Federal Budget 2026 Summary

Proposed Tax Changes for Investors, 

Trusts and Small Businesses

The 2026 Federal Budget delivered one of the most significant proposed overhauls to Australia’s tax and investment landscape in decades, with major announcements targeting discretionary trusts, capital gains tax, superannuation, property investing and small business tax planning.

For many Australians, the Budget signals a potential shift away from some of the long-standing tax structures and investment strategies that have shaped wealth creation for years.

Key Federal Budget 2026 Announcements

Proposed 30% Minimum Tax on Discretionary Trusts

One of the headline Budget measures is the proposed introduction of a minimum 30% tax on discretionary trust income from 2028.

Why This Matters

Discretionary trusts are widely used throughout Australia for:

• Family business structures
• Asset protection
• Succession planning
• Investment property ownership
• Tax planning flexibility

If implemented, the proposed changes could significantly reduce the tax effectiveness of many existing trust arrangements.

Who Could Be Affected

• Small business owners
• Property investors
• Family groups with investment trusts
• Professionals operating through trust structures

Potential Impact

For some families and businesses, the changes may reduce the long-term benefits of retaining investment assets inside discretionary trusts.

Capital Gains Tax (CGT) Reform Proposals

• The government is proposing to abolish the current 50 % CGT discount that applies when an asset is held for more than 12 months.
• Instead, from 1 July 2027, capital gains will be calculated using an inflation indexation method, meaning only real gains (after inflation) are taxed.
• A minimum effective tax rate of 30 % on net capital gains is proposed, so even if indexation results in a low taxable gain, tax can’t go below 30 % of that gain.

What This Means in Practice

• Investors will pay tax on the real, inflation‑adjusted gain rather than simply getting a straight 50 % discount.
• Investors with pre‑existing assets will have a transition mechanism so gains accrued before 1 July 2027 continue to get some concession, separate from gains after that date.
• Assets purchased before 1 September 1985 (pre‑CGT assets) may now be brought into the tax net for gains arising after 1 July 2027 under the new regime, whereas they were previously entirely exempt.

Negative Gearing Changes

• Under current tax law, negative gearing allows an investment property loss to be offset against other income (e.g., salary).
• The Budget proposes that, from 1 July 2027, negative gearing deductions will be limited to newly built residential properties that increase housing supply (not existing homes).

Grandfathering & Transitional Rules

• Properties bought before 7:30 pm AEST on 12 May 2026 (Budget night) will keep the old negative gearing rules i.e., losses can still be offset against other income.
• For established properties bought after Budget night, losses can only be offset against other rental income or capital gains from residential properties, not against salary or wages.

• Negative gearing still applies fully for:
• new builds even if purchased after Budget night, and
• commercial property and other asset classes that are not affected by these specific residential rules.

Potential Winners

• Some first-home buyers
• Future owner-occupiers entering the market

Potential Losers

• Existing property investors
• High-leverage investors
• Rental supply markets

Superannuation Changes Remain in Focus

Separate to the Budget announcements, the government has also progressed major superannuation tax reforms for high-balance super accounts.

From 1 July 2026, super balances above $3 million will face higher tax rates on earnings, with balances between $3 million and $10 million effectively taxed at 30%, and balances above $10 million potentially taxed at 40%.

Importantly, the revised legislation removed the originally proposed taxation of unrealised gains and introduced indexation of thresholds.

Key Proposed Thresholds

Why Investors Are Watching Closely

Superannuation remains one of the most tax-effective investment environments in Australia. Any reduction in tax concessions could affect:

• Retirement planning
• Intergenerational wealth transfer
• SMSF investment strategies
• Long-term wealth accumulation

Working Australians Tax Offset (WATO)

The Budget introduced a proposed new Working Australians Tax Offset (WATO), designed to provide ongoing tax relief to eligible workers.

Key Features

• Proposed offset of up to $250
• Expected to apply automatically through tax returns
• Designed to support cost-of-living pressures

The Government has positioned this as part of broader personal tax relief measures.

$1,000 Instant Tax Deduction Proposal

Another Budget announcement includes a proposed $1,000 instant tax deduction for work-related expenses without the need for receipts.

Potential Benefits

• Simpler tax returns
• Reduced record-keeping
• Easier deductions for employees

Federal Budget 2026 Winners and Losers

Potential Winners

• First-home buyers
• Lower and middle-income earners
• Employees receiving new tax offsets
• Some owner-occupier buyers

Potential Losers

• Discretionary trust structures
• Property investors
• High-balance superannuation holders
• Families relying on income splitting strategies

What This Means for Business Owners & Investors

The 2026 Federal Budget signals a broader move toward restructuring how wealth, investments and business income are taxed in Australia. For business owners and investors, the key issue right now is uncertainty.

Many measures remain proposals only, and there may be:

• Amendments to legislation
• Delays to implementation
• Grandfathering provisions
• Transitional rules
• Political negotiation before final laws are passed

This means making major structural decisions too early could create unnecessary risk.

Key Takeaways From the Federal Budget 2026

• Significant tax reform is now firmly on the table
• Discretionary trusts will face a minimum 30% tax
• Major CGT reforms could reshape investment tax planning
• Negative gearing concessions may narrow for future property purchases
• Superannuation concessions continue to tighten
• Many measures are still proposed and not yet law

Frequently Asked Questions

Are these Budget changes already law?

No. Many announcements are currently proposed measures only and still require legislation to pass Parliament.

Should I restructure my trust or investments now?

It is important to wait for greater legislative clarity before making significant restructuring decisions.

Will these changes affect small businesses?

Potentially yes. Business owners using discretionary trusts or investment structures could be significantly impacted if the reforms proceed.

Could property investors face higher tax bills?

Possibly. Future changes to CGT, trust taxation and negative gearing may alter after-tax investment returns.

How Cashflow Financial Can Help

At Cashflow Financial, we are actively reviewing the proposed legislation. When there is more clarity, we will be working alongside our tax legal advisors to understand the best strategies moving forward for our clients.

Contact Cashflow Financial

If you would like to discuss how the proposed Federal Budget 2026 changes may affect your business, investments or tax strategy, contact the team at Cashflow Financial today.

Servicing clients across:

• Wollongong & Illawarra
• Sutherland Shire
• Greater Sydney

We can help you navigate the changing tax landscape with proactive advice and strategic planning.