This year’s Federal budget was widely expected to include significant tax changes compared to the reasonably moderate tax changes we have seen recently (with the exception of time limited COVID-based concessions). It did not disappoint.
The changes to capital gains tax, taxation of trusts and to a lesser extent negative gearing represent a fundamental change to the way in which business and investment has been structured for at least the last 20 years and even since capital gains tax was introduced back in 1985.
Combinations of discretionary trusts paired with trading and wealth companies have largely become the structure of choice for most small and medium family businesses looking to create and protect their wealth.
These structures will now require a radical rethink and planning to transition to a tax effective structure which meets the future needs of the business, the owners and their families.
How will retirement change?
Retirement planning could change for clients whose assets or tax outcomes rely heavily on the capital gains tax or negative gearing. (More on this shortly.)
There are also new changes to Pension Supplement recipients overseas. The full rate of payment is extended to 12 weeks for temporary departures before stopping entirely, and for permanent departures the Pension Supplement will immediately end upon departure.
The aged pension age remains at 67. And the government has committed $3.7 billion to increase the supply of residential aged care accommodations, which may influence long-term retirement plans.
How will superannuation change?
There are no major changes to superannuation.
As fixed trusts, superannuation funds are not subjected to the new minimum 30% tax on discretionary trusts.
However, from 2026-27, super balances above $3 million will begin transitioning to the new Division 296 tax, which applies a higher tax rate to earnings above this threshold.
How will taxes change?
The Government announced several tax changes to help with cost-of-living.
This includes:
• A $250 tax offset from 2027-28
• An instant $1,000 deduction for work-related expenses on 2026-27 tax returns
Starting 1 July 2026, the tax rate for income between $18,201 and $45,000 will fall from 16% to 15%, then to 14% on 1 July 2027.
Additionally, a new minimum 30% tax rate will apply to family trusts. From 1 July 2028, income distributed through discretionary and ‘family’ trusts will be taxed at least 30% regardless of the beneficiaries’ taxable income.
How will capital gains tax change?
The Capital Gains Tax (CGT) discount will change from a flat 50% discount to an inflation-based model, with a minimum tax of 30% on total gains for an asset.
This could increase tax on future investment gains and reduce after-tax for some clients.
“Where the CGT tax change may bite is in relation to shares and businesses – particularly those which don’t meet any carve out for startups,”.
The change will come into effect after 1 July 2027.
For people who already hold assets, the new rule will only apply to gains made from 1 July 2027 and onward; any gains made before then will not be subject to the new changes.
How will negative gearing change?
From 1 July 2027, negative gearing will apply only to newly built residential properties. There will be no limits on the number properties investors can negatively gear.
The change will apply to homes purchased on and after 12 May 2026 but won’t come into effect until 1 July 2027.
Properties negatively geared before 12 May 2026 will not be affected.
Shares and commercial property are also exempt from this change.
How could house prices change?
Changes to negative gearing and the CGT discount could result in a short-term fall of around 5% in house prices.
“Investors [could] retreat due to a fall in the perceived after-tax return to property investments.”
The price dip will be temporary, given Australia’s ongoing housing supply imbalance.
The Budget’s impact on financial planning
The Budget signals a shift in how financial strategies are approached, with less emphasis on tax optimisation and greater focus on structure, clarity and long-term outcomes.
Capital Gain Tax management strategies
Financial strategies will need to adapt to the new taxation rules, including the end of the CGT discount.
The new minimum 30% CGT may reduce the effectiveness of common CGT-management strategies, such as offsetting gains with personal deductible superannuation contributions.
Valuation and record-keeping will become crucial for clients with long-held assets. From 1 July 2027, clients may need to navigate new valuations or apportionment calculations, adding complexity to financial planning decisions.
Property strategies
Property investments could offer less tax-driven benefits under the new rules.
You may need to reassess whether residential property continues to play a role in a client’s portfolio when compared with alternatives such as:
• Commercial property
• Equities
• Superannuation
Overall, the Budget nudges financial planning away from tax-led strategies and towards advice grounded in clarity, structure, and long-term goals.
Your Dunsford Financial Advisor is well placed to assist you through this transitional period to ensure your business and wealth structure is adapted to the changes when they commence in 2027 and 2028.
CLICK HERE FOR INSIGHT INTO WHAT THE FEDERAL BUDGET MEANS FOR FAMILIES AND INDIVIDUALS
CLICK HERE FOR INSIGHT INTO WHAT THE FEDERAL BUDGET MEANS FOR AUSTRALIAN BUSINESSES
