2026 Federal budget
With the release of the Federal Budget on the 12 May 2026 we have compiled an overview of the Budget to assist you with understanding the potential impact these measures could have on you and your investments.
Although the Legislation for these proposals is not certain to pass and wont come into effect for some time we will be assisting our clients with preparing for these changes.
LAST UPDATED 13 May 2026
Minimum Tax on Discretionary Trusts
From 1 July 2028, the Government proposes that Trustees will pay a minimum tax of 30% on the Taxable Income of Discretionary Trusts.
Individuals and Non-Corporate Beneficiaries will be able to claim a non-refundable tax offset in relation to the tax paid by the Trustee.
This means that if the Individual / Non-Corporate Beneficiary is already on a tax rate of 30% or higher then this change won’t result in additional tax payable by the group.
Critically any distributions made to a Corporate Beneficiary would effectively result in double taxation because the Corporate Beneficiary will not be able to claim a non-refundable tax offset in relation to the tax paid by the Trustee.
Negative Gearing on Residential Property
From 1 July 2027, the Government proposes to limit Negative Gearing for Residential Properties to new builds acquired after 7.30PM (AEST) on 12 May 2026 and Residential properties acquired prior to 12 May 2026.
These changes will apply to most taxpayers (Individuals, Companies, Partnerships and most Trusts) with some exceptions (such as Widely Held Trusts and Superannuation Funds).
Changes to the CGT Discount
From 1 July 2027, the Government proposes that the 50% CGT Discount will be replaced by Cost Base Indexation for CGT Assets held for more than 12 months, with a minimum tax on Net Capital Gains of 30%.
The changes will apply to all CGT Assets (including pre-CGT Assets) held by Individuals, Partnerships and Trusts. However, investors who acquire new builds will have the choice of applying the 50% CGT Discount or the Cost Base Indexation method.
Where a property was acquired prior to 1 July 2027, that portion of any Capital Gain that was made prior to 1 July 2027 would continue to attract the CGT Discount and would not attract the minimum tax of 30%. Note that any portion of a Capital Gain made on pre-CGT Assets that accrued prior to 1 July 2027 will continue to be tax free, however any Capital Gain that accrued after 1 July 2027 will attract both Capital Gains Tax (with Cost Base Indexation) and the minimum tax of 30%.
Small Business Instant Asset Write-off
From 1 July 2026, the Government proposes to permanently extend the $20,000 Instant Asset Write-off for small businesses with a Turnover of less than $10 million.
Loss Carry Back Measures
From 1 July 2026, the Government proposes to allow companies with aggregated global turnover of less than $1 Billion to carry back a tax loss incurred in the 2027 FY (and onwards) and offset it against (gain a refund of) tax paid in the two prior income years.
Working Australian Tax Offset
From 1 July 2027, the Government proposes to introduce a $250 Working Australian Tax Offset. This will be available to Australian Resident Individuals in receipt of salaries and wages and business income from Sole Traders.
Instant Tax Deduction for Work-related Expenses
From 1 July 2027, the Government proposes to introduce an instant tax deduction of up to $1000 for work-related deductions. This is designed to reduce record keeping requirements for itemised deductions where an individual is claiming less than $1000 in work-related expenses.
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