The Federal Budget handed down on 12 May 2026 introduces some of the most significant tax reforms in decades.

We will be carefully monitoring the reforms as it becomes legislation and will keep you updated with any recommendations.

Capital Gains Tax (CGT): Major Overhaul

What’s changing?

• The 50% CGT discount will be removed from 1 July 2027.
• It will be replaced with cost‑base indexation and a minimum 30% tax rate on realised gains.
• Applies to all CGT assets, including long‑held and pre‑CGT assets (except new builds).

What this means for you:

• Investors selling assets after July 2027 may face higher tax bills.
• Gains accrued before 1 July 2027 will still receive the 50% discount, so timing matters, as will valuations. Consider reviewing your asset portfolio and potential sale timelines.

Negative Gearing: Restricted Going Forward

What’s changing?

• Negative gearing will be limited to new residential builds acquired after Budget night.
• Existing investment properties are grandfathered and keep current rules.

What this means for you:

• Investors purchasing established properties will no longer be able to offset rental losses against other income.
• New builds remain eligible, which may shift investor demand toward construction‑phase housing.

Discretionary Trusts: Minimum 30% Tax

What’s changing?

• From 1 July 2028, all distributions from discretionary trusts will be       taxed at a minimum 30% rate.

What this means for you:

• Trusts will lose much of their flexibility for income splitting.
• Families and business groups using trusts should consider restructuring options well before 2028. We will be in touch with you about this after its legislated and we know all the details.

Personal Income Tax: Modest Relief

Key measures:

• Introduction of the Working Australians Tax Offset (WATO) of $250 annually from 2027–28.
• Medicare levy low‑income thresholds will increase.

What this means for you:

• Most workers will see small annual tax savings.
• The offset is automatic and applied through the tax return.

Business Tax Measures: Support for Investment

Key changes:

• Instant asset write‑off of $20,000 made permanent for small businesses       (turnover < $10m).
• Loss carry‑back reintroduced for companies with turnover under $1b, allowing losses to offset prior‑year tax.
• R&D and venture capital incentives expanded.

What this means for businesses:

• Improved cash flow and flexibility for small and medium enterprises.
• Opportunity to reassess investment and innovation strategies.

6. Broader Economic Context

• Deficit: $31.5b forecast for 2026–27
• Government debt: Expected to exceed $1 trillion
• Inflation: Projected at 2.5%, within RBA target

These settings influence interest rates, business confidence, and investment decisions.

FBT concessions for electric cars will be reduced

From 1 April 2029, a permanent 25% discount on FBT will be available for all electric cars valued up to and including the fuel-efficient luxury car tax threshold, implemented through a 15% rate in the statutory formula. Transitional arrangements will apply to existing arrangements and for some electric vehicles purchase before 1 April, 2029.

What Should You Do Now?

Wait until its legislated and consider:

For individuals:

• Review your investment property strategy, especially if considering new purchases.
• Consider timing of asset sales ahead of CGT changes.

For business owners:

• Reassess trust structures before the 2028 changes.
• Explore opportunities from the permanent instant asset write‑off and loss carry‑back rules.

For all taxpayers:

• Expect modest personal tax relief from 2027–28.

Stay informed – these reforms roll out progressively through to 2030