What the Federal Budget means for business owners and property investors
The 2026-27 Federal Budget has created plenty of discussion, particularly around proposed changes to discretionary trusts, negative gearing and capital gains tax.
For many business owners and property investors, these announcements have raised understandable questions.
Will your family trust still be effective? Will your investment property deductions change? Will selling an asset become more expensive? Do you need to restructure now?
The short answer is: not necessarily.
The Budget includes some significant tax changes, but they will not affect everyone in the same way. In many cases, the impact will depend on what you own, how it is structured, when it was acquired and what your future plans look like.
Most importantly, this is not a reason to make rushed decisions. It is a reason to get clear advice.
Discretionary trusts: what is changing?
One of the biggest Budget announcements is a proposed change to how discretionary trusts, often called family trusts, are taxed.
At the moment, many discretionary trusts distribute income to beneficiaries, and those beneficiaries pay tax at their own individual tax rates.
Under the proposed change, from 1 July 2028, taxable income of a discretionary trust would be subject to a minimum tax rate of 30 per cent. This means the Government wants to make sure income distributed through a discretionary trust is not taxed below 30 per cent overall.
This does not mean family trusts are being banned. It also does not mean every person with a trust will suddenly pay 30 per cent more tax.
The change is designed to set a minimum tax rate on trust income. If tax has already been paid by the trustee, most beneficiaries will receive a credit for that tax. However, those credits will be non-refundable, which means they can reduce tax payable, but they generally cannot create a tax refund.
The change also does not apply to every type of trust. For example, fixed trusts, complying superannuation funds, deceased estates, special disability trusts and charitable trusts are not expected to be covered by the new minimum tax.
Some income will also be excluded, including primary production income and certain income relating to vulnerable minors.
For business owners and families who use a discretionary trust, your trust may need to be reviewed, but there is no need to panic or make immediate changes.
The proposed start date is still some time away, and whether this affects you will depend on how your trust is used, who receives distributions, and what role the trust plays in your overall business and family wealth structure.
Should you be worried if you have a family trust?
If you operate a business or hold investments through a discretionary trust, a review of your structure may be warranted. However, it does not mean you need to restructure immediately.
The proposed start date is 1 July 2028, which gives time to assess your position properly.
The Budget also includes expanded rollover relief for three years from 1 July 2027 to support small businesses and others that may wish to restructure out of a discretionary trust into another entity type, such as a company or fixed trust.
That does not mean restructuring will be the right answer for everyone.
Trusts are often used for more than tax planning. They can play a role in asset protection, succession planning, family wealth planning and business flexibility. Before making changes, it is important to understand the broader consequences.
Investment properties
what is changing with negative gearing?
The Budget includes proposed changes to negative gearing for residential investment properties.
Negative gearing is when the costs of owning an investment property, such as loan interest, rates, insurance and other expenses, are higher than the rental income the property earns. Under the current rules, many investors can use that loss to reduce their other taxable income, such as wages or business income.
Under the proposed changes, this will become more limited.
From 1 July 2027, investors will generally only be able to negatively gear eligible newly built residential properties.
For established residential properties, the rules will be different. If the property makes a loss, that loss generally will not be able to reduce your salary, wages or business income. Instead, the loss can only be used against income or capital gains from residential property.
If you cannot use the full loss in that year, it can be carried forward and potentially used in a future year against residential property income or gains.
These changes apply to established residential properties acquired from 7:30 pm AEST on 12 May 2026. If you already owned an established investment property before the Budget announcement time, the new negative gearing rules generally do not apply to that property while you continue to own it.
However, if you are thinking about buying another investment property, the decision may need more planning. Whether the property is new or established, when you buy it, how it is funded and how it fits into your broader tax position could all make a bigger difference under the proposed rules.
What is changing with capital gains tax (CGT)?
CGT is the tax that can apply when you sell an asset, such as an investment property, shares or other investments, for more than you paid for it.
At the moment, if you are an individual, trust or partnership and you sell an asset you have owned for more than 12 months, you may be able to reduce the taxable capital gain by 50 per cent.
Under the proposed changes, from 1 July 2027, that 50 per cent CGT discount will be replaced for CGT assets held by individuals, trusts and partnerships. Instead, the cost base of the asset may be indexed, which means the original purchase cost is adjusted to reflect inflation. A 30 per cent minimum tax would then apply to net capital gains.
This means investors may no longer automatically reduce a capital gain by 50 per cent after holding an asset for more than 12 months.
There are transition rules for assets you already own.
The new rules are only expected to apply to gains made from 1 July 2027 onwards. Any gain built up before that date should still be able to use the current 50 per cent CGT discount.
For new residential properties, investors are expected to have a choice. They may be able to choose between the current 50 per cent CGT discount, or the new indexation and minimum tax method. This is designed to keep encouraging investment in new housing.
The practical point is that selling an asset may become more complex. The tax outcome could depend on when you bought the asset, when you sell it, what type of asset it is and how it is owned.
For property investors, this makes it especially important to get advice before selling, transferring or restructuring assets.
Other Budget measures for small business owners
While the trust and property changes are getting the most attention, there are several other measures business owners should be aware of.
The $20,000 instant asset write-off will become permanent
The Budget also confirmed that the $20,000 instant asset write-off will become permanent from 1 July 2026.
This is a tax rule that allows eligible small businesses to claim an immediate deduction for certain business assets that cost less than $20,000.
If your business buys an eligible asset, such as equipment, tools, computers, machinery or vehicles, you may be able to claim the full tax deduction in the year the asset is first used or ready to use, rather than spreading the deduction over several years.
This can help reduce taxable income and may support cash flow planning when a business needs to invest in new assets. However, it is important to remember that a tax deduction does not mean the asset is free. The business still needs to pay for the purchase, and the deduction only reduces taxable income.
For business owners, the question should still be whether the asset is genuinely needed and whether the purchase makes commercial sense. A tax benefit can help, but it should not be the main reason to spend money.
Company tax losses may become more flexible
For tax years starting on or after 1 July 2026, companies with aggregated annual global turnover of less than $1 billion will be able to carry back a tax loss and offset it against tax paid up to two years earlier.
This may help some companies that have a profitable year followed by a loss-making year. Instead of waiting to use the loss against future profits, the company may be able to use it to offset tax paid in an earlier year.
This will not apply to every business structure, and it will be subject to rules and limits, including the company’s franking account balance. However, it may be worth understanding if your business operates through a company and your profits vary from year to year.
A $1,000 instant tax deduction for work-related expenses
From the 2026–27 income tax year, eligible Australian tax residents who earn income from work will be able to claim an instant tax deduction of up to $1,000 without itemising work-related expenses.
People with work-related expenses above $1,000 can still claim their deductions in the usual way. Charitable donations, union and professional association membership fees and other non-work-related deductions can still be claimed separately.
For many everyday taxpayers, this may make tax time simpler. However, if your actual deductions are higher, keeping records will still matter.
A tax offset for working Australians
The Budget includes a new $250 Working Australians Tax Offset from the 2027-28 income tax year.
The offset will apply to income derived from work, including wages, salaries and sole trader business income.
This is a personal tax measure rather than a business tax change, but it may still be relevant for business owners, employees and sole traders.
Medicare levy thresholds are increasing
The Budget increases the Medicare levy low-income thresholds for the 2025-26 financial year.
This means some individuals, families, seniors and pensioners may pay less Medicare levy, or may not need to pay it at all, when they lodge their 2025-26 tax return.
For business owners and property investors, this may not be the biggest Budget measure to focus on. However, it could still be relevant if your taxable income changes from year to year, or if you have lower income in the 2025-26 financial year.
What should you do now?
While these changes are sure to raise questions, it is important to remember that many of the major measures are not starting straight away.
The negative gearing and capital gains tax changes are proposed to apply from 1 July 2027, while the discretionary trust minimum tax is proposed to apply from 1 July 2028. That means there is time for the details to be worked through before most people need to make decisions.
Treasury and the ATO are expected to provide more guidance as the measures move through consultation, draft legislation and implementation. Until that detail is available, it is worth avoiding rushed decisions based on headlines alone.
For most people, there is no need to restructure, sell assets or change investment plans immediately. The sensible approach is to understand the broad direction of the changes, wait for further detail, and seek advice before making any major decisions.
