The Federal Budget announced on 12 May 2026 introduces significant structural tax reforms that will materially impact wealth creation, investment strategies, and business/holding structures.
Below is a summary of the key changes and their practical implications.
Capital Gains Tax (CGT) Reform
From 1 July 2027, fundamental changes have been proposed by the Government regarding capital gains tax.
The key changes are:
- The 50% CGT discount applicable for assets held longer than 12 months will be replaced with cost base indexation (i.e. adjusting for inflation).
- This adjustment applies to all CGT assets, including:
- Property
- Shares
- Cryptocurrency
- Pre-CGT assets (acquired before 20 September 1985) which were previously entirely disregarded, will now be subject to CGT with a cost base calculated at 1 July 2027.
- Introduction of a minimum 30% tax on net capital gains.
The transitional rules currently proposed with the removal and replacement of the 50% CGT discount with the cost base indexation are:
- Gains accrued before 1 July 2027: still eligible for the 50% discount
- Gains accrued after 1 July 2027: subject to indexation and the 30% minimum tax
Changes to Negative Gearing
From 1 July 2027, negative gearing will be limited to new residential properties only.
As part of this reform, the key changes are:
- Negative gearing will be removed for residential properties purchased after 12 May 2026.
- Rental losses will be quarantined, meaning they can only be offset against:
- Future rental income, or
- Capital gains on the same property
- Under this new reform, the following types of properties are exempt from the limitation:
- Properties acquired before 12 May 2026
- New builds; and
- Commercial properties
Trust Distribution Reform
From 1 July 2028, new tax rules will apply to discretionary trusts, introducing a minimum tax regime.
The key changes proposed for discretionary trusts:
- A minimum tax rate of 30% will apply to the taxable income of discretionary trusts
- Trustees will be responsible for paying this tax
- Beneficiaries (who are non-corporate entities) will receive non-refundable credits for the tax paid by the trustee
- However, distributions made to corporate beneficiaries (i.e. bucket companies) will potentially be double taxed as they are not entitled to the non-refundable credits
As part of the tax reforms, a rollover relief period of three years commencing from 1 July 2027 is provided to allow families to restructure.
Other tax changes
In addition to the three key changes mentioned above for capital gains tax, negative gearing and trust distributions, other changes to the tax regime include:
- An additional $250 tax cut for working Australians from 1 July 2027;
- A reduction in the lowest marginal tax rate to 15% from 1 July 2026; and 14% from 1 July 2027;
- A $1,000 instant tax deduction for workers from 1 July 2026;
- Loss carry back will be available for companies with a turnover of less than $1 billion, which allows them to apply any losses made in the current income year against taxes paid in the prior two income years.
Our recommendations
Though the announced changes are not law and may change in the coming months, we recommend getting on the front foot and:
- Reviewing your asset holding structures ahead of the CGT changes
- Reviewing property investment strategies, with consideration to the negative gearing reforms
- Undertaking a review of your current trust structure before the proposed 2028 changes
If you would like to discuss how these changes may affect your specific circumstances or require assistance with restructuring, please contact Coleman Greig’s Tax & Superannuation team.
