Federal Budget Changes We Need Our Clients to Know
Following the release of the 2026–27 Federal Budget, several proposed tax and investment reforms have generated significant discussion across Australia — particularly around Capital Gains Tax (CGT), negative gearing, and the taxation of trust income.
While many of these measures are still subject to legislation and further clarification, they may have important implications for property owners, investors, business owners, and families using discretionary trust structures as part of their long-term financial planning.
At Strategem, we understand that Budget announcements can often create uncertainty, confusion, and questions around what changes are proposed, when they may apply, and how they could impact your personal financial position.
To help provide clarity, we’ve prepared a simplified FAQ overview covering some of the key proposed reforms announced as part of the Federal Budget, including:
proposed changes to Capital Gains Tax (CGT)
updates to negative gearing rules
proposed changes to the taxation of discretionary trust income.
This blog is designed to provide general information only and help clients better understand the discussions currently taking place around these proposed reforms. As further details emerge and legislation progresses, the practical impact for individuals and businesses may continue to evolve.
If you would like tailored advice around how these proposed changes may affect your financial position, investment strategy, or business structures, we encourage you to speak with the Strategem team directly.
Frequently Asked Questions
Changes to Capital Gains Tax
1. What is changing with Capital Gains Tax (CGT)?
The Federal Budget proposes replacing the current 50% CGT discount with a system based on inflation (cost base indexation), along with a minimum 30% tax rate on capital gains.
2. From when will the CGT changes apply?
The new rules are expected to apply from 1 July 2027 and will only affect capital gains that arise after this date, not gains already accrued.
3. Will existing investments be affected?
Existing investments are largely protected.
The 50% discount still applies to gains accrued before 1 July 2027
The new rules will only apply to future gains from that date onward
4. How will the new system calculate capital gains?
Instead of halving the gain, the new approach will:
Adjust the purchase price for inflation, and
Tax only the real (inflation-adjusted) gain. A minimum 30% tax will then apply to those gains.
5. Are there any exceptions or special rules?
Yes, a few key ones:
Investors in new residential builds may be able to choose between the old 50% discount and the new system
The main residence exemption remains unchanged
Some concessions (e.g. small business CGT concessions) are not impacted by the announcement
Frequently Asked Questions
Changes to Negative Gearing
1. What has changed with negative gearing in the Federal Budget?
The Government has announced that negative gearing will be restricted to newly built residential properties from 1 July 2027.
For established properties purchased after the budget announcement, investors will no longer be able to deduct losses against other income such as salary and wages.
2. Will existing investment properties be affected?
No — existing investors are protected under “grandfathering” rules.
If you owned an investment property before 7:30pm (AEST) on 12 May 2026, you can continue to claim negative gearing benefits under the current system until the property is sold.
3. What happens if I buy an established property after the changes?
If you purchase an existing (non-new) investment property after the cut-off, you will still be able to claim losses — but only against rental income or future capital gains, not your salary.
Unused losses can be carried forward to offset future property income.
4. Are there any exceptions to the new rules?
Yes. The key exception is for new property builds.
Investors who purchase eligible newly built properties will still be able to negatively gear and deduct losses against other income, maintaining the current tax benefit.
5. Why is the Government making these changes?
The reforms are aimed at improving housing affordability and increasing housing supply, particularly for first home buyers.
By reducing tax incentives for investors purchasing existing properties, the Government hopes to encourage investment into new housing construction and level the playing field for buyers.
Frequently Asked Questions
Changes to Taxing of Trust Income
1. What is the key change to how trust income will be taxed?
The Federal Budget introduces a 30% minimum tax on discretionary trust income, which will apply at the trustee level from 1 July 2028.
This marks a significant shift from the current system where trust income is generally taxed in the hands of beneficiaries at their individual marginal tax rates.
2. How will the new minimum tax work in practice?
Under the proposed rules:
The trustee pays at least 30% tax on the trust’s taxable income.
Beneficiaries still include their share of income in their tax returns.
Individual beneficiaries receive a non-refundable tax credit for tax already paid by the trust.
This ensures the overall tax paid on trust income is not less than 30%.
3. Why is the Government making this change?
The reform is aimed at improving fairness in the tax system by limiting the ability to reduce tax through income splitting across family members with lower tax rates.
Historically, discretionary trusts have allowed income to be distributed to beneficiaries in lower tax brackets, reducing overall tax payable.
4. Will all trusts be affected?
No. The 30% minimum tax is expected to apply primarily to discretionary (family) trusts.
It will not apply to certain other structures, including:
Fixed trusts
Widely held trusts (e.g. managed funds)
Superannuation funds
Charitable trusts
Deceased estates
Some types of income (such as primary production income) may also be excluded.
5. What does this mean for clients with existing trust structures?
Clients using discretionary trusts—particularly those distributing income to low-tax or non-working beneficiaries—may face higher tax outcomes under the new rules.
To assist with this transition:
The Government is offering rollover relief from 1 July 2027 for three years
This allows restructuring (e.g. moving to a company or fixed trust) without immediate tax consequences [ato.gov.au]
How We Can Support You
While many of the proposed Budget reforms are still subject to legislation and further detail, they highlight the importance of staying proactive when it comes to your financial position, investment strategy, and long-term planning.
Changes to Capital Gains Tax, negative gearing, trust structures, and broader taxation policy can have flow-on effects across property ownership, business structures, wealth creation, succession planning, and retirement strategies. What these changes may mean for you will depend entirely on your personal circumstances, goals, and existing financial arrangements.
At Strategem, we encourage clients to look beyond the headlines and seek advice tailored to their individual situation before making any financial decisions based on Budget announcements or media commentary.
If you’d like to better understand how these proposed reforms may impact you, your family, your investments, or your business structures, our team is here to help guide you through the changes and support informed financial decision-making moving forward.
Looking for more insights?
Explore the Federal Budget Highlights and how it will effect you and your situation…
Read our recent blog following the announcement.
We are here to help
If you need further advice, please do not hesitate to contact our office on (03) 5445 4777 and one of our Accountants & Advisors are available to support you.
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