The Federal Government delivered the 2026-27 Federal Budget last night (12 May 2026) with the government proposing a ‘fairer, better, simpler and more sustainable’ tax system. Whether they have succeeded or not is yet to be seen since the devil really will be in the detail.
What is certain is that the announced changes are significant for many Australian small businesses and property investors.
It’s important to remember that these changes are NOT yet law. With some small exceptions, most of these announcements don’t yet have draft legislation to support them. This means that they may not become law; they may become law later than proposed; or there may be changes to the final laws that are introduced compared to the proposals announced on budget night.
Below, we summarise the key tax and business measures announced in the budget and highlight the areas most likely to affect our clients. We will continue to monitor developments and provide updates when changes come into effect.
Negative Gearing
- From 1 July 2027, negative gearing will be limited to new builds. Losses on established residential properties will only be deductible against rental income or the capital gains realised from residential properties. Excess losses will be carried forward and offset against future residential property income.
- These changes will only apply to properties purchased after 7:30 PM 12 May 2026. Properties acquired prior to this date will be fully grandfathered, meaning they will be exempt from these changes.
- Properties held by superannuation funds and widely held trusts (and some other limited specific situations) will also be exempt from these changes.
Capital Gains Tax (CGT)
- From 1 July 2027 the 50% CGT discount is proposed to be replaced by Cost Base Indexation (for assets held for more than 12 months). There will also be a 30% minimum tax on net capital gains calculated using Cost Base Indexation for gains accrued from 1 Jul 2027.
- The change is to apply to all assets, including pre-CGT assets held by individuals, trusts and partnerships (but not superannuation funds).
- Pre-CGT assets will retain the tax-free gains accrued from purchase date to 1 July 2027. However, from 1 July 2027 they will be subject to CGT using Cost Base Indexation.
- Investors purchasing new residential properties will be the winners, with the ability to choose to apply either:
- 50% CGT discount or
- Cost Base Indexation and the minimum 30% tax
- It is expected that individuals in receipt of support payments (e.g. Age Pension) will be exempt from the minimum 30% tax.
Taxation of Discretionary Trusts
- A 30% minimum tax on discretionary trusts is to be introduced from 1 July 2028 (2029 financial year).
- From this date, the trust will pay a minimum tax of 30% on taxable income of the trust.
- Beneficiaries, other than companies, will receive non-refundable credits for the tax paid by the trust.
- Corporate beneficiaries will be taxed on the income distributed to them however they will not be able to claim a credit for the tax payable by the trust.
- Some types of income, such as primary production income, will be excluded.
- Rollover relief is to be provided for three years (from 1 July 2027) for small businesses that wish to restructure out of discretionary trusts into companies or fixed trusts.
Individual Tax Measures
- A $250 Working Australians Tax Offset is to be introduced from 1 July 2027 (2028 financial year) for individuals in receipt of wages or sole trader business income.
- A $1,000 standard deduction for work related expenses will be available from the 2027 financial year. For anyone wanting to claim more than $1,000 the current substantiation rules will remain unchanged.
- Non work related deductions can continue to be claimed under the usual rules in addition to the $1,000 standard deduction (eg donations).
- The Private Health Insurance age-based rebate uplift (available to individuals aged over 65) will be removed from 1 April 2027.
Business Impacts
- From 1 July 2026, assets over $20,000 will be eligible for the instant asset write off for businesses with a turnover of less than $10 million.
- From 1 July 2026, companies with an aggregated global turnover of less than $1 billion will be able to carry back tax losses and offset them against tax paid in the prior two years. This will only apply to revenue losses, and will be limited to the company’s franking account balance.
- From 1 July 2027, small businesses can opt in to the PAYG Instalments system monthly. Taxpayers with a history of non-compliance will be forced to join this system.
- From 1 July 2028, start up companies with a turnover of less than $10 million that generate a loss in the first two years can use that loss to generate a refundable tax offset, limited to the value of the Fringe Benefits Tax (FBT) and withholding tax paid on wages in the loss year.
- From 1 July 2028, the government plans to reform the Research and Development (R&D) incentives through a number of measures to simplify and better target the support.
- From 1 April, 2029, Fringe Benefits Tax (FBT) concessions on electric cars is to be reduced by introducing a permanent 25% discount on the FBT for all electric cars valued below the fuel-efficient LCT threshold (currently $91,387). Transition arrangements will apply to vehicles purchased prior to this date.
What should you do next?
Given the scale of the proposed changes, particularly around negative gearing, capital gains tax and trust structures, it’s important not to make decisions based solely on Budget announcements. If you are a property investor, business owner, trustee or planning a structural change in the coming years, now is the right time to review your position and understand how these proposals may affect you.
If you’d like tailored advice or would like to discuss how the 2026–27 Federal Budget could impact your personal or business circumstances, please contact your Grenfell Murray advisor. We’re here to help you navigate the changes with clarity and confidence.
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.
