Analysis & Insights – What the proposed 2026 Federal Budge could mean for you
Dear Clients,
Last night the Federal Treasurer, the Hon Dr Jim Chalmers MP, delivered his fifth Federal Budget, with venture capital tax incentives and reforms announced for capital gains tax, negative gearing and a minimum tax to apply to taxable income from discretionary trusts.
Need help making sense of the changes?
We’ve included below a summary of some key budget announcements that may impact you. It’s important to remember that many of these measures are proposals only, and will need to pass through the legislative process before they become effective. If you’d like to understand how these changes impact to your personal situation please contact us.
What you need to know
Capital Gains Tax (CGT) Changes: From 1 July 2027, the 50% CGT discount will be replaced by cost base indexation (based on the Consumer Price Index) for assets held for more than 12 months, with a 30% minimum tax on net capital gains. This will apply to all CGT assets, including pre-1985 assets, held by individuals, trusts, and partnerships, however it does not apply to assets held in superannuation.
o Transitional arrangements mean these changes will only apply to gains that accrue after 1 July 2027. The 50% CGT discount will still apply to gains that accrue before this date, and pre-1985 assets remain exempt from CGT for gains that accrue up to 1 July 2027.
o New Residential Properties: Investors in new residential properties will have the option to choose either the 50% CGT discount or the new cost base indexation method for calculating capital gains.
o There is no change to how CGT is calculated on assets held in superannuation.
Negative Gearing Reforms: From 1 July 2027, losses from established residential properties will only be deductible against rental income or capital gains from residential properties.
o Properties acquired prior 7.30PM (AEST) on 12 May 2026 are exempt from these changes until disposed of.
o Eligible new builds will be exempt from these changes.
o Properties in widely held trusts and superannuation funds, as well as specific build-to-rent developments and private investors supporting government housing programs, will also be excluded.
o Negative gearing into other types of investments (such as shares or managed funds) will be unaffected by the negative gearing reforms.
Minimum 30% tax on Discretionary Trusts: From 1 July 2028, a 30% minimum tax will be applied on the taxable income of discretionary trusts. Beneficiaries (other than corporate beneficiaries) will still declare the income in their tax return though will receive non-refundable credit for the tax paid by the trustee.
o This minimum tax will not apply to fixed and widely held trusts (including fixed testamentary trusts), complying superannuation funds, special disability trusts, deceased estates, and charitable trusts. Certain types of income, such as primary production income or income relating to vulnerable minors, will also be excluded.
o Expanded rollover relief will be available for three years from 1 July 2027 to support small businesses and others that restructure out of discretionary trusts into other entity types like companies or fixed trusts.
Venture capital tax incentives: From 1 July 2027 the early stage venture capital limited partnership (ESVCLP) tax incentive cap on the asset size of the investee business (which determines when investment returns can be fully tax exempt) will be increased to $420 million from the current cap of $250 million.
What’s next
Be sure to watch for confirmed start dates and eligibility criteria as more details become available. In the meantime, don’t hesitate to reach out if you’d like to discuss your financial plan, tax implications or any of the announcements outlined above
