The Federal Budget in recent years have been a rather dull affair with minimal changes and impact on taxpayers and businesses. However, this budget has proposed some significant tax reforms aimed at building a more resilient economy given the current worldwide volatility and trying to give young Australians a better chance of home ownership.

The major changes proposed that will impact personal investors are: 

– Replacement of the 50% capital gains tax (CGT) discount with inflation-adjusted indexation and introduction of a minimum 30% tax rate on realised capital gains accruing from 1 July 2027. This will apply to all CGT assets (i.e. not just property but also shares and other assets) and the real sting is it will also apply to all pre-Sept 1985 assets. Effectively, the old rules apply until 1 July 2027 for existing assets but any gains accrued after that date will be subject to the new rules. The only exception is that the 50% discount will still be available for new residential properties

– Removal of negative gearing benefits for any non-new properties purchased after 12 May 2026 from 1 July 2027. Effectively, any existing property is exempt but any existing (i.e. not new) property purchased from now will not be able to claim any rental loss against other income from 1 July 2027. These losses are not lost but will be carried forward to offset future rental profits. However, self-managed super funds are exempt so this might create a bigger appetite for direct property investment in this structure given the limited recourse borrowing possibilities.

– A new $250 offset for working Australians (i.e. salary and wages or sole traders) from the 2028 tax return onwards.

– From the 2027 tax return, the introduction of a standard $1,000 deduction for work related expenses. Effectively, no substantiation or itemisation will be required up to this limit but taxpayers wishing to claim above this limit will still be subject to the existing substantiation rules.

– Introduction of a minimum 30% tax rate on distributions from discretionary trusts from 1 July 2028. This new tax rate does not apply to fixed trusts, fixed testamentary trusts, deceased estates or special disability trusts. The measure also excludes existing discretionary testamentary trusts as at 12 May 2026 but will apply to any new testamentary trusts.

There were also some significant measures proposed for businesses: 

– The Government has indicated it will provide expanded rollover relief for 3 years from 1 July 2027 for small businesses which wish to roll out of their trust structure to another structure such as a fixed trust or company given the new 30% tax on trust distribution.

– Making the $20,000 immediate asset write off limit permanent for eligible small businesses. This measure was already in place for the 2026 year, but the Budget intends to make this limit permanent to provide certainty for businesses rather than needing to wait for the annual confirmation and passing of legislation.

– Reintroducing the company loss carry back rules from the 2027 year which enable companies to carry back a loss to the prior two years to offset tax paid in those years.

– Making changes to the FBT exemptions in place for electric cars. From 1 April 2029, electric cars will only have access to a 25% discount on FBT.

The good news is that most of these changes allow for a transition period. So, there is time for taxpayers and businesses to make informed decisions and not make rash choices. It is also important to see when and how these measures are legislated. As always, the team at Elysium is here to help and answer any questions you might have.