2026 Federal Budget

What a week it has been in the tax space with Tuesday night's 2026 Federal Budget proposing some pretty big changes. We have been spending the last 36 hours digesting and understanding how this may impact our clients. However the reality is the details are a little grey in some areas at this stage and these proposed changes are not yet legislated. For now I have put together a high level summary of the proposed key changes. I will be in touch with more information as it comes to light. 

If you have any questions in the meantime, or are concerned how these proposed changes may impact you please don't hesitate to reach out. 

-- Morgan, Founder

Negative gearing — significant changes from 1 July 2027

This is the headline reform. From 1 July 2027, negative gearing will only be available on new residential property builds. If you purchase an established property after Budget night (12 May 2026, 7:30 PM AEST), any rental losses will only be deductible against rental income — not your wages or other income. Unused losses can be carried forward.

If you already own investment properties, or had a contract signed before Budget night, nothing changes for you — existing properties are fully grandfathered until you sell.

Capital gains tax — the 50% discount is being replaced

From 1 July 2027, the 50% CGT discount for assets held over 12 months will be replaced by a cost-base indexation approach, with a minimum 30% tax on net capital gains. The change applies only to gains arising after 1 July 2027 — so prior growth is not affected.

Investors purchasing new builds will have a choice: use the old 50% discount or the new inflation-linked rules — whichever produces the better outcome.

Small business CGT concessions are preserved. Super fund CGT treatment is also unaffected. But if you hold assets in your personal name or a trust, this reform is worth modelling.

Minimum 30% tax on discretionary trust distributions

From 1 July 2028, a minimum effective tax rate of 30% will apply to taxable income distributed from discretionary trusts. This is a major change for those who have historically distributed to lower-income beneficiaries to reduce overall tax.

The minimum tax will not apply to: fixed trusts, widely held trusts, charitable trusts, special disability trusts, complying superannuation funds, deceased estates, primary production income, or income relating to vulnerable minors.

Three years of rollover relief (from 1 July 2027) may be available for trusts wishing to restructure into a company or other vehicle. This is worth planning once we have sufficient information to do so.

Income tax cuts — more relief on the way

The Government has already legislated a cut to the lowest tax bracket from 16% to 15% from 1 July 2026. Another cut to 14% follows on 1 July 2027. These apply to all income between $18,201 and $45,000.

On top of this, a new Working Australians Tax Offset (WATO) of up to $250 per year will apply from the 2027–28 income year. It's automatic — no claiming required — and applies to sole traders as well as employees. It effectively raises the tax-free threshold by nearly $1,800.

$1,000 instant tax deduction — no receipts needed

From 2026–27, employees and sole traders can claim up to $1,000 in work-related expense deductions without keeping receipts. The ATO will apply it automatically, saving you time at tax time.

If your actual work-related expenses are higher than $1,000, you can still claim the full amount — just keep your receipts as usual. This is a floor, not a cap.

$20,000 instant asset write-off — now permanent

The $20,000 instant asset write-off for small businesses (turnover under $10 million) has been made permanent from 1 July 2026. Previously operating on a year-by-year basis, you can now plan capital expenditure with confidence.

Monthly PAYG instalments — optional flexibility

From 1 July 2027, small and medium businesses will be able to opt in to paying PAYG instalments monthly, using ATO-approved accounting software calculations.

These changes are significant — and how they affect you depends entirely on your structure, situation, and timing. We're here to help you make sense of it all and plan ahead before the rules lock in.