Federal Budget 2026-27 Tax Changes: Status and Planning

Last substantively reviewed: 18 October 2026. We update this guide as bills progress, Acts commence and the ATO publishes guidance.

The 2026-27 Federal Budget introduces changes affecting family trusts, investment property, capital gains and small businesses. Their practical impact depends on your circumstances, the final legislation and the relevant commencement dates.

This guide explains the key measures, distinguishes proposals from enacted changes, and identifies the decisions worth reviewing. Where we have published a detailed technical article on a single measure, we link to it rather than repeat it here.

At 42 Advisory, we discuss these developments with clients, compare practical "what if" scenarios and revisit the options as legislation and ATO guidance develop. Our business tax and advisory team handles the structure questions; our property tax accountants handle the investment property questions.

Which Federal Budget 2026-27 tax changes are law?

The table below separates the legislative status from the date a measure starts to apply. An Act can receive Royal Assent well before its rules commence, and a bill can change before it passes. Status is drawn from the ATO new legislation register, the Federal Register of Legislation and the Parliament bills database.

Sources: ATO, Latest news on tax and superannuation law and policy; Federal Register of Legislation; Treasurer, second reading speech, Tax Reform No. 3 Bill (14/10/2026). Status as at 18/10/2026.

"Proposed" dates can move. We treat a measure as settled only once it has Royal Assent, and we then check its commencement and application provisions separately.

What does the discretionary trust minimum tax mean for your family group?

The measure targets the tax-rate advantage of distributing to family members on lower marginal rates. According to Treasury's minimum tax explainer, Australia has over one million trusts, of which around 840,000 are discretionary trusts. Fixed trusts, charitable trusts, special disability trusts, super funds, deceased estates, genuine testamentary trusts and primary production income are outside the proposal, as set out in the Treasurer's second reading speech.

For an existing family trust, the realistic choices are:

• Retain discretion and accept the minimum tax where it applies. This keeps flexibility, but the credit is non-refundable, so distributions to beneficiaries taxed below 30 per cent lose most of their benefit.
• Consider the proposed election. The trust nominates beneficiaries up front and continues distributing to them. Treasury says the election would not require a restructure and is not expected to result in state or territory stamp duty. Flexibility is reduced, and the final conditions depend on the bill as passed.
• Investigate restructuring into a company or fixed trust using the proposed rollover window from 1 July 2027 to 30 June 2030. Rollover relief addresses income tax; duty, finance consents, asset protection and succession still need separate review.

Each choice trades tax against cash flow, control, succession and implementation cost. A restructure that saves tax each year can still be the wrong answer if duty, refinancing or legal costs outweigh the saving, or if it weakens asset protection. We work through these trade-offs in detail in our technical guide to the proposed 30% trust tax: keep, elect or restructure, and compare company alternatives in share classes versus a discretionary trust. If you want a refresher first, see how trusts work in Australia.

On stamp duty, we recommend caution. Treasury's 3 September 2026 release describes the election as not expected to trigger duty. That is a Government expectation, not a state ruling. Any conclusion on duty for a particular transaction needs the relevant state provisions and, where assets move, legal advice.

An illustrative client discussion

The following is a hypothetical family group, not a client. It shows how we frame the conversation; the outcome for any real family depends on its facts and the final law.

The group: a family trust receives $300,000 of net income a year from a trading business. It distributes to two parents, a $40,000 distribution to an adult child at university with no other income, and the balance to a bucket company.

Assumptions: the 2028-29 income year; the trust minimum tax passes in the form introduced; the adult child pays 14 per cent on income between $18,201 and $45,000 (the rate legislated from 1 July 2027). We ignore the low income tax offset and Medicare levy, which would only lower the child's own tax and widen the gap shown below.

Illustrative only. Figures rounded; based on the bill as introduced on 14/10/2026 and 2027-28 resident rates. Not a recommendation for any taxpayer.

In practice we ask the family different questions for each option. How much income goes to beneficiaries below 30 per cent, and for how many more years? Would locked-in proportions still suit the family in five years? What would a restructure cost to implement, and how long would it take to recover that cost? Who controls the assets on death or separation? The answers usually narrow the field to one or two options worth modelling in full.

How do the capital gains tax changes work?

It helps to keep three layers separate.

Existing rules. Until 30 June 2027, an individual or trust that holds a CGT asset for at least 12 months can generally reduce the gain by 50 per cent. Assets bought and sold before 1 July 2027 are unaffected.

New rules. For gains accruing from 1 July 2027, the cost base is indexed by CPI and the real gain is taxed at your marginal rate, with a minimum of 30 per cent. The ATO's capital gains tax reform page confirms the changes are law and do not affect 2026-27 returns. New residential dwellings and qualifying affordable housing can keep the 50 per cent discount by choice. The main residence exemption and the four small business CGT concessions are unchanged.

Transitional treatment. For assets held before 1 July 2027 and sold later, the asset is treated as reacquired on 1 July 2027 at its market value. The gain up to that date keeps the discount; the gain after it uses indexation. The Treasury explainer notes an apportionment formula as an alternative to valuation; the ATO says this method is still being developed and is not yet law. Pre-1985 assets stay exempt for gains accrued before 1 July 2027 only. Our article on the 2026 CGT reform carve-outs covers the small business and start-up rules.

Worked comparison

The figures below are Treasury's own example, reproduced so the assumptions are visible.

Source: Treasury, Negative Gearing and Capital Gains Tax Reform explainer, Budget 2026-27. Assumes a top marginal rate including Medicare levy and Treasury's CPI assumptions.

The same explainer shows the result can reverse: on a low-growth asset, indexation can produce a smaller taxable gain than the discount would. That is why we do not treat "sell before 1 July 2027" as a default answer. Selling early crystallises tax now, adds transaction costs and gives up future growth. The right decision depends on expected growth, your marginal rate in the year of sale, cash needs and whether you would buy the asset back. Our property tax accounting service runs both methods side by side before any sale.

One practical step does apply widely: plan how you will evidence the 1 July 2027 market value. Listed shares have quoted prices. Property and private company shares will usually need a valuation, and arranging it close to the date is easier than reconstructing it years later.

How do the negative gearing changes affect your property?

The acquisition cut-off and the commencement date are different things. The cut-off (7:30pm AEST, 12 May 2026) decides which rules a property falls under. The commencement date (the 2027-28 income year) decides when the limit starts to bite. Separately, the CGT changes apply to gains accruing from 1 July 2027 regardless of when the property was bought.

Sources: Act No. 49 of 2026, Schedule 2 item 5 (application from 2027-28); Treasury explainer; ATO, Boosting home ownership: reforming negative gearing and CGT.

For taxpayers with a 30 June year-end, established residential property acquired after Budget night can still generate rental deductions against other income through 30 June 2027, subject to ordinary deductibility requirements. From 2027-28, the new loss-quarantining rules apply unless an exception is satisfied. Buying after Budget night was therefore not a mistake in itself, but it changes the cash flow from 2027-28 and should be reflected in your forecast.

Grandfathering attaches to your ownership interest, not the property. Act No. 71 of 2026 inserts three conditional reliefs into the ITAA 1997: s 26-156 for qualifying acquisitions from a deceased spouse; s 26-157 for qualifying acquisitions from a deceased co-owner who was not a spouse, where both existing interests satisfy the pre-Budget acquisition requirement; and s 26-158 for qualifying relationship breakdown transfers made under the orders, agreements or awards listed in s 126-5(1)(a) to (f). The amendments commenced on 1 October 2026 and apply from 2027-28.

This is not blanket protection. A child inheriting a parent's solely owned property, an informal transfer on separation, and restructures such as moving a property into a trust or company fall outside these provisions. We explain the edge cases in how you can lose negative gearing grandfathering. If you are weighing an established purchase against a new build, the financing and tax answers interact; our residential finance team can model both.

What changes for individual taxpayers?

A deduction and an offset work differently. A deduction reduces taxable income, so its value depends on your marginal rate: $1,000 at the 15 per cent rate saves $150 plus Medicare levy. An offset reduces tax payable directly, so up to $250 is worth up to $250. The ATO confirms the rate cuts are law. If your actual work-related expenses exceed $1,000, keeping receipts and claiming them may still be better; our personal tax accountants can confirm which applies to you.

What should business owners review?

Instant asset write-off

Businesses with aggregated turnover under $10 million can deduct eligible assets costing less than $20,000 each, where the asset is first used or installed ready for use from 1 July 2026. The threshold is now permanent under Act No. 71 of 2026. Decision to review: whether planned purchases are better timed for this year or next, given cash flow and expected profit. Trades businesses can see examples in our instant asset write-off guide for tradies and through our builders and tradies accounting service.

Loss carry-back

Companies with aggregated turnover under $1 billion can carry a revenue loss from an income year starting on or after 1 July 2026 back against tax paid in either of the two previous years, receiving a refundable offset. The ATO notes the refund is limited by the company's franking account balance. Decision to review: whether a loss-making year is likely, and how dividend decisions affect the franking balance that caps the refund.

PAYG instalments

The Government proposes letting businesses opt in to monthly instalments, with dynamic calculations through approved software, from 1 July 2027. This is not yet legislated. Decision to review: whether monthly instalments that track actual trading would smooth cash flow, once the law and software are available. We build this into forecasts through our small business accounting service.

Electric car FBT

The proposal keeps the full FBT exemption for eligible electric cars valued up to $75,000 where the arrangement starts before 1 April 2029, introduces a 25 per cent discount for cars over $75,000 from 1 April 2027, and moves all eligible cars to the 25 per cent discount from 1 April 2029. It is not yet legislated. Decision to review: the timing of any new novated lease or fleet arrangement. Founders should also note start-up loss refundability, proposed from 2028-29; our startup advisory team tracks it.

When do the Federal Budget 2026-27 changes start?

Sources: Tax Reform No. 1 second reading speech; Treasurer, 19 August 2026; Parliament bills database; ATO new legislation register.

What should you review now, and what can wait?

What to review now

• Confirm which investment properties were held or under contract before 7:30pm AEST on 12 May 2026, and keep the contract evidence.
• Plan how you will establish the market value of growth assets at 1 July 2027.
• Model the trust minimum tax against your actual beneficiary profile, so you know whether the issue is material for your family before the bill settles.
• Time asset purchases and loss positions against the permanent write-off and loss carry-back, which already apply.

What to revisit when the law changes

• Once the trust bill passes: the final election conditions, the rollover rules and any state duty concessions, then a decision on retain, elect or restructure.
• When the ATO finalises the CGT apportionment method: whether it is simpler or better than a valuation for your assets.
• When PAYG instalment and electric car FBT legislation is released: cash flow and vehicle arrangements.

How 42 Advisory helps you find the best way forward

Budget changes raise different questions for each business and family. We start by discussing your current arrangements, financial position and longer-term objectives.

We then work through practical "what if" scenarios. What happens if you retain your structure? How could different arrangements affect tax and cash flow? Would restructuring costs outweigh the potential benefit? What would each option mean for succession and access to funds?

We compare the available options, explain the assumptions and identify which decisions need attention now and which should be revisited when further detail is available.

Our review continues as the measures develop. We monitor Government announcements, draft legislation, parliamentary progress, enacted changes and ATO guidance. We distinguish when a measure becomes law from when it starts applying, then revisit the analysis with affected clients.

Where implementation requires legal or finance advice, we coordinate with the relevant advisers. As a fixed-fee CPA firm, we build this into year-round tax planning and advisory work rather than leaving it to lodgement.

Frequently asked questions