 2027 to assist small businesses and other taxpayers to restructure out of discretionary trusts.
WHAT THIS MEANS
Discretionary trusts will become less flexible from a tax perspective. For some clients, this may prompt a review of existing structures over the coming years.
tax relief and opportunities
$1,000 Instant Tax Deduction
WHAT’S CHANGING
From 2026/2027, Australian taxpayers earning income from work can claim an instant tax deduction of $1,000 for work-related expenses without receipts or itemising, provided total claims do not exceed this amount.
WHAT YOU NEED TO KNOW
- If work-related expenses exceed $1,000, standard substantiation rules apply
- This is in addition to other deductions such as charitable donations, unions and professional membership fees and other non-work related deductions.
WHAT THIS MEANS
This simplifies tax returns for many individuals, though the overall financial impact is relatively modest.
Working Australians Tax Offset (WATO)
WHAT’S CHANGING
From 1 July 2027, a permanent tax offset of up to $250 per financial year will apply to income earned from work, including wages, salaries and business income of sole traders.
WHAT THIS MEANS
This provides a small but ongoing reduction in tax for working Australians.
Small business tax changes
WHAT’S CHANGING
The $20,000 instant asset write-off for small businesses (turnover under $10 million) will be permanently extended.
Loss refundability for business for business and start ups
- From 1 July 2028, eligible start-ups (aggregated annual turnover of less than $10m that generate a tax loss, in their first two years of operation) can utilise the loss to generate a refundable tax offset. The offset will be limited to the value of fringe benefits tax and withholding tax on wages paid in respect of Australian employees in the loss year.
- From 1 July 2026, companies with an aggregated annual global turnover under $1 billion can carry back losses to offset tax paid in the previous two years. This will apply to revenue losses only and will be limited by a company’s franking account balance.
- Venture capital incentives will be expanded from 1 July 2027.
- Reforming the R&D Tax Incentive from 1 July 2028 by increasing offset rates for ‘core’ R&D by approx. 25% to 50%, increasing the turnover threshold for higher refundable tax offset to $50m, reducing the intensity threshold and increasing the maximum expenditure threshold.
WHAT THIS MEANS
These measures are broadly supportive for business owners, particularly those in growth or early-stage phases, and may create planning opportunities over time.
other changes
Private Health Insurance Rebate
WHAT’S CHANGING
From 1 April 2027, the Government is proposing to remove the higher Private Health Insurance (PHI) Rebate for individuals aged 65 and over will be removed.
WHAT THIS MEANS
This may increase out-of-pocket costs for those aged 65 and over. Based on current rebate settings (1 April 2026 to 30 June 2026), this could equate to an additional cost of approximately $80.40 per year for every $1,000 of premium.
WHAT THIS MEANS FOR YOU
Taken together, these changes reflect a broader shift in the tax landscape.
The effectiveness of commonly used strategies, particularly around property and discretionary trusts, is being reduced. At the same time, tax-efficient environments such as superannuation are being further reinforced.
For most clients, this is not about immediate action, but it does highlight the importance of ensuring your strategy remains aligned over the next three to five years.