Federal Budget 2026 Newsletter
Please click on the following link to view this month's newsletter for the Federal Budget 2026. We would like to highlight the following articles:-
CGT Discount Replaced: Minimum 30% Tax on Capital Gains
From 1 July 2027, the Government will replace the current 50% CGT discount with inflation-adjusted cost base indexation, alongside a new minimum 30% tax rate on realised capital gains. These changes apply to assets held by individuals, trusts, and partnerships for more than 12 months.
Gains are transitional - the 50% discount continues to apply to gains accrued before 1 July 2027, and pre-1985 assets remain exempt for disposals made prior to that date. Income support recipients, including Age Pension recipients, are exempt from the minimum tax. Complying superannuation funds and SMSFs are also unaffected and will continue to receive a 33⅓% CGT discount.
Investors in new residential properties will have the option to choose between the existing 50% CGT discount or cost base indexation with the minimum tax, preserving incentives for new housing construction.
Minimum 30% Tax on Discretionary Trust Income
From 1 July 2028, trustees of discretionary trusts will be required to pay a minimum 30% tax on the trust's taxable income. Beneficiaries (other than corporate beneficiaries) will receive non-refundable credits for the tax paid by the trustee. Importantly, beneficiaries with taxable income below $45,000 may effectively pay a higher rate on trust distributions than on their other income.
Excluded trust types include fixed trusts, testamentary trusts, complying superannuation funds, special disability trusts, deceased estates, and charitable trusts. Certain income types are also excluded, including primary production income and income for vulnerable minors.
To support those wishing to restructure, the Government will provide rollover relief for three years from 1 July 2027 for small businesses and others looking to move out of discretionary trusts into a company or fixed trust structure.
Negative Gearing Restricted to New Builds
From 1 July 2027, losses from established residential properties will only be deductible against rental income or capital gains from residential properties — not against salary or other income. Excess losses can be carried forward and offset against future residential property income.
Properties owned at Budget night (12 May 2026) are fully grandfathered and remain unaffected until they are sold. New residential builds will remain fully negatively gearable, as a deliberate incentive to increase housing supply. Exemptions also apply to widely held trusts, superannuation funds, build-to-rent developments, and private investors supporting government housing programs.
Please do not hesitate to contact us if you have any queries in relation to your tax and accounting matters.
Important: Clients should not act solely on the basis of the material contained in Client Alert. Items herein are general comments only and do not constitute or convey advice per se. Also changes in legislation may occur quickly. We therefore recommend that our formal advice be sought before acting in any of the areas. Client Alert is issued as a helpful guide to clients and for their private information. Therefore it should be regarded as confidential and not be made available to any person without our prior approval.