“Future shock is the shattering stress and disorientation that we induce in individuals by subjecting them to too much change in too short a time.” – Alvin Toffler
This budget contains the most ambitious and significant change to the Tax landscape in decades. It aligns with the current governments aim of increasing the tax load on Capital (Investment returns) while providing some relief for labour (Wages) and supporting government expenditure.
Instead of summarising the whole Budget, which is already well covered, this article will focus on;
Changes to Capital Gains Tax.
Changes to Trust Taxation.
Changes to Negative gearing.
We will ;
focus on what to be cautious of
what structures may be affected and the potential dangers
what possible actions to consider.
Warning – There is still significant information that has not been provided by the government to date and remember that the Budget provisions have not been legislated. Do not take any direct actions immediately due to the following summary until you have spoken to your Bishop Collins Advisor or other Chartered Accountant. This is about being prepared for the future and taking timely action where appropriate.
Changes to Capital Gains Tax & CGT Discount
Capital Gains arising for Individuals, trusts and Partnerships on or after 1 July 2027;
the 50% CGT discount is to be replaced by an indexation on the cost base for assets held for more than 12 months with a minimum tax of 30 %. Let’s break it down further…
If you sell an asset before 1 July 2027 and held it for more than 12 months the gain is reduced by 50% and no change
If you sell after 1 July 2027 and held the asset for more than 12 months the tax will be calculated in two parts.
Part One – The difference between the value of the asset at 1 July 27 less the assets cost will still enjoy the 50% CGT discount.
Part two – The difference between the sale price and the Indexed cost base or the 1 July 27 Value adjusted for inflation.
To determine the value on 1 July 2027 for listed asset where the value is known such as listed shares or equities, the calculation is easy enough however for property or unlisted assets this remains unclear. The ATO has said the calculation of this will be determined by an ATO “specified apportionment formula”. We do not have this available currently. One possible method for illustration purposes may be as follows;
Property purchased 1 July 2022 – $1,000,000
Sold 1 July 2032 – $2,000,000
Value on 1 July 2027 cannot be accurately gained
Assumed value growth straight line so at the halfway mark of 1 July 2027 value is ($2Mil – $1Mil)/2 = $1.5 Mil
Part One – Pre-1 July 2027 gain is $1.5Mil – $1Mil = $500,000. 50% Disc applied taxable Capital Gain = $250,000 at taxpayer’s marginal tax rate
Part Two – Post 1 July 2027 gain using the Indexation Factor = CPI on 1 July 2032 / CPI on 1 July 2027 * Value on 1 July 2027. This is then deducted from the Sale price of $2Mil.
New residential properties can choose at the time of sale either the 50% discount or cost base indexation and the 30% min tax rate.
the above changes are to include pre-1985 CGT assets, held by individuals, trusts and partnerships.
If a Pre CGT asset is sold before 1 July 2027 there is no change and it will remain completely tax free.
Only the Increase in value of the Pre CGT asset from 1 July 2027 will be taxed under the new regime.
The value of the Pre CGT asset is not covered in the Budget papers so we are unsure how this will be calculated. It will either be at Market Value and require a valuation as of 1 July 2027 or some other apportionment formulae to be determined.
It is important to note the main residence CGT exemption will continue to apply. The four small business CGT concessions will also be unchanged.
Australian superannuation funds effective tax rate on Capital Gains of 10% should continue to apply. What is unclear, however, is how these changes will impact superannuation funds that hold their assets via trusts. Refer Trust changes below.
CGT Changes – Actions To Consider:
Remember nothing changes until 1 July 2027.
If you wish to purchase an asset before 1 July 2027 and are not sure what the most tax effective structure will be we recommend waiting until more detail is provided and Legislation is passed.
If you cannot wait due to a great buying opportunity and need to know what structure to use, there are several factors to consider and before acting talk to your Chartered Accountant as every taxpayer’s position is unique.
Changes To Discretionary Trust Taxation
From 1 July 2028, trustees of discretionary trusts will pay a minimum tax on the taxable income of the trust of 30%, not the beneficiaries. Let’s break this down …
Non-company beneficiaries will receive the credits for the tax paid however they will be non-refundable. The non-refundable action ensures the minimum tax on distributions from trusts to 30%.
Company beneficiaries appear to not be entitled to the non-refundable credit paid by the trustee. The aim of this is to avoid the company beneficiary from converting these into refundable franking credits. This will result in trust distributions being double taxed in the hands of a company beneficiary and marks the end to any tax benefits of a “Bucket” company.
It is unclear how excess franking credits in a trust will be treated under these changes. CAUTION: This is significant for Discretionary Trusts held in Family investment vehicles and high net worth individuals that utilise gearing for their investments. The changes will result in an increase in the tax burden on trust distributions.
A number of trust types and income categories will sit outside its scope. Excluded trust types include:
fixed and widely held trusts, including fixed testamentary trusts
complying superannuation funds
special disability trusts
deceased estates; and
charitable trusts.
Excluded Income includes
primary production income,
certain income relating to vulnerable minors,
amounts to which non-resident withholding tax applies, and
income from assets of discretionary testamentary trusts existing at the time of announcement, would also be excluded.
Discretionary Trusts – Actions To Consider
Expanded rollover relief will be available for three years from 1 July 2027 to support small businesses and others that wish to restructure out of a discretionary trust into another entity, such as a company or a fixed trust.
WARNING – Small business and Family Investment held in trusts who choose to restructure could face stamp duty costs in the hundreds of thousands if the changes are not harmonised with State tax legislation.
Our recommendation is that decisions on restructuring should not be rushed. It is wise to use the period to 1 July 2028, and the rollover relief window from 1 July 2027, to take speak to your Chartered Accountant and consider your options. Decisions will also need to consider other changes announced in the Budget, including reforms to capital gains tax.
We recommend clients to treat the 1 July 2028 start date as likely and use the lead time to review their structures, look at alternatives and keep options open so they can take appropriate timely action once draft legislation is released.
Changes to Property Negative gearing
From 1 July 2027 negative gearing for established residential properties (acquired after 7:30 PM (AEST) on 12 May 2026) will be limited. Let’s break this down…
NOTE this only applies to established residential properties. It does not apply to Commercial properties or losses on other asset classes such as share investments.
Rental losses on established residential properties can only be offset against other residential rental income or capital gains, not salary or other income.
Any unused losses will be carried forward and applied against future residential property revenue gains or capital gains.
Investments in “New Builds” will continue to be able to negative gear any losses against all other taxable income
“New Builds” include properties that add to the housing supply, such as dwellings constructed on vacant land or where existing properties are demolished and replaced with a greater number of dwellings.
Knock down and rebuilds that do not increase supply will not qualify.
The following are excluded from these changes;
properties held by widely held trusts (presumably including listed funds and MITs),
properties in superannuation funds,
build-to-rent developments
and government housing projects
Negative Gearing – Actions to Consider:
Remember nothing changes until 1 July 2027.
If you wish to purchase an asset before 1 July 2027 and are not sure what the most tax effective structure will be we recommend waiting until more detail is provided and Legislation is passed.
If you cannot wait due to a great buying opportunity there are several factors to consider and before acting talk to your Chartered Accountant as every taxpayer’s position is unique.
We recommend the following action to consider with your Financial Advisor and Chartered Accountant
identifying which properties in existing portfolios are grandfathered
carefully document the timing of any contracts entered around 12 May 2026
review financial modelling on the after-tax comparison of established versus new build property purchases, and
reassessing investment structures to consider including Self-Managed Superannuation Funds and build-to-rent developments.
You’re Not Alone In Business – Bishop Collins
In summary, the Federal Budget 2026 proposes some of the most significant changes to the tax system in decades, with a clear focus on how capital gains, discretionary trusts, and negative gearing may be treated from 1 July 2027 and 1 July 2028.
The article highlights the practical cautions: uncertainty around valuation and transitional calculations for CGT assets and cost base indexation, the potential increase in tax burden where trusts face a minimum tax and beneficiaries receive non refundable credits, and the shift in how rental losses on established residential property can be offset against income versus being carried forward against future residential rental income or capital gains. Because there is still missing information and the measures have not yet been legislated, this is about preparation – not rushed action.
If you want help understanding how these proposed changes could affect your taxable income, net capital gains, and investment structures, seek guidance from Bishop Collins – so you can plan early and act at the right time.
Frequently asked questions:
What is the Australian Federal Budget?
The Australian Federal Budget is the Government’s annual plan for the country’s finances. It sets out:
Expected revenue (mainly taxes and other receipts)
Planned spending (health, defence, welfare, infrastructure, etc.)
The projected surplus/deficit and debt
New or changed policy measures (including tax and cost-of-living measures)
It’s delivered by the Treasurer in Parliament and is accompanied by official Budget papers and detailed portfolio statements.
What time is the budget announced in Australia?
Budget night is traditionally delivered at 7:30pm AEST (Budget speech in Parliament).
In Sydney time (AEST), that’s 7:30pm.
What date is the federal budget 2026?
The 2026–27 Australian Federal Budget was handed down on 12 May 2026.
Does “Budget 2026” release?
Yes. The Budget is released publicly on Budget night (speech + Budget papers), and supporting documents are published on the official Budget site.