Below is a short summary of the recent 2026 Australian Government Budget.
From 1 July 2026
- $1000 instant deduction – first claimed in 2027 tax return
- Eligible individual taxpayers who earn labour income can claim up to a $1,000 standard deduction for work-related expenses without the need to keep or produce receipts
- Small business instant asset write of $20k made permanent
- The $20k asset write off has extended each year by various governments and has now been made permanent. Not really a change of any note. Should have been done years ago.
From 1 July 2027
- Removal of 50% CGT Discount including CGT exempt assets (Pre 1985)
- The CGT 50% discount is removed and replaced with a cost base indexation and a min 30% tax on the net capital gains. This affects all assets not just property. Including assets held before capital gains existed (1985). Note there is a transition period for assets currently held. Investor buying new residential properties with be able to choose between 50% discount and indexation method.
- Negative gearing limited to new builds of residential properties
- Any loss from the property rolls forward to a offset future property income.
- Workers $250 tax offset
- Permanent tax offset of $250 for workers.
From 1 July 2028
- Minimum 30% tax on discretionary trusts (Family Trusts)
- A minimum tax of 30% will apply to all distributions from a discretionary trust – the tax paid forms a non-refundable credit in the beneficiaries tax return. Interestingly primary production income is exempt.
Thoughts on the 2026 Budget…
This budget contains some of the biggest changes to the tax system that I have seen. Under the guise of intergenerational fairness the government is increasing taxes. The government has put a limit on the amount of Super you can have tax free in retirement, and just wait for them to come after your tax free main residence.
I don’t mind the limit on negative gearing, a similar provision already exists for sole traders running at a loss. The removal of the 50% discount now actually favours investment held in a tax structure other than your personal name. This incentivises complicated tax structures.
The tax on discretionary trusts, that is more than the tax rate of small company structures, means that many businesses will need to consider a change in structure.
I assume this will unintentionally impact not for profits who could now receive 30% less funds from investment trusts.