The 2026–27 Federal Budget has delivered some of the most significant proposed tax reforms Australia has seen in decades.
While some measures had been widely discussed in recent years, others came as a surprise — particularly the proposed changes to discretionary trusts.
Importantly, many of these measures are still proposals only.
The draft legislation, technical detail and interaction with existing tax law are still evolving, meaning there are areas where uncertainty remains.
As with all major tax reform, the final legislation may differ from the original announcements.
What is already clear, however, is that these proposed reforms could have a significant impact on:
- property investors,
- business owners,
- family groups,
- trusts,
- investment structures,
- and long-term tax planning strategies.
For many Australians, the key issue will not simply be the changes themselves, but understanding:
- when they commence,
- which transitional rules apply,
- what existing arrangements are grandfathered,
- and whether proactive planning may be beneficial before the rules take effect.
The good news is that many of the proposed measures have long lead times and transitional periods, meaning there is still time for careful review and strategic planning.
Below is an overview of the major announcements and what they may mean for business owners, investors and families.
The Biggest Changes at a Glance
The 2026–27 Federal Budget contains a wide range of tax and business measures; however, several reforms stand out as particularly significant.
- Negative Gearing Changes
From 1 July 2027, proposed changes would limit negative gearing for residential investment properties to new builds only.
Existing residential properties held before 7:30 pm on 12 May 2026 are proposed to be grandfathered, meaning they can continue under the current rules.
Under the new system, losses from affected residential rental properties would no longer be offset against wages or business income. Instead, those losses could only be offset against:
- future residential rental income, or
- future capital gains from residential property.
- Capital Gains Tax (CGT) Reform
The Budget also proposes major reforms to capital gains tax from 1 July 2027.
The current 50% CGT discount for assets held longer than 12 months would be replaced with:
- cost base indexation, and
- A new 30% minimum tax on capital gains.
Importantly, these proposed changes apply broadly across assets — including shares, investments and property — and even extend to certain pre-CGT assets.
- Minimum Tax on Discretionary Trusts
From 1 July 2028, discretionary trusts may become subject to a minimum tax rate of 30%.
This could significantly affect traditional trust distribution strategies and the use of corporate beneficiaries (“bucket companies”).
The Government has also announced transitional restructuring relief for affected businesses and family groups.
- Small Business Measures
The Budget also included several measures aimed at small businesses, including:
- making the $20,000 instant asset write-off permanent,
- PAYG instalment modernisation,
- company loss carry-back measures,
- start-up company tax offsets,
- and revised electric vehicle FBT concessions
- Individual Tax Measures
Additional measures for individuals include:
- the proposed $250 Working Australians Tax Offset,
- a new $1,000 instant work-related deduction,
- and changes to the Private Health Insurance Rebate.
What Should You Be Doing Now?
With many of these reforms still in the proposal stage, the most important step for many taxpayers right now is not rushing into major decisions.
Instead, the focus should be on:
- understanding potential exposure,
- reviewing existing structures,
- and planning before commencement dates arrive.
As the proposed changes are confirmed and become law, it will be important to seek advice as to how your specific circumstances are affected.
The CGT changes in particular make access to the small business CGT concessions more valuable than ever. Anyone potentially eligible for these concessions should be reviewing their structures and planning to ensure eligibility when the time comes. This must be done ahead of time, as some tests require conditions to be met for as much as 7.5 – 15 years.
Anyone holding assets subject to capital gains tax should consider how the asset will be valued at 30 June 2027 and ensure adequate substantiation of the valuation used is available.
Don’t Panic — There Is Still Time
One of the most important things to understand is that many of these reforms are still proposals only.
While the announcements are significant, the legislation is still evolving, and many technical details remain unclear
For most taxpayers, this is not a situation requiring rushed decisions — it is a time for informed planning.
Many of the proposed reforms do not commence until:
- 1 July 2027, or
- 1 July 2028.
In addition, many measures still require:
- draft legislation,
- parliamentary approval,
- and further technical clarification.
That means there is still time for considered planning, rather than reactive decision-making.
Our Budget Timeline below summarises the effective dates of the major announcements.
For more detailed information about the above, click here https://hilliersadvisors.com.au/blog/2026-27-federal-budget-what-you-need-to-know
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