the meatiest budget just got a little saucier

updated 29 June 2026

Quite a bit has happened since this article was first published on 12 May. The first package of tax legislation has now passed Parliament and received Royal Assent – however this does not include all of the budget measures.

The Government has already tweaked a few of the original announcements following consultation a couple of the original biggest concerns from Budget night have now been changed, including testamentary trusts and some concessions for businesses.

We will continue to update this blog as things evolve.

 

where things stand now 

 

Let me cut to the chase… this budget is meaty and includes a few surprises!

When it first landed, there was not a lot of good news in this one for business owners and investors, whether investing in property or other capital appreciating assets.

Since then, a few of the sharper edges have been softened, but there is no doubt this budget is looking to the long term with changes to CGT, negative gearing and the taxation of trusts bringing very real changes to the tax system.

These are the meatiest bits of the budget you need to know about.

 

1. the 50% CGT discount is cut

 

The Government has confirmed that from 1 July 2027, the current 50% CGT discount [for most assets held for more than 12 months] for individuals, partnerships and trusts will effectively be replaced.

Under the new rules:

• Existing unrealised gains up to 30 June 2027 will continue to receive the current 50% discount.
• Future gains after 1 July 2027 move to a new indexed cost-base system [similar to the system pre-1999].
• A 30% minimum effective tax rate on real capital gains will apply [this bit was not announced before budget night] for gains from 1 July 2027.

Importantly, investors who buy ‘new residential properties’ will be able to choose between applying the 50% discount or indexation and the minimum tax when they sell the property.

The family home exemption will continue, as will the existing super fund discounts remaining untouched.

The changes apply to all CGT assets, including shares, properties and cryptocurrency.

If all CGT assets are going to be taxed based on indexation from 1 July 2027, we need to set a value for all CGT assets as at 30 June 2027.  To determine this value, taxpayers will be able to either get an external valuation or use a ‘specified apportionment formula’ which will be provided by the ATO.

and for a surprise…

One of the bigger surprises from budget night is that this change also applies to pre-CGT assets, those bought before 1985 which until now have never been subject to capital gains tax.

Any gains on pre-CGT assets from 1 July 2027 are going to be taxed with a minimum tax of 30%.

 

food for thought

Do not underestimate the impact of the 30% minimum tax component of this change to CGT. A retiree who has no other income will pay at least 30% tax on a capital gain even if they have no other income.

Another reason to hold investments in companies going forward.

 

further food for thought

What about business assets like goodwill? It is expected we will need a goodwill and entity valuation as at 30 June 2027 to be prepared at some stage to know what the position would be if ever there is a sale. 

 

backflip for businesses 

Since originally releasing the budget the government has received significant negative feedback from business owners – especially those growing an asset from scratch with no cost or minimal cost base to be indexed.

The government has proposed to address this with 2 proposals:

1. small business CGT concessions

Increase in the turnover threshold to access the 50% active asset reduction from $2m to $10m from 1 July 2027 [in line with other rules application for small business].  This will effectively enable those businesses that qualify to access a 50% reduction in CGT.

Word of warning: Accessing the SBCGT Concessions is not easy, there are a lot more considerations here than just turnover.

2. innovative business CGT concession

Inclusion of an ‘innovative business’ definition to enable founders, early-stage investors and employee share scheme participants that fit the definition to still be able to opt to use a 50% CGT Discount rather than the new indexation methodology.

There are a few eligibility requirements though:

• shares must be newly issued equity [not acquired from an existing shareholder]
• the company must generally be less than 10 years old when the shares are issued [Treasury is consulting on extending this to 15 years for industries with longer commercialisation timeframes, such as biotechnology, MedTech and deep technology]
• annual turnover must be less than $50 million
• the company must satisfy principles-based innovation criteria, intended to target genuinely innovative businesses rather than all small businesses
• the shares must generally be held for at least five years before disposal
• a proposed $10 million lifetime concession cap would apply to each eligible taxpayer.

Watch this space for when we see the actual legislation to support the proposals.

 

2. negative gearing narrowed

 

As widely speculated, the Budget introduced changes to negative gearing for residential properties.

Negative gearing occurs when a rental property makes a tax loss that is utilised against other income in the same entity with the effect of reducing overall tax paid.

Instead, from 1 July 2027 negative gearing will only be allowed on properties that were purchased prior to 7.30pm 12 May 2026 [i.e. grandfathered] and new builds.

Importantly it is contract date that is the relevant date.

For all other residential properties, any rental losses will only be utilised against:

• rental income from other residential properties either in the same year; or
• be carried forward to be used against residential rental income in future years; or
• the capital gain on the eventual sale of the property

These changes apply to all structures that own rental properties, such as individuals, trusts, companies and partnerships.

Negative gearing is still available for commercial properties, shares and other existing arrangements.

what this actually means…

For years, the negative gearing has been one of very few effective tax planning strategies. It has been built around three assumptions:

1. leverage your equity
2. claim losses against other income
3. rely on long-term capital growth

With two of these assumptions weakened in this budget, it does not mean property investment disappears, but it may mean:

• less appetite for investors to buy established apartments and houses
• stronger investor demand for new developments
• greater focus on rental income [yield] over capital growth
• more use of company structures to invest
• increased importance of debt strategy
• portfolios of rental properties with some positively geared properties offsetting negatively geared properties
• more attention on commercial properties
• rents may go up

The impact on the economy of removing negative gearing has been debated for decades.

In 20 years time, this is going to be a great case study for economics students because I don’t believe anyone really knows what is going to happen.

 

food for thought

A purchaser buying a property after 12 May 2026 next to a similar property bought before the budget [such as two adjacent apartments], may need to charge more rent to cover the tax benefit they will no longer receive. 

 

last minute Senate amendments

Following negotiations in the Senate, the Government has agreed to a second tranche of legislation to address concerns that the original negative gearing reforms could have unintentionally removed grandfathering protection where an investment property was transferred due to the death of a spouse or following a relationship breakdown.

Under the proposed additional legislation, taxpayers who inherit an investment property from a deceased spouse or receive an investment property as part of a court-approved property settlement or relationship breakdown will continue to access the same grandfathering treatment that applied to the original owner, provided the relevant legislative requirements are satisfied.

The proposed amendment is intended to ensure that these common life events do not, of themselves, trigger the loss of existing tax concessions.

It provides greater certainty for families managing deceased estates and separating couples, while maintaining the Government’s broader policy settings for negative gearing.

Although this amendment resolves one of the key concerns raised following the Budget announcement, taxpayers should continue to seek advice where ownership of investment properties changes as part of estate planning or family law arrangements, as the detailed transitional rules remain important.

‘new residential’ amendments

As introduced, the legislation would have allowed the Treasurer to determine certain key aspects of the new CGT and negative gearing rules by legislative instrument, including matters such as the definition of eligible new residential dwellings and the operation of some concessional asset categories.

During the Senate negotiations, these broad regulation-making powers were removed. As a result, significant changes to the operation of the CGT and negative gearing reforms will now require amendment by Parliament, rather than being made through ministerial determination.

While this amendment does not change the substantive tax outcomes, it provides greater certainty for taxpayers and advisers by ensuring that future policy changes remain subject to parliamentary scrutiny.

 

3. minimum tax discretionary trusts

 

From 1 July 2028, discretionary trusts will face a 30% minimum tax on taxable income, with the tax being paid by the trustee.

Beneficiaries will still include the income in their own tax returns, with a non-refundable credit for the tax already paid by the trustee [other than for corporate beneficiaries].

Emphasis here on ‘non-refundable’ because this means, irrespective of who you distribute the income to, even if their individual tax rate is nil, their effective tax rate will be 30%.

The measure is designed to reduce income splitting advantages and what Treasury views as excessive flexibility within trust structures.

Now for some good news… 

Following consultation, the Government has confirmed that some testamentary discretionary trusts will be carved out of the proposed minimum trust tax regime. It was announced that the carve out will apply to ‘genuine testamentary trusts’, whose only beneficiaries are individuals and income tax exempt entities.

Exactly what this means won’t be clear until we see legislation which could be a long way off given these measures don’t commence until 1 July 2028.

There will still be further consultation around integrity measures and the final legislative design. Whilst the announcements so far suggest a considerable tightening of the tax concessions applying to testamentary trusts, the current model appears to be a significant improvement on the original announcement.

Corporate Beneficiaries

Our view remains that the proposed rules will effectively eliminate the use of corporate beneficiaries [bucket companies], making  the transitional rollover provisions even more important for some families and business owners

Note: We still have no legislation on these proposals!

 

food for thought 

What will be the best type of entity to invest from in the future?

We have already seen a shift towards investing through companies [especially corporate beneficiaries] rather than trusts.

While the changes to testamentary trusts are welcome, the broader trust reforms are still likely to encourage that trend. .

Over the next few years, we are likely to see:

• more businesses moving into company structures
• greater use of fixed/unit trusts
• review of bucket company arrangements
• more formal family office style investment structures
• increased focus on Division 7A and retained earnings strategies

This will become an important tax planning and estate planning conversations over the next couple of years.

See the proposed rollover relief below.  

 

4. transitional rollover relief

 

Given the changes to the rules for discretionary trusts, the government has flagged transitional rollover relief [income tax and capital gains tax] for 3 years from 1 July 2027 for taxpayers who want to restructure out of discretionary trusts [for example, to a company or fixed trust].

This could be a good opportunity to roll into a company structure, which is often considered the best structure for trading entities and even more so with the changes to the CGT discount.

While the testamentary trust carve-out means some families may no longer need to restructure, many business owners will still be reviewing whether their existing structures remain the best fit.

State government transfer duty is often a handbrake to rolling from a trust to a company, so for these rollovers to be effective, we will need to overlay state government rollover exemptions.

 

5. permanent instant asset write-off

 

Finally, the $20,000 instant asset write-off is to be permanently locked into legislation from 1 July 2026.

Honestly, this should have happened years ago.

 

6. loss carry back rules are back

 

The Government has brought back the Loss Carry Back rules that were first introduced during COVID for businesses with less than $1 billion in turnover.

From the 2027 financial year onwards, businesses that make tax losses will be able to apply those losses against income tax paid in the prior two income years and receive a refund for the taxes paid in those prior years.

For example, a company that makes a loss in the 2028 income year can apply those losses against the profits made in either or both of the 2026 and 2027 income years and receive a cash refund of the tax already paid in those earlier years.

 

food for thought

I struggle to get too excited about this rule, but they can come in handy if a business has had a major change in performance. 

 

7. startup loss refunds [what the?!]

 

Startups are one of the big losers with the changes to the CGT discount. High-risk, high-return investors were incentivised by knowing the tax rate would be more appealing on an eventual exit.

To somewhat appease the startup community [I would suggest], the Government has announced a refund of PAYG Withholding on wages and fringe benefits tax paid for companies that make tax losses in their first two years of trading.

It is proposed that these measures will be as follows:

• applies to new companies only;
• the company must have aggregated turnover below $10 million;
• only applies during the first two years of operation;
• commences for income years starting on or after 1 July 2028;
• the benefit is delivered as a refundable tax offset, rather than carrying the loss forward;
• the refundable amount is capped at the value of:
• PAYG withholding remitted on Australian employee wages, and
• Fringe Benefits Tax (FBT) paid in the income year in which the loss arises.

While the measure remains a positive initiative for cash flow, many of the practical rules have yet to be released. Start-ups should not assume that every tax loss will generate a cash refund.

The proposal is narrowly targeted and tied to employment taxes actually paid. We still have very little information on this proposed measure.

Note: The Government has announced it will develop a new Innovative Business CGT Concession. See CGT section above for more detail.

 

food for thought

Even with the new CGT concession, I still don’t quite understand the logic of refunding PAYG Withholding and FBT, but I guess it’s the only tax they remit [other than GST which goes to the States], so I am not going to look a gift horse in the mouth.  

 

8. Working Australians Tax Offset [WATO]

 

The $250 Working Australians Tax Offset [WATO] has now passed parliament, received Royal Assent and will apply from 2027/28.

The offset will only be available to offset tax on income derived from ‘work’, such as wages and business income of sole traders.

The offset has the effect of increasing the tax–free threshold from $18,200 to $19,985 for workers [before the Low Income Tax Offset] on their labour income.

 

9. instant tax deduction for workers

 

The $1,000 instant tax deduction for workers has now passed Parliament and received Royal Assent.

From 2026/27, taxpayers can claim a $1,000 instant deduction for work-related expenses to reduce their taxable income without being required to provide receipts when they lodge their tax returns.

This replaces the $300 limit that previously existed [about time].

 

food for thought 

I am a big fan of anything that simplifies the tax system – especially for individuals. This may make it easier for individuals to lodge more of their own returns.  

 

10. changes to FBT on electric vehicles

 

The Government is adjusting the electric car discount to maintain incentives for the shift to electric vehicles while transitioning to more sustainable settings for the longer term.

The Government will transition the arrangements to support electric cars to a permanent 25 per cent fringe benefits tax [FBT] discount, for eligible electric cars over $75,000 from 1 April 2027 and for all eligible electric cars from 1 April 2029.

Electric cars costing up to $75,000 will continue to receive a full FBT exemption provided the fringe benefit arrangement commences before 1 April 2029.

 

11. SMSF limited recourse borrowing arrangements restricted [new proposal]

 

As part of the Senate negotiations, LRBA’s will no longer be available for residential properties going forward.  To be clear, the legislation states that LRBA’s will only be available for “business real property”. Therefore, it’s not enough to be “non-residential” – it must meet the wholly and exclusively used in one or more businesses.

Vacant premises [or indeed vacant land] won’t qualify. Conversely, it may be that some residential property might qualify where it meets the “wholly and exclusively” test.

For example the manager’s unit used in a unit management business may be eligible.

These changes will apply 45 days after the legislation receives Royal Assent.

Existing residential LRBAs entered into before the commencement date will continue under grandfathering provisions.

 

residential property [a summary]

 

A lot is going on in this budget for residential property.

Following is a summary of the residential property CGT negative gearing rules based on when the property was purchased [contract date].

The table below reflects the current position following the Government’s post-Budget consultation announcements.

property date [contract date]	CGT treatment	negative gearing treatment
Owned pre-CGT [i.e. pre 20 Sept 1985]	CGT on gains after 1 July 2027 based on CPI indexation and minimum tax rate of 30% [may need a valuation as at 1 July]	Still available
Owned before 7.30pm 12 May 2026	If sold before 1 July 2027 = no changes [i.e. 50% CGT Discount available if held for greater than 12 months]​ If sold after 30 June 2027 = 50% CGT Discount to value at 30 June 2027 + gains arising after 30 June 2027 subject to new rules with indexed cost base and 30% minimum tax [may need a valuation as at 1 July 2027]	Negative gearing can continue on these properties until sold
Acquired after 7.30pm 12 May 2026 but before 1 July 2027		Negative gearing allowed to 30 June 2027 No negative gearing allowed after 30 June 2027 but can still offset against other residential property income or carry forward to future years or added to cost base
Acquired after 1 July 2027 [existing residential properties]	Cost base indexed for CPI and gain taxed at marginal tax rate [up to 47%] with a minimum tax rate of 30%	No negative gearing allowed​ Deductions can be offset against other residential rental income or carried forward to future years or added to the cost base
Acquired after 1 July 2027 [new residential builds]	Choose between the 2 systems:​ – either the 50% CGT Discount or​ – cost base indexed for CPI and gain taxed at marginal tax rate [with the minimum tax rate of 30%]	Negative gearing allowed
Other asset types	All other CGT assets subject to the same rules with the exception of new residential builds, discounts under SBCGT Concessions and proposed ‘Innovative Business Concessions’	Negative gearing still available for non-residential property assets

 

the big picture

 

Some of the broader economic forecasts in this budget include that inflation is going to continue, deficits are going to continue and wage growth is going to continue. They are talking of productivity improvements – that is a good thing, the country needs them!

They positioned the budget around making it easier for the younger generation to get into the housing market and that may be true, but for me, it does nothing to encourage the younger generations to take risk on investments or in business.

What do people do when they are uncertain? Nothing!

My prediction is that there is going to be a whole lot of nothing done by investors and business owners in the next little while.

 

what is law + what is not

 

The first package of tax legislation has now passed Parliament and received Royal Assent, giving us much more certainty than we had on Budget night. That said, there is still more legislation expected later this year, so the devil is still in the detail.

The following tables summarises where the different legislation is currently at [at the time of updated writing]:

budget measure	current status [29 June 2026]	notes
Working Australians Tax Offset [$250]	Now legislation	Included in Tax Reform No. 1
$1,000 Instant Tax Deduction	Now legislation	Included in Tax Reform No. 1
General CGT reforms [indexation and 30% minimum tax]	Now legislation	Passed with Senate amendments
Negative gearing reforms	Now legislation	Although not legislation yet, the Government has proposed a second tranche of legislation to provide grandfathering protections following death of a spouse or relationship breakdown
SMSF limited recourse borrowing arrangements [residential property]	Now legislation	New residential LRBAs prohibited from 45 days after Royal Assent Existing arrangements grandfathered. Business real property borrowing remains permitted
Removal of ministerial discretion provisions	Now legislation	Amendment negotiated during Senate debate
Testamentary trust exemption	Government policy announced	Government has confirmed genuine testamentary trusts will be excluded from the minimum trust tax Further legislation still required to implement the revised design
Small business CGT concession changes	Government policy announced	Government announced the turnover threshold for the Active Asset Reduction will increase from $2 million to $10 million Legislative amendments yet to be introduced
Innovative business CGT Concession [IBCC]	Under Treasury consultation	Consultation paper released. Exposure draft legislation has not yet been released
Start-up loss refundability	Government policy announced	Measure remains Government policy for commencement from 1 July 2028 No exposure draft legislation released
Trust tax reform [including revised treatment of testamentary trusts]	Further legislation expected	Consultation continues following significant changes announced on 18 June
Permanent $20,000 instant asset write-off	Before parliament	Tax Reform No. 2 is before Parliament
Permanent company loss carry-back	Before Parliament	Tax Reform No. 2 is before Parliament
Remaining tax reform measures	Future legislative tranches expected	The Government has indicated that additional legislation will be introduced later in 2026 to implement the balance of the Budget reforms

One thing is for sure though, the tax system is not getting any simpler. There is going to be a stack of complexity around tracking different cost bases, different types of income and different types of deductions, with some offsets only applying to specific types of income.

I am sorry to say this, but with this level of complexity, the biggest winners are probably the accountants and the valuers!

 

want the practical version?

Get our free 2026–27 Federal Budget Cheat Sheet with key tax changes, business impacts, important dates, and action items in one easy-to-read PDF. [download here]

 

we’re here to help

The Federal Budget 2026-27 brings plenty of change and plenty of questions.

If you’d like to understand how these updates may impact you or your business, our team is here to help.

Reach out to your usual contact at businessDEPOT, email oneplace@businessdepot.com.au or give us a buzz on 1300 BDEPOT.

While we’ve now got much more certainty than we did on Budget night, more legislation is expected later in 2026. We’ll continue to keep this blog updated as those changes unfold.   

 

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