Major Changes Introduced in Budget 2026-27
The Australian Government has released a tax reform package with significant changes to long-standing investment and trust tax rules. Key points include:
- Negative gearing: From 1 July 2027, residential property negative gearing is limited to new builds. Properties held before 7:30pm AEST on 12 May 2026 (“Budget night”) are exempt.(budget.gov.au)
- Capital Gains Tax (CGT) reforms: Replacing the current 50% discount with a system based on inflation-adjusted indexation, plus a minimum tax rate of 30% on realised gains from 1 July 2027. Again, new builds can be eligible for old or new arrangements.(budget.gov.au)
- Discretionary trusts: Starting from 1 July 2028, trustees will pay a minimum 30% tax on taxable income. Expanded rollover relief (3-year window from 1 July 2027) provided for small businesses and others looking to restructure. Consultation paper released 8 July 2026.(ministers.treasury.gov.au)
How These Reforms Affect Different Groups
| Group | Key Impacts | Things to Consider |
|---|---|---|
| Property Investors | Restrictions on claiming losses against wages for established properties acquired after Budget night | Might delay purchases or refocus on new builds; evaluate cash flow implications and debt leverage carefully |
| Passive Investors/Shares | CGT discount removal means higher tax on gains—rate floor at 30% | Existing assets still enjoy old discount, but indexed cost base system requires careful record-keeping |
| Trustees / Trust Beneficiaries | Trust income taxed at flat 30%, not beneficiary marginal rate; implications for trust distributions | Review trust deeds; anticipate taxation on distributions; beneficiaries to plan for creditable tax from trustee |
Examples in Practice
- Jane bought an established property after 12 May 2026. Under new rules, if it runs at a loss, cannot deduct the loss against wage income, only against other property income, and must carry forward excess losses.
- Sam holds shares bought in 2024. If sold on 1 Aug 2027, the capital gain will be computed with indexation (inflation adjustment), not flat 50% discount, and taxed at least at 30%.
- A family discretionary trust distributes to beneficiary A, a corporate beneficiary. Under minimum tax, trustee pays 30%, and beneficiary receives non-refundable credit for tax paid by trustee—but cannot eliminate all tax inefficiencies.
Planning and Transition Tips
- Document asset acquisition dates, cost base, and inflation factors accurately.
- If buying property, consider contracts signed before 12 May 2026 for grandfathering.
- Trusts: evaluate whether to restructure, unwind, or adjust distribution practices ahead of changes.
- Use rollover relief window (3 years from 1 July 2027) for trusts needing restructuring.
Broader Implications
These reforms aim to rebalance tax incentives, reduce upward intergenerational inequality, and better align taxation of investment returns with real economic gains. For investors, they portend higher taxes on passive wealth accumulation and trust distributions—but also offer clearer rules and predictability with respect to when the changes apply.
Actionable Steps:
- Assess your portfolio for exposure: property type, acquisition dates, asset gains and trust use.
- Consult a tax adviser for structures involving trusts to evaluate the cost of anticipated minimum tax vs existing marginal-rate taxation.
- Plan timing of asset disposals before 1 July 2027 where beneficial.
These reforms represent the biggest investor-facing tax overhaul in decades. Being informed now gives you more options going forward.