Following the release of the Federal Budget 2026–27, our team of experts share their perspectives.
Andrew Ellem, Matthew Smith and Simone Quin, Partners, together with Brett Havlin, Director (Accounting & Business Advisory), and Marcus Ainger, Partner, Wealth, provide insights across tax, business and investment considerations.
While some measures are already legislated or relatively certain to proceed, a significant portion remains subject to consultation and passage through Parliament. That distinction is important, particularly for investors and business owners considering structural changes.
In our view, the overarching theme is clear: the Government is tightening integrity across the tax system, while reshaping incentives toward housing supply, scalable business investment and innovation.
Personal tax and wealth planning
The Budget introduces a number of measures that will impact personal tax, wealth and planning considerations for individuals and families.
Capital gains tax: structural reform for investors
One of the most significant announcements relates to capital gains tax.
From 1 July 2027, the Government proposes replacing the 50% CGT discount with an indexation-based system. A minimum effective tax outcomeof 30% on realised capital gains is also proposed.
In practice, this introduces a meaningful shift in after-tax investment returns for individuals, trusts and partnerships, particularly where assets are held outside superannuation or corporate structures.
Importantly, the effective tax outcome may exceed the 30% floor depending on income level, with outcomes for higher-income individuals potentially reaching up to marginal rates.
We are already seeing increased client focus on ownership structures for future investments, particularly where asset realisation is part of longer-term planning.
Negative gearing: repositioning toward new housing supply
From 1 July 2027, negative gearing is proposed to be limited to new residential builds.
Under the proposal, losses on established residential properties acquired after Budget night would no longer be deductible against other income, although they could still be carried forward and offset against future rental income or capital gains.
Existing properties are expected to be grandfathered.
This represents a clear policy shift toward incentivising new housing supply. Over time, it is likely to influence investor preferences between new and established residential property.
A key outstanding issue remains the definition of a “new build”, which will determine the practical impact.
Discretionary trusts: significant structural change
From 1 July 2028, the Government has proposed a minimum 30% tax rate on discretionary trusts.
While detail is still emerging, the intent is to reduce the effectiveness of income splitting and discretionary distribution strategies within private groups.
Certain exclusions are expected, including fixed trusts, superannuation funds, charitable trusts and deceased estates. A three-year rollover relief period from 1 July 2027 is also proposed to support restructuring into companies or fixed trusts.
In practical terms, this effectively aligns discretionary trust taxation more closely with corporate tax outcomes, reducing flexibility around distribution planning.
For many family groups and privately held businesses, this is likely to become one of the most important planning considerations arising from the Budget.
At this stage, we would not recommend immediate structural change, but we do think it is appropriate to begin modelling future scenarios.
Superannuation & SMSFs
Key measures include:
- Paydaysuper commencing from 1 July 2026
- Division 296 tax for super balances above $3 million proceeding from 1 July 2026
Existing SMSF CGT concessions and negative gearing arrangements remaining largely unchanged under the proposed reforms.
The Budget did not introduce major new superannuation reforms, however previously announced changes remain highly relevant.
For clients with larger super balances or complex estate planning structures, proactive planning remains essential.
Business measures: support for investment, innovation and cashflow
For business, the Budget delivers a combination of certainty, targeted support and tighter integrity settings.
The instant asset write-off is proposed to be permanently extended at $20,000 for small businesses with turnover up to $10 million. This provides welcome certainty for short-term capital investment planning.
Loss carry-back provisions returned for eligible companies, allowing current year revenue losses to be offset against prior year income, potentially generating cash refunds during lower profitability periods.
Company loss carry-back: franking account linked relief
From 1 July 2026, companies will be able to carry back current year revenue losses to prior year taxable income. Refunds issued will be limited to the franking account balance.
This is a meaningful cash flow measure for companies that have previously been profitable and accumulated franking credits but are currently in a loss position. However, accessing these refunds is expected to reduce future franking capacity, potentially limiting the ability to pay fully franked dividends over time.
Overall, the measure improves near-term liquidity but comes at the cost of long-term dividend flexibility. It is broadly consistent with arrangements introduced during COVID.
Electric vehicles : FBT concession recalibration
The Budget also proposes changes to FBT treatment of electric vehicles under novated lease arrangements.
Key features include:
- Existing arrangements retain the FBT treatment applicable at commencement
- EVs valued up to $75,000 provided before 1 April 2029 remain eligible for a 100% FBT exemption
- EVs above $75,000 (up to the luxury car tax threshold) provided between 1 April 2027 and 1 April 2029 will receive a 25% FBT discount
These changes introduce a staged reduction in concessional treatment, particularly for higher-value vehicles.
Compliance: increased ATO scrutiny
The ATO has received additional funding of more than $700 million, with a focus on integrity programs and high-risk areas including R&D claims and private group arrangements.
We are already seeing increased scrutiny in these areas, and this is expected to continue.
For clients, this reinforces the importance of strong documentation, clear structuring and ongoing tax governance.
Innovation, startups and R&D: stronger support, tighter guardrails
The Budget introduces a range of measures aimed at supporting innovation, early-stage companies and capital investment, alongside tighter eligibility and compliance settings.
R&D Tax Incentive: meaningful structural overhaul
The changes to the R&D Tax Incentive are more significant than anticipated, particularly the increased refundable rate, which is positive, however the introduction of a 10-year limit introduces constraints for growing companies.
Key changes include:
- Increasing the core R&D offset by around 25% (via a 4.5 percentage point uplift)
- Reducing the intensity threshold from 2% to 1.5%, broadening access to the higher rate
- Increasing the refundable offset turnover threshold from $20 million to $50 million
- Limiting refundability to firms under 10 years old, with older firms receiving a non-refundable offset
- Removing eligibility for certain supporting R&D expenditure
- Increasing the maximum R&D expenditure cap from $150 million to $200 million
- Raising the minimum claim threshold from $20,000 to $50,000, with lower-value R&D requiring use of a registered Research Service Provider or Cooperative Research Centre
Overall, the direction is toward stronger support for scalable, commercially meaningful innovation, alongside tighter eligibility and increased compliance thresholds.
Given additional ATO funding, we expect R&D claims will remain a key audit focus area.
Startup loss tax refund: early-stage cash flow support
From 1 July 2028, eligible startups in their first two years will be able to cash out tax losses against PAYG withholding and Fringe Benefits Tax (FBT) paid.
In practical terms, this is designed to support early-stage employer startups that are generating payroll costs but not yet profitable, effectively providing liquidity support during the critical scaling phase.
Venture Capital: expanded investment capacity
From 1 July 2027, venture capital tax incentives are proposed to be expanded.
Key changes include:
- Increasing the asset size cap for investee companies under VCLPs to $480 million
- Increasing the ESVCLP investee asset cap to $80 million
- Increasing the ESVCLP tax exemption cap on investee asset size to $420 million
- Increasing maximum ESVCLP fund size to $270 million
These changes broaden access to venture capital structures and are expected to improve capital flow into growth-stage and emerging businesses.
Final word
The key theme across this Budget is structural change rather than immediate relief.
While many of the measures remain subject to legislation, the direction of policy is becoming clearer. The tax system is gradually shifting toward:
- reduced advantages for passive capital accumulation outside superannuation and companies
- tighter rules around discretionary structures
- stronger incentives for new housing supply
- increased focus on innovation and scalable business investment
- greater short-term liquidity support for startups and companies, balanced against longer-term integrity settings
At this stage, we are not encouraging reactive decision-making. However, we do believe this is an appropriate time for clients to review structures, understand exposure, and begin modelling potential outcomes over the medium term.
If you would like to discuss how these announcements may impact your personal, business or investment position, please reach out below
This article contains general information only and does not constitute financial or taxation advice. Clients should seek advice specific to their circumstances before acting on any proposed Budget measures.
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