Entity Setup
Entity Setup and Tax Strategy: Choosing Between Trusts, Companies, and Partnerships After 2026 Reforms
Australia’s 2026 tax law changes make how you structure your business or investment entity more critical than ever. Decide smartly between companies, trusts, or partnerships based on CGT, negative gearing, and loss carry back rules.
By NomadicTax Research Team • 5-8 min read • July 15, 2026
## Why Business Structure Matters More in 2026
Australia has introduced sweeping changes that affect:
- Capital gains tax (CGT), replacing the 50% discount with inflation-indexation + a 30% minimum rate for individuals, trusts & partnerships from **1 July 2027**; ([aph.gov.au](https://www.aph.gov.au/Parliamentary_Business/Bills_Legislation/Bills_Search_Results/Result?bId=r7493&utm_source=openai))
- Negative gearing limited to **new builds** only for residential property from the same date; ([aph.gov.au](https://www.aph.gov.au/Parliamentary_Business/Bills_Legislation/Bills_Search_Results/Result?bId=r7493&utm_source=openai))
- New rules allowing **loss carry back** for companies with turnover up to $1 billion from **2026-27**, and loss refundability for start-ups from **2028-29**; ([pm.gov.au](https://www.pm.gov.au/media/tax-reform-workers-businesses-and-future-generations?utm_source=openai))
## Key Features of Different Entity Types
| Entity Type | Tax Rate / Benefits | Downsides / Complexity |
|-------------|----------------------|--------------------------|
| **Company** | Flat corporate rates; access to loss carry back; beneficial for reinvestment | Setup & compliance costs; dividend imputation issues |
| **Trusts** | Can split income among beneficiaries; preserving pre-reform CGT discounts for assets held before the changes; flexibility in tax planning | Complexity; beneficiaries taxed at individual rates; less favourable for future acquisitions |
| **Partnerships** | Transparent taxation; partners include CGT and negative gearing rules | Partners individually exposed to changes; less shield from liability |
## Choosing Wisely: Recommendations Post-Reform
- If you're investing in **new property builds**, consider a trust or individual ownership up until 30 June 2027 to maximise current negative gearing. After that, trusts and individuals lose this flexibility unless property is a new build. ([aph.gov.au](https://www.aph.gov.au/Parliamentary_Business/Bills_Legislation/Bills_Search_Results/Result?bId=r7493&utm_source=openai))
- For start-ups with high initial losses, forming a company could unlock loss carry back immediately from 2026-27, and then loss **refundability** from 2028-29. ([pm.gov.au](https://www.pm.gov.au/media/tax-reform-workers-businesses-and-future-generations?utm_source=openai))
- Hold high-growth assets under an entity before 1 July 2027 if possible, since CGT will be less generous after the reforms. Use trusts to distribute gains to lower-rate individuals where tax optimisation is possible.
## Example Case Study
Ella wants to launch a tech venture, while Jake invests in residential property:
- **Ella** sets up a company. First few years she incurs losses, so loss carry back helps reduce taxable income declared previously. From 2028-29, if the business is considered a start-up, refundability helps cash flow.
- **Jake** invests in a property completed since 1 July 2027; negative gearing doesn’t apply unless it's a brand-new build. If he bought earlier, and property was completed before that date, his deductions are preserved under old rules. And any asset bought before changes may still benefit from the pre-July 2027 CGT discount.
## Checklist for Setup
- Confirm your financial horizon: Are you aiming for quick profits, or long-term holding?
- Forecast your expected profits and losses for first 2–3 years (especially relevant for loss carry back / refundability).
- Map out key dates—especially 12 May 2026, 1 July 2026, and 1 July 2027—to protect existing tax benefits.
- Get legal and accounting help early to draft trust deeds, share-holder agreements or partnership contracts that account for changing tax laws.
Smart entity choice after the 2026 reforms can save you tens of thousands in tax and maintain flexibility.