13/05/2026
2026/27 Budget Notes:
https://krsaccountants.com/profit-improver/budget2026/
The 2026/27 Federal Budget delivered the most significant structural tax reforms in over two decades. For our clients, the era of “business as usual” for investment and trust planning is shifting.
The Three Pillars of Change
While the technical details are still emerging, the three most impactful proposals are:
1) CGT Overhaul: Replacing the 50% discount with a return to cost-base indexation, coupled with a 30% minimum tax floor on net gains (effective 1 July 2027).
2) Negative Gearing Restrictions: Deductions for rental losses on established residential properties (purchased after 12 May 2026) will be limited to offsetting rental income or related capital gains only.
3) 30% Trust Tax Floor: A minimum tax rate for discretionary trusts starting 1 July 2028, aimed at curbing income-splitting.
The Real Impact on Small Business
The proposed 30% minimum tax on trust income is particularly concerning for the small business sector. Many of our clients use trusts for legitimate asset protection and succession planning.
Currently, a business distributing $45,000 to an owner might see that individual pay roughly $4,288 in tax (based on 2026/27 rates). Under the new rules, the Trust would pay a minimum of $13,500 (30%). While the individual receives a tax credit, they lose the benefit of the lower 15% tax bracket and the tax-free threshold. This represents a significant cash-flow hit for family-run enterprises.
Who Stands to Lose?
1) Aspirational Investors: Younger clients who have used ETFs and shares to build a home deposit will face a higher tax hurdle upon realization.
2) Self-Funded Retirees: While Age Pensioners are exempt from the 30% CGT floor, those just above the threshold who have “done the right thing” by investing for self-sufficiency will see their capital eroded by the new minimum rates.
What Happens Next?
The Government announced a three-year “restructure window” starting 1 July 2027, allowing businesses to move out of discretionary trusts into other structures without triggering immediate tax penalties.
Our Advice: Do not make “wholesale” changes today. These measures are not yet law, and the transition rules are complex.
Below is a summary of other changes in the budget:
Income Tax:
- The 50% CGT discount will be replaced with cost base indexation for all CGT assets (except new homes) from 1 July 2027, with a 30% minimum tax on realised gains also applying from that date.
- A minimum tax rate of 30% will be payable by trustees of discretionary trusts from 1 July 2028.
[More information is on the website, click on the link above]
2026/27 Federal Budget Posted on May 13, 2026May 13, 2026 by KRS Accountants The 2026/27 Federal Budget delivered the most significant structural tax reforms in over two decades. For our clients, the era of “business as usual” for investment and trust planning is shifting. The Three Pillars of C...
