Navigating a Changing Legislative Landscape

The Federal Budget has been on the lips of many since it was revealed on the 12th of May 2026, and given it includes major proposed tax changes to capital gains tax (CGT), negative gearing and family (discretionary) trusts that impacts many Australians, it’s no surprise. 

Some of the main changes proposed include: 

Capital Gains Tax – 50% Discount Scaled Back

From 1 July 2027, the Government proposes to: 

• Remove the 50% CGT discount for individuals, trusts and partnerships on gains accruing after that date.
• Replace it with indexation of the cost base (to account for inflation) and a 30% minimum tax rate on net capital gains.
• Super funds (including SMSFs) keep their existing CGT treatment under these proposals. 

In general, investors with strong real (after‑inflation) growth may pay more tax on future gains than under the current rules. 

An important consideration – Pre 1985 assets 

Assets bought before 20 September 1985 (currently outside CGT) would be partly brought into the net: 

• Gains up to 30 June 2027 remain CGT free.
• Gains after 1 July 2027 would be taxed under the new rules, based on an ‘apportioned’ split between pre and post 2027 growth. 

Negative Gearing – Established Property vs New Builds 

Negative gearing is proposed to be tightened for certain residential properties: 

• For established residential investment properties purchased after 7:30pm on 12 May 2026, rental losses would only be deductible against other residential investment property income (including property capital gains).
• Losses could be carried forward, but would no longer reduce salary, wages or other non‑property income. 

By contrast: 

• Existing properties held before Budget night keep current negative gearing rules (they are ‘grandfathered’).
• New residential builds keep full negative gearing (losses can still offset all income)
• Shares and commercial property are not affected by these negative gearing proposals. 

Family (Discretionary) Trusts – 30% Minimum Tax 

From 1 July 2028, the Government has proposed a 30% minimum tax on taxable income of discretionary (family) trusts. The aim is to limit income splitting to low‑income adult beneficiaries. Early indications are that: 

• There may be complexity where income is distributed to companies, with potential for two layers of tax. This has traditionally been a highly recommended structure from accountants, so this change could shift tax planning significantly.
• Fixed trusts, superannuation funds, charitable trusts and deceased estates are expected to be excluded, though discretionary testamentary trusts could fall under these arrangements, resulting in what experts consider to be a ‘hidden death tax’.
• Limited CGT rollover relief is proposed from 1 July 2027 to allow families to restructure into companies or fixed trusts, where appropriate. 

Traditional trust distribution strategies are likely to need review over the next few years. 

Don’t Rush – Plan with Advice 

Even though this has been the most impactful Federal Budget in decades, the key message is do not panic and do not act without advice: 

• These measures are still to be legislated and may change.
• Start by understanding where you are exposed. For example, large unrealised gains, pre‑1985 assets or reliance on family trust distributions.
• Then work with your professional advisers to model options before making any major decisions, particularly around asset sales or restructuring. 

There’s no doubt that navigating this changing landscape can be challenging, so now more than ever, if you feel a level of uncertainty around your financial situation and need someone in your corner, please reach out to our team.

Important information 

This article is general in nature and based on Federal Budget announcements as at May 2026. It does not take into account your personal objectives, financial situation or needs and is not personal financial or tax advice. The proposals outlined remain subject to legislation and may change.