When the Treasurer handed down the 2026-27 Federal Budget on 12 May 2026, we cautioned that the announcements were just that, announcements. Parliament still needed to pass legislation to bring them into effect. It’s not unusual for budget night measures to be legislated differently to how they were announced, or never legislated at all.
Less than two months later, we now have answers on some of the most significant measures and a few surprises that weren’t announced on Budget night at all. Here’s where everything currently stands.
Now law: CGT and negative gearing reform
Replacement of the 50% CGT discount
From 1 July 2027, the 50% CGT discount for individuals, trusts and partnerships will be replaced with cost base indexation (based on CPI) for assets held for more than 12 months.
Important to note is that there is a 30% minimum tax rate on capital gains.
Pre-CGT assets (those acquired before 20 September 1985) will also be brought into the CGT net from that date.
Transitional rules for existing assets
Every CGT asset held at 30 June 2027 will be treated as having been disposed of and immediately reacquired just before 1 July 2027. No tax is payable at that point. Instead, the gain that has accrued up to 1 July 2027 is calculated under the old rules – preserving the 50% discount on that portion and is deferred until the asset is actually sold. Only growth after 1 July 2027 is taxed under the new indexation and minimum tax rules.
The split between the old and new regimes will generally be determined by the market value of the asset at 1 July 2027 (with an alternative apportionment method available by election).
In practical terms, this means taxpayers will need evidence of what their assets were worth at 1 July 2027. We will be working with our clients on valuation strategies in the lead up to 30 June 2027 as the approach will largely depend on the type of asset held.
Negative gearing restrictions
As announced, negative gearing on established residential properties will be restricted from 1 July 2027. Rental losses on established residential properties acquired after 7:30pm (AEST) on 12 May 2026 will be quarantined so they can only be offset against residential property income or capital gains, with excess losses carried forward.
The grandfathering arrangements were preserved in the final legislation. This means that properties held at 7:30pm on 12 May 2026, including properties under contract but not yet settled at that time are exempt from the changes and can continue to be negatively geared in the ordinary way until they are sold.
Investors in eligible new builds will be able to choose between the 50% CGT discount and the new indexation regime when they eventually sell.
Small business CGT concessions
All four existing small business CGT concessions have been retained, and following Senate amendments, the turnover threshold for the 50% active asset reduction will increase from $2 million to $10 million from 1 July 2027. On the surface this is a win, and for some business owners it will be but the change is perhaps narrower than the headlines suggest.
Only the active asset reduction moves to $10 million. The concessions that can actually reduce the tax bill to nil – the 15-year exemption, the retirement exemption and the small business rollover keep their existing gateways of $2 million turnover or $6 million in net assets.
The interaction between the small business concessions, the transitional rules and the new minimum tax is genuinely complex, and further amending legislation is still expected.
Other Individual measures now legislated
The legislative package also included the $1,000 instant tax deduction for work-related expenses (from 2026-27) and the $250 Working Australians Tax Offset (from 2027-28).
A change nobody saw coming: SMSF borrowing restrictions
The most significant surprise did not appear in any Budget paper. To secure Senate support for the tax reform package, the Government agreed to a Greens amendment that bans Self Managed Superannuation Funds (SMSFs) from entering new limited recourse borrowing arrangements (LRBAs) over residential property.
From commencement (10 August 2026), an SMSF will only be able to use an LRBA to acquire real property if that property is business real property. Residential property, whether new or established will be excluded. Existing arrangements, and re-financings of existing arrangements, are grandfathered
Still announcements only
Not everything from Budget night has been legislated. The following remain proposals at this stage, and the usual caution applies – they may be legislated differently to how they were announced, or not at all.
Minimum tax on family trust distributions
The proposed 30% minimum tax on the taxable income of discretionary trusts, due to commence 1 July 2028, has not yet been introduced into Parliament. However, on 8 July 2026, Treasury released its consultation paper on the implementation of the minimum tax, raising 17 questions on the design of the measure.
The paper confirms that distributions to corporate beneficiaries will effectively be taxed twice – once at the trust level and again in the company. This appears to be a deliberate design feature and, if it proceeds, is likely to spell the end of the traditional ‘bucket company’ strategy for trusts retained beyond 1 July 2028.
More positively, the proposed rollover relief for restructuring out of a discretionary trust is broader than many expected – available to trusts of any size, without a ‘genuine restructure’ requirement, for three years from 1 July 2027. However, stamp duty is a state matter and remains unresolved, so a restructure that avoids CGT could still trigger a significant transfer duty cost.
Our earlier caution stands – these remain proposals, and we would not recommend voluntarily restructuring existing arrangements until the rules are settled.
Instant asset write-off
The permanent $20,000 instant asset write-off for small businesses, announced to apply from 1 July 2026 had not passed Parliament at the time of writing. The $20,000 threshold for the year ended 30 June 2026 is already law, but until the new Bill passes, the standing legislated threshold from 1 July 2026 is technically $1,000.
Based on the history of this measure we expect the permanent threshold to pass, but businesses making significant asset purchases in the meantime should factor in this uncertainty.
Other measures
The remaining Budget announcements – including the FBT changes for electric cars, loss carry back for companies, the R&D tax incentive reforms and the PAYG instalment changes – are at various stages of development and remain announcements at this point.
What should you be doing now?
For most clients, the start dates for the major changes are still some time away or have passed, in that changes were effective as at budget night, so it’s now about reviewing strategies in light of the new changes.
Unfortunately, the most difficult issue is still unresolved. Structuring new business or new asset acquisitions remains very difficult with the proposed trust changes still only at consultation paper stage.
As always, it is important that you seek personal advice regarding your specific situation before taking any action in relation to these changes. Every client’s circumstances are different, and the interaction between the new rules, the transitional arrangements and your existing structures needs to be considered carefully.
Please reach out to our team if you have any queries.
Disclaimer
The content provided in this article is for informational purposes only and does not constitute legal or financial advice. While we strive to ensure accuracy, we recommend that readers consult with an appropriate specialist for professional guidance specific to their individual circumstances. The information presented here may not cover all aspects of superannuation regulations or tax implications. It is essential to conduct further research and consider seeking personalised advice before making any decisions related to your business or your workers. Grenfell Murray Pty Ltd disclaims any liability arising from reliance on the information contained in this article. Readers should exercise due diligence and verify details independently.
