It’s been three months since the Government handed down the 2026-27 budget with the biggest changes in tax law in over 25 years.

Some of the proposed changes have been legislated and some are still awaiting consultation.

There is much talk in the media, down the pub and in our meetings about the impact of the changes and what action can or should be taken. Of course, this depends on individual circumstance, and we look forward to discussing these with each client in the coming months before the changes take effect.

Here we will provide an update on the major announcements, what we know and what we are still waiting on.

Changes to Capital Gains Tax (CGT)

The current 50% Capital Gains Tax (CGT) discount will be replaced with cost base indexation for capital gains arising on or after 1 July 2027. The 50% CGT discount will remain on all eligible gains arising before 1 July 2027. This legislation has passed.

In practice, taxpayers can choose to get an independent valuation of their CGT asset on 1 July 2027 and, once disposed, the gain to this point will receive the 50% discount with any further gain taxed under the new rules. If a valuation is not obtained, you can instead use a formula based on days held before and after 30 June 2027 (note: this formula is in Tranche 2 legislation not yet passed). This formula may only be used for real property and assets that do not have a readily ascertainable market value (e.g. you cannot use it for listed shares).

A new 30% minimum tax will be levied on net capital gains arising post 30 June 2027. Donations to deductible gift recipients will be allowed to reduce the amount subject to the minimum 30% tax (but this is not yet legislated). Income support and Age Pension recipients will be exempt from this minimum tax.

These changes apply to all CGT assets except new residential dwellings held by individuals, trusts and partnerships. CGT assets with pre-CGT status will also be included for gains above the 1 July 2027 values. 

Investors in new residential properties will be able to choose between the 50% CGT discount or cost base indexation and the 30% minimum tax. The definition of new residential is not yet legislated but the proposal is about increasing supply so if you knock down a house and build a new one that isn’t eligible because still same number of dwellings. 

There is no change to the CGT discount for superannuation funds who will continue to receive the 33.3% discount and will not be subject to the minimum tax.

The Tranche 2 CGT legislation, not yet passed, contains an exemption from the 30% minimum tax for deceased estates and testamentary trusts when disposing of assets which have been transferred from a deceased estate provided the testamentary trust is established for genuine testamentary purposes. Special disability trusts are also excluded from the 30% minimum tax.

The small business CGT concessions remain available to eligible taxpayers (generally under $2 million turnover or $6 million net assets). Eligibility is assessed only on realisation of the business asset not at 30 June 2027 valuation.

From 1 July 2027, the 50% active asset reduction will also be available to businesses with a turnover between $2 million and $10 million and assets over the $6 million net asset value. The 3 other concessions (15-year, retirement and rollover) will not be available to these taxpayers. 

The Government has proposed a 50% CGT discount for founders and early-stage investors in innovation startups established after 30 June 2027. This measure is not yet legislated.

Changes to Negative Gearing

From 1 July 2027, negative gearing losses on residential properties acquired after 12 May 2026 (unless newly built) will be quarantined.

The ability to offset losses from an existing investment property against other income continues unchanged for as long as you hold that property under the grandfathering provisions.

For established residential properties acquired after 7:30pm AEST on 12 May 2026, rental losses from those properties will only be deductible against residential rental income or capital gains from residential properties. Excess losses are carried forward but cannot reduce other income. Executed contracts to purchase established residential properties before 7:30pm on 12 May 2026, including those not yet settled, are covered by the grandfathering provisions.

These changes do not apply to other CGT assets including commercial property and shares.

The quarantined negative gearing losses are applied to reduce the following (in this order):

• Deferred residential capital gains (pre-30 June 2027 component of gains since realised)
• Residential capital gains (post 30 June 2027 component of gains realised)
• Positive residential property net income

Due to this required order, the deferred residential capital gains (which may have otherwise been eligible for the 50% CGT discount) are used first so the maximum tax is paid by the taxpayer.

Widely held unit trusts and superannuation funds are excluded but a subsequent change has since disallowed self-managed superannuation funds from using Limited Recourse Borrowing Arrangements (LRBAs) to acquire residential property from 10 August 2026.

Changes to Taxation of Trusts (not yet legislated) 

From 1 July 2028, trustees of discretionary trusts will be required to pay a minimum tax of 30% on the taxable income of the trust. Beneficiaries other than corporate beneficiaries will receive non-refundable credits for the tax paid by the trustee. Corporate beneficiaries will not receive the credit meaning that they will be double taxed (a total of nearly 70% tax once the company pays dividends to shareholders). This disincentive will effectively stop affected trusts from distributing to companies from the 2029 financial year onwards.

Fixed trusts, widely held trusts, complying superannuation funds, special disability trusts, deceased estates, and charitable trusts are not subject to the measure. A number of exclusions apply to certain types of income, including primary production income.

Income from assets already in testamentary trusts is excluded from the measure but income from assets transferred to testamentary trusts from 12 May 2026 are not. The Government has now announced they will broaden the exclusion for testamentary trusts subject to integrity measures to ensure they are used for genuine inheritance. This may impact estate planning considerations.

The practical effect is a significant increase in the tax cost of distributing trust income to beneficiaries who pay tax at a combined rate below 30%. Where a beneficiary’s actual tax liability is less than the credit received, the excess is not refunded.

There will be rollover relief for three years from 1 July 2027 to support those wishing to restructure out of discretionary trusts into another entity type before the minimum tax takes effect. The details of this rollover are yet to be legislated and for some clients it may be preferable to use the existing small business concessions instead if these are available. Any restructures will also need to consider stamp duty costs and other factors. 

The Government released a consultation paper on these changes in July 2026, and many submissions have been made regarding how the new tax could or should apply.

There are many issues and complexity that need to be resolved before decisions can be made, so in most cases we suggest waiting before making any changes to your trust structures. Once the legislation is finalised, we will be able to advise you on the changes and available options.

Other changes

The $1,000 standard deduction for work related expenses has been passed but remember this starts from 1 July 2026 so is not available for your 2026 tax return.

The $250 working Australian Tax Offset has been legislated and will apply from the 2028 financial year.

The following announcements have not yet been legislated:

• Loss carry-back for companies from 1 July 2026
• Loss refundability for start-up companies from 1 July 2028
• Changes to the R&D tax incentive from 1 July 2028
• Changes to the FBT Exemption for electric vehicles
• Immediate tax deduction for assets under $20,000 for small businesses with turnover below $10 million

Contact us if you would like to discuss any of the above changes in further detail or find out how Brentnalls SA can help you.

The content provided in this article does not constitute advice. The information is of a general nature only and does not take into account your individual financial situation. It should not be used, relied upon, or treated as a substitute for specific professional advice. We recommend that you contact Brentnalls SA before making any decision to discuss your particular requirements or circumstances.