On Tuesday, 12 May, Treasurer Jim Chalmers handed down the 2026–27 Federal Budget, with a strong focus on cost-of-living relief, housing affordability, tax reform and small business support.
While some measures are designed to support workers and businesses, others may significantly impact property investors and discretionary trusts.
Here’s a simple breakdown of the key announcements.
Tax Cuts & Cost of Living Relief
The Government announced additional tax relief measures for individuals, including:
- A new $250 Working Australians Tax Offset from 1 July 2027
- A proposed $1,000 instant tax deduction for work-related expenses from the 2026–27 income year
- Increased Medicare levy low-income thresholds
The aim is to simplify tax returns and provide extra support to low and middle-income earners.
Small Business Support
Several positive measures were announced for small businesses:
Permanent $20,000 Instant Asset Write-Off
From 1 July 2026, eligible small businesses with turnover under $10 million will permanently be able to immediately deduct eligible assets costing under $20,000.
PAYG Instalment Changes
From 1 July 2027, businesses will be able to opt into monthly PAYG instalments using real-time accounting software calculations to better align tax payments with actual cash flow.
Mental Health & Financial Support
Additional funding was announced for small business financial counselling and mental health support programs.
Major Property Tax Changes
One of the biggest announcements was the reform of negative gearing and capital gains tax.
Negative Gearing Changes
From 1 July 2027:
- Negative gearing for residential property investments will generally be limited to new builds
- Existing properties purchased before 12 May 2026 will be grandfathered
- Losses on established properties will only be offset against rental income or future capital gains
Capital Gains Tax Changes
The current 50% CGT discount is proposed to be replaced with a cost base indexation method and a minimum 30% tax on capital gains from 1 July 2027.
These changes could significantly impact investment property strategies moving forward.
Changes to Family Trusts
From 1 July 2028, discretionary trusts may be subject to a minimum 30% tax on trust income.
While some trusts will be exempt, this could affect many small business and investment structures commonly used for tax planning and asset protection.
The Government has also announced rollover relief for businesses wanting to restructure from a trust into another entity type.
Superannuation Changes
Key superannuation measures include:
- Payday Super commencing from 1 July 2026
- Higher tax rates for super balances above $3 million
- Increased low-income super tax offset thresholds
Final Thoughts
This year’s Budget introduces some of the most significant tax reforms seen in years, particularly around property investment and trust structures.
While there is welcome relief for workers and small businesses, many investors and business owners may need to review their current structures and future strategies.
You can read the full Budget Papers and announcements here:
If you would like to discuss how these changes may affect you or your business, please contact our office.
