The Tax Changes That Reshape Your Decisions
The 2026-27 Budget overhauls capital gains tax, restricts negative gearing to new builds, and puts a 30% minimum tax on discretionary trusts. Run the comparators, walk the timeline, and see exactly what changes for you.
The Budget at a Glance
The 2026-27 Federal Budget delivered the largest restructure of the Australian tax system since the introduction of the 50% capital gains tax discount in 1999. The headlines are modest deficits — but the real story is what is happening underneath.
Underlying cash deficit, 2026-27
New business tax reform package
Trust minimum tax revenue, 5 yrs
New minimum rate on capital gains and trust income
Three structural reforms
The 50% CGT discount is being replaced with cost-base indexation and a 30% minimum tax on real gains. Negative gearing is being restricted to new builds. And a 30% minimum tax is being applied to the income of discretionary trusts. Together, they rewire the after-tax economics of the two structures most Australian accountants spend the bulk of their advisory time on — rental property and discretionary trusts.
The dates matter more than the policy
Every change has a delayed start, generous grandfathering, and a clearly signalled escape hatch. Properties held at 7:30pm on Budget night are fully grandfathered. A three-year window opens in 2027 to restructure out of a discretionary trust without CGT. Decisions made in the next 24 months will shape household tax bills for the next decade.
How to read this page
This is not financial or tax advice — it is a structured explainer based on Budget Paper No. 1 (2026-27) and the Treasurer's Budget Night statements. Use the interactive comparators to see how a measure could apply to a specific scenario, then talk to a registered tax agent or financial planner before making any decision.
When the Changes Bite
Almost nothing in this Budget starts on 1 July 2026. The deferred timeline is a feature, not a bug — it is what gives investors and trustees a window to plan around the new rules. These are the dates to mark.
12 May 2026 — 7:30pm AEST
12 May 2026 — 7:30pm AEST
Negative gearing grandfather line
Residential properties held at this moment are fully grandfathered from the new negative gearing rules.
1 July 2026
1 July 2026
Personal tax cut + IAWO permanent
16% bracket cut to 15%. $20,000 instant asset write-off becomes permanent for businesses under $10m turnover. Two-year loss carry back permanent for companies up to $1bn.
1 July 2027
1 July 2027
CGT, negative gearing and trust rollover
50% CGT discount abolished, replaced by cost-base indexation + 30% minimum rate. Negative gearing restricted to new builds. Three-year rollover relief window opens for restructuring out of discretionary trusts. 16% bracket cut to 14%.
1 July 2028
1 July 2028
30% minimum trust tax + R&D + WATO
30% minimum tax on discretionary trust income starts. R&D Tax Incentive overhaul. Working Australians Tax Offset starts ($250 max). Start-up loss refundability begins.
By 30 June 2030
By 30 June 2030
Trust rollover window closes
Final cut-off to use the three-year CGT-free rollover relief for moving out of a discretionary trust into a company or fixed trust.
All effective dates are as announced in the Budget Papers. Several measures remain subject to legislation, consultation and stakeholder review — particularly the trust minimum tax collection mechanics and franking credit treatment.
Capital Gains Tax: Old vs New
From 1 July 2027 the 50% CGT discount is abolished for individuals, trusts and partnerships. In its place: cost-base indexation, plus a 30% minimum tax rate on the real gain. The main residence exemption and the small business CGT concessions are untouched.
Your scenario
Assumes the 12-month minimum hold for the 50% CGT discount is met. Sales inside 12 months attract no discount under the old regime.
Excludes Medicare levy. Pick the bracket your top dollar falls into.
Investors buying new builds can choose between the existing 50% discount or the new indexation regime.
Inflation assumption (advanced)
Budget forecasts headline CPI returning to 2.5% by 2026-27. This comparator applies the rate as a flat compound annual rate over the holding period — the real ATO indexation method uses quarterly CPI ratios, so a hold spanning the 2022-23 inflation spike will index more aggressively than this estimate suggests.
Old regime — 50% CGT discount
Pre-1 July 2027 (or new-build carve-out)
Tax payable
$92,500
New regime — indexation + 30% floor
From 1 July 2027 for individuals, trusts, partnerships
Tax payable
$143,547
New regime is more expensive in this scenario
Indexation rewards long holds and high inflation; the 30% floor hurts low-bracket earners the most.
+$51,047
Who pays more. Investors on the 30% bracket or below face a punitive 30% floor on real gains. A 15% bracket earner previously paid 7.5¢ in tax per dollar of nominal gain; they will now face up to 30¢ per dollar of indexed gain.
Who pays less. Long-held assets owned by high-bracket earners may come out roughly the same — indexation eats most of the nominal gain. Pre-1985 assets are now in the CGT net for gains arising from 1 July 2027 onward.
Method note. This comparator applies a single assumed inflation rate (default 2.5%) compounded annually over your holding period to estimate the indexed cost base. The actual ATO indexation method uses quarterly CPI ratios — so a hold spanning a high-inflation period (e.g. 2022-23) indexes more aggressively than this flat-rate model.
Treasury has not yet confirmed whether indexation runs from the original acquisition date or only from 1 July 2027. If it runs from 2027, the real-world relief on long-held assets will be smaller than this estimate suggests. We'll update once draft legislation is released.
Negative Gearing Restricted to New Builds
From 1 July 2027, net rental losses on established residential property can only offset rental income or capital gains from residential property — not your salary. Existing investors are fully grandfathered for properties held at 7:30pm AEST on 12 May 2026. Investors who buy new builds keep the old rules.
Grandfathered
Properties held at 7:30pm AEST 12 May 2026 — keep full negative gearing forever.
New builds
New build investments after the cutoff — keep full negative gearing and the 50% CGT discount as a chosen path.
Established, post-cutoff
Net rental losses can only offset rental income or residential property capital gains. Excess losses carry forward.
Your scenario
Old rules
Net loss deducted against any income
Tax saving this year
$5,550
Assumes the loss is fully absorbed by your other taxable income. If the loss exceeds total taxable income, the unused amount becomes a tax loss carried forward to future years.
Old rules apply — protected
Grandfathered property — no change
Tax saving this year
$5,550
You keep the old rules — no cash-flow change
Carried-forward losses can be used against future rental income or residential property capital gains.
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A 30% Minimum Tax on Discretionary Trusts
From 1 July 2028, a 30% minimum tax will apply to the taxable income of discretionary trusts. The trustee pays it; beneficiaries other than companies receive non-refundable credits against their own tax. Forecast revenue: $4.5b over five years.
Who pays
The trustee pays the 30% tax at the trust level on taxable income that isn't otherwise streamed to an excluded class.
Who gets a credit
Non-corporate beneficiaries receive non-refundable credits against their personal income tax — preventing the same dollar being taxed twice.
What's exempt
Fixed trusts, widely held trusts, complying super funds, special disability trusts, deceased estates, charitable trusts, primary production income, vulnerable minor income.
Does your trust need to plan around this?
1. Is the trust a discretionary trust?
The rollover window is the escape hatch
A three-year window from 1 July 2027 to 30 June 2030 lets small businesses move out of a discretionary trust into a company or fixed trust without triggering income tax or CGT. The 25% small business company rate is retained. ASIC will set up dedicated support arrangements, and the Australian Small Business and Family Enterprise Ombudsman will help from 1 January 2027. The consultation period on collection mechanics, franking credit treatment, and the precise scope of the rollover is open now.
Personal, Small Business & ATO
Underneath the big structural reforms sits a tidy package of personal tax tweaks, permanent small business concessions, an R&D overhaul, and a quiet but important modernisation of how the ATO collects PAYG.
Personal income tax
16% bracket cut to 15%, then 14%
The bottom marginal bracket on income $18,201–$45,000 falls to 15% from 1 July 2026 and to 14% from 1 July 2027 — the staged rate cut continues.
Effective: 1 Jul 2026 / 1 Jul 2027
$1,000 instant work-related deduction
Claim up to $1,000 of work-related expenses with no receipts or substantiation. Reduces taxable income on top of any other claims.
Effective: 2026-27 income year
Working Australians Tax Offset (WATO)
New permanent offset up to $250 per year for work income. Lifts the effective tax-free threshold for workers to $19,985 — or $24,985 if also LITO-eligible.
Effective: 2027-28 income year
Medicare levy thresholds + 2.9%
Low-income thresholds increased for singles, families, seniors and pensioners. Keeps over one million Australians exempt or paying a reduced rate.
Effective: 2025-26 income year
Small business & company tax
$20,000 instant asset write-off — permanent
No more annual cliff. Small businesses under $10m turnover can immediately deduct eligible assets under $20,000 indefinitely.
Effective: 1 Jul 2026
Permanent two-year loss carry back
Companies up to $1bn turnover can offset current-year losses against tax paid in the prior two years — refunded as cash. A genuine cash-flow lever during downturns.
Effective: 1 Jul 2026
R&D Tax Incentive overhaul
Core R&D offset boosted 25-50%. Supporting activities (lit reviews, equipment maintenance) excluded. Refundability lifted to $50m turnover but capped at firms under 10 years old. Minimum expenditure threshold lifted to $50,000.
Effective: 1 Jul 2028
Start-up loss refundability
New businesses operating less than two years can swap tax losses for a refundable offset, capped at the FBT and withholding tax paid on employee wages.
Effective: 1 Jul 2028
ATO compliance & PAYG modernisation
Temporary ATO relief
Streamlined access to payment plans, interest and penalty remission, and PAYG instalment variations for eligible businesses.
Effective: Until 30 Jun 2026
Dynamic PAYG instalments
Opt-in ATO-approved calculation embedded in accounting software, tying instalments to real-time business performance. Includes a safe-harbour against interest on good-faith underestimates.
Effective: 1 Jul 2027
Monthly PAYG opt-in
Businesses can opt into monthly PAYG instalment reporting to better manage cash flow.
Effective: 1 Jul 2027
497 nuisance tariffs abolished
A further round of low-collection tariffs removed to cut compliance costs on imports.
Effective: 1 Jul 2026
What Changes for You
Pick the role that best describes your tax situation and see only the measures that matter. If two apply, run both filters and look at the overlap.
Bottom line for a investor
The biggest structural change in 25 years. The 7:30pm 12 May 2026 grandfather line matters more than anything else on your tax return.
Grandfathering of existing properties
Properties owned at 7:30pm AEST 12 May 2026 are fully grandfathered — negative gearing rules unchanged for those assets.
Negative gearing restricted to new builds
For established properties bought after the cutoff, net rental losses only offset rental income or capital gains from residential property. Excess losses carry forward.
50% CGT discount abolished
Replaced with cost-base indexation plus a 30% minimum tax on real capital gains. Pre-1985 assets brought into the regime on gains from 1 Jul 2027.
New build carve-out
New builds keep access to the existing 50% CGT discount and full negative gearing — a meaningful tilt in the system.
Main residence exemption unchanged
Your principal place of residence is untouched.
Where to From Here
The 2026-27 Budget did not change anyone's tax bill on Budget night. It changed the shape of every major decision an Australian household, investor, or small business owner will make in the next 24 months. The grandfathering, the new-build carve-out, and the three-year rollover window are not loopholes — they are the policy.
01
Document what you own now
Pull title certificates and trust deeds. The 7:30pm 12 May 2026 grandfather line is binary — your records need to prove which side you sit on.
02
Stress-test your structures
Run the CGT and negative gearing comparators above with your real numbers. For trusts, model the 30% minimum tax against your beneficiary mix.
03
Decide before the windows close
The trust rollover window closes 30 June 2030. The new-build election will be locked in at purchase. Reactive decisions cost more than planned ones.
Talk it through with a human
This page is a structured explainer, not advice. The right move depends on your full financial picture — beneficiaries, other income, asset mix, time horizon. Get a registered tax agent or financial planner to model your scenario before you act.
Source: Australian Government, Budget Paper No. 1 (2026-27): Budget Strategy and Outlook. Figures and effective dates correct as at the Budget Night statement on 12 May 2026 and subject to legislation, consultation and stakeholder review. This page is general information only and is not personal financial, tax, or legal advice.