Overview

The 2026–27 Federal Budget introduces the most significant tax reforms in more than 25 years. With major changes affecting capital gains tax, property investment, and trust structures, there is a limited window to review your position and consider proactive strategies.

Economic Snapshot

• Budget deficit: $31.5 billion
• GDP growth:
  • 1.75% in 2026–27
  • 2.25% in 2027–28
• Inflation:
  • 5% to June 2026
  • 2.5% to June 2027
• Unemployment rate: 4.5%
• Wage growth: 3.5%

 

Key Changes for Individuals

Capital Gains Tax Reform

From 1 July 2027:

• The 50% CGT discount will be removed
• Replaced with cost-base indexation (inflation adjusted gains)
• A minimum 30% tax will apply to real gains
• Gains accrued before this date retain the current discount

Impact: This represents a fundamental shift in how investment gains are taxed. While indexation provides some inflation relief, most taxpayers will face a higher effective tax burden on capital gains, particularly on long-held assets.

This creates a critical planning window before 1 July 2027, where investors may consider realising gains, restructuring ownership, or reassessing long-term investment strategies to minimise future tax exposure

Negative Gearing Restrictions

From 1 July 2027:

• Rental losses on established properties can no longer offset salary or business income
• Losses can only offset future property income or gains
• Existing investments purchased before 12 May 2026 are grandfathered

Impact: This significantly reduces the tax effectiveness of negatively geared property strategies, particularly for higher-income earners.

It is likely to shift investor demand, influence property market behaviour, and create a two-tier system between grandfathered and new investments. Existing properties purchased before 12 May 2026 remain protected, which may affect decisions to hold or dispose of assets.

Discretionary Trust Minimum Tax

From 1 July 2028:

• A 30% minimum tax will apply at trustee level
• Income splitting to lower-tax beneficiaries will be less effective
• CGT rollover relief available (2027–2030) to restructure

Impact: This reduces the effectiveness of income splitting to lower-tax beneficiaries and represents a major shift in traditional family trust planning strategies.

Many structures will require review, and potentially restructuring, to remain tax-effective. A three-year rollover relief window (2027–2030) provides an opportunity to reposition before the rules take effect.

Tax Relief Measures

• $250 Working Australians Tax Offset from 1 July 2027
• $1,000 standard deduction from 2026–27 without needing receipts

Impact: Together, these measures provide modest but broad-based tax relief while simplifying the tax process for individuals. They will slightly increase disposable income and improve household cash flow, while also reducing compliance effort by removing the need to track and substantiate smaller work-related expenses. Although the financial benefit is relatively modest, the changes offer a practical balance of tax savings and administrative simplicity, with those incurring higher expenses still able to itemise deductions if more beneficial.

Key Changes for Businesses

Instant Asset Write-Off (Permanent)

From 1 July 2026:

• $20,000 threshold becomes permanent
• Applies to businesses with turnover under $10 million

Benefit: This provides certainty and allows businesses to plan capital expenditure with confidence, accelerating deductions and improving cash flow without reliance on temporary policy extensions.

Loss Carry-Back (Permanent)

From 1 July 2026:

• Companies under $1 billion turnover can carry losses back two years
• Allows refunds of previously paid tax

Benefit: This strengthens financial resilience by allowing businesses to recover cash during downturns, smoothing earnings volatility and supporting ongoing operations.

Start-Up Loss Refunds

From 1 July 2028:

• New companies can convert losses into refundable offsets in their first two years

Benefit: Provides valuable early-stage cash flow support, reducing reliance on external funding and encouraging innovation. This is particularly beneficial for new and scaling businesses.

Research & Development (R&D) Changes

From 1 July 2028:

Positive Changes

• Refundable offset increased to 23% for eligible SMEs
• Turnover threshold lifted to $50 million
• R&D cap increased to $200 million
• Higher non-refundable offset rates

Restrictive Changes

• Eligibility limited to companies operating under 10 years
• Removal of supporting activities
• Minimum spend of $50,000 required (unless using approved providers)

Impact: Collectively, these changes significantly reshape the R&D incentive landscape. While increased offset rates, higher turnover thresholds, and expanded expenditure caps enhance access and improve cash flow for certain SMEs and large, research-intensive businesses, these benefits are partially offset by tighter eligibility rules. Restrictions based on company age, the removal of supporting activities, and higher minimum spend requirements will reduce claim values and limit access—particularly for smaller or more established businesses. Overall, the reforms create a more targeted but more complex regime, requiring businesses to carefully reassess their R&D strategies, eligibility, and claim methodologies to maximise available benefits.

Superannuation: The Quiet Winner

While the Budget introduces sweeping reforms across investment structures, one of the most important strategic takeaways is what hasn’t changed—superannuation.

Impact:In the context of higher taxation on investments held personally or through trusts, the absence of major superannuation changes may be one of the most significant outcomes of the Budget.

Historically, major tax reform cycles have reshaped wealth strategies—and superannuation has consistently emerged as a key long-term vehicle.

Under the new regime:

• Capital gains outside super will face a minimum 30% tax rate
• Superannuation continues to benefit from concessional tax rates (around 10% on long-term gains and 0% in pension phase)

At the same time, superannuation has been largely excluded from the major reforms, including:

• Negative gearing changes
• CGT restructuring
• Trust tax measures

This creates a widening gap between investment structures inside and outside super, reinforcing super as a highly tax-effective and stable environment for long-term wealth accumulation.

Strategic Considerations

• Greater emphasis on using superannuation as part of long-term investment strategy
• Review whether current assets are optimally structured across personal, trust, and super environments
• Increased importance of timing, contributions, and cap management
• A need to reassess retirement and wealth accumulation strategies in light of changing tax differentials

Key Takeaway

The most significant impact of this Budget may not be the changes themselves—but the relative advantage created by leaving superannuation largely unchanged.

What This Means For You

These reforms represent a significant shift across:

• Investment strategies
• Property ownership
• Business structures
• Trust distributions

Timing is critical, for reviewing your position and implementing strategies before key changes take effect.

How Supervision Group Can Help

At Supervision Group, we work with individuals, families, and businesses to:

• Assess the impact of these reforms
• Identify tax planning opportunities
• Restructure where needed
• Develop proactive, tailored strategies

Let’s Plan Ahead

If you’d like to understand how these changes affect you, now is the time to act.

Get in touch with Supervision Group to put a plan in place.

The information provided is general in nature and is subject to legislative change. You should obtain professional advice tailored to your circumstances before acting.