Entity Setup
How Australia’s 2026–27 Budget Affects Entity Setup for Businesses
Recent budget reforms significantly reshape how entities are structured, taxed, and managed—from startups to large enterprises.
By NomadicTax Research Team • 5-8 min read • July 31, 2026
## Understanding Entity-Related Changes in the 2026–27 Budget
Australia’s Budget 2026–27, announced in May 2026, introduces major shifts affecting both new and existing entities. These changes span capital gains tax, trust taxation, small business write-offs, PAYG instalments, and loss carry-back regimes. For those setting up or restructuring entities, understanding these reforms is essential.
### Key Reforms Impacting Entity Structure
- **Replacement of the 50% CGT Discount (from 1 July 2027):** Investors will move from the current flat 50% discount to an inflation-indexed discount. A **minimum 30% tax on capital gains** will apply to gains realised from that date. Entities investing in *new builds* will have the option to choose between old and new regimes. ([budget.gov.au](https://budget.gov.au/content/04-tax-reform.htm?utm_source=openai))
- **Minimum Tax for Discretionary Trusts:** From 1 July 2028, discretionary trusts (with exceptions) will face a minimum 30% tax rate. Transitional rollover relief is available between 1 July 2027 and 30 June 2030 for small businesses and others restructuring. ([budget.gov.au](https://budget.gov.au/content/04-tax-reform.htm?utm_source=openai))
- **Instant Asset Write-Off:** Small businesses (turnover ≤ AUD 10 million) can immediately deduct eligible assets costing less than AUD 20,000 from 1 July 2026. Existing entities using it can benefit immediately. ([budget.gov.au](https://budget.gov.au/content/04-tax-reform.htm?utm_source=openai))
- **Loss Carry-Back and Refunds:** Eligible companies can carry back losses to the prior two income years from 2026-27, producing refunds. From 2028-29, small start-ups will be able to use losses to offset **fringe benefits tax (FBT)** and **withholding tax** on employee wages. ([budget.gov.au](https://budget.gov.au/content/04-tax-reform.htm?utm_source=openai))
- **PAYG Instalment Flexibility:** From 1 July 2027, more businesses can opt into monthly PAYG instalments. Also, dynamic instalments using business software will be expanded for greater alignment with actual operating conditions. ([budget.gov.au](https://budget.gov.au/content/04-tax-reform.htm?utm_source=openai))
## Practical Steps for Setting Up or Restructuring an Entity
1. **Choose the right structure early.** If you plan to hold investment assets, consider whether delaying or accelerating acquisition until after 1 July 2027 alters exposure to CGT changes.
2. **Review trust arrangements.** If your structure involves discretionary trusts, evaluate whether maintaining those or converting to companies or fixed-trust arrangements may reduce exposure to the 30% minimum tax.
3. **Optimize asset purchases.** For small businesses, ensure eligible assets are under the AUD 20,000 threshold to secure immediate deductions. Plan capex in advance to leverage the write-off.
4. **Prepare for cash flow impacts.** Loss carry-back refunds and flexible PAYG instalments help manage timing mismatches between costs and income. Entities with variable income should adjust forecasts accordingly.
5. **Super and trust compliance.** Retail, self-managed, or APRA-regulated funds need to flag when TSB exceeds AUD 3 million (see **Division 296** reforms in separate article). Trust-based investment structures will also need to consider additional reporting and taxation burdens.
## Example Scenario: Startup Using Trust Structure
- **Startup X** is incorporated in 2026 using a discretionary trust to distribute profits to family members with varying income.
- Under new law from 1 July 2028, that trust faces a **minimum 30% tax rate**. The owners consider closing the trust, switching to a company, or redesigning distributions to a fixed trust.
- They also examine loss carry-backs: if they incur losses in their first two years, they can use them for refunds of FBT and withholding tax—valuable relief for growing businesses. ([budget.gov.au](https://budget.gov.au/content/04-tax-reform.htm?utm_source=openai))
## Key Takeaways
- Many reforms **take effect 1 July 2026, 1 July 2027, or 1 July 2028**—check deadlines for your entity.
- Transition periods and grandfathering apply **especially for existing investments held before Budget night (approx. 12 May 2026).** ([budget.gov.au](https://budget.gov.au/content/04-tax-reform.htm?utm_source=openai))
- Structure choice now can significantly influence tax outcomes under new CGT, trust, and superannuation rules.
By aligning your entity structure with upcoming tax changes, you can mitigate surprise liabilities, optimize deductions, and position your business for long-term tax efficiency.