Every year, the Federal Budget is released with a lot of noise. Headlines. Big numbers. Policy announcements. And this year in particular, after a period of little to no tax reform in the Federal Budget, we have been presented with what could be some major changes for you, our clients.

‍Every year, we get the same question:

“What does this actually mean for me?”

Because the reality is most of it won’t. But some of it will. And the difference between understanding that early… and reacting to it later… can have a real impact on your business, your cashflow, and your tax position.

Before getting into the detail, here’s the broader direction of this year’s budget:

-  Major tax reform to CGT, negative gearing and trust reforms, with what the Government is selling as making our tax system fairer

-  Minor tax relief and cost of living focus without too many hand outs

What this tells us is:

• The government has a strong majority in parliament and are determined to bring in the tax reforms that have been on their agenda for some time
• The government want to be seen to be helping with cost of living relief without putting too much stimulus into the economy and fuelling further  inflation

This matters because it sets the tone for the next 12–24months - not just the next financial year.

What Actually Impacts You

Here’s where we cut through the noise.

These are the major areas we believe will have the most practical impact for our clients:

‍

1. Minimum tax of 30% on discretionary trust taxable income from 1 July 2028

• What’s changing: A lot ….

Introduction of minimum 30% tax rate for trust taxable income, to be paid by the trustee, with beneficiaries, other than corporate beneficiaries, to receive non-refundable credits for the tax payable by the trustee.

• Who it affects: All those who trade or hold assets within discretionary trust structures
• What it means in real terms: This is a major change on how discretionary trusts will be taxed, and may have broad implications for how we structure trading entities or hold assets in the future.

It is important to note that these proposed changes are not yet law, and we expect to see further clarification on this matter before they are passed into law.

It means that if discretionary trusts are a part of your existing structures, that Inspire Accounting, as your adviser, will need to revisit your structures, to ensure no changes need to be made due to these proposed changes.

But it is important to emphasis that these changes are not due to take effect until 1 July 2028, so we have time for the full effect of these changes to be clarified and confirmed before we need to do anything.

‍

2. Capital gains tax changes

a. 50% discount being replaced with former inflation-adjusted indexation system from 1 July 2027

b. minimum 30% tax on net capital gains

c. pre-1985 CGT assets now caught  

• What’s changing:  A lot ….

- The changes take effect from 1 July 2027. There will be no changes for disposals before that date.

- The changes will be grandfathered, i.e. with gains accrued on existing investments prior to the start date to retain the 50% discount up to the start date.

This means the changes only apply to gains arising on or after 1 July 2027, ie the 50% CGT discount will continue to apply to gains arising before 1 July 2027. Look out for more clarification here, but at first glance it appears that if you sell an asset owned prior to the changes after 1/7/27, some of the gain for the years owned prior to 1/7/27 will still apply the 50% discount, while the period after 1/7/27 will use the indexation method.

- There will be an exemption for new builds, ie investors in new residential properties will be able to choose:

• the 50% CGT discount, or
• cost base indexation and the minimum tax

- This is designed to maintain incentives for the construction of new housing.

- There is not yet much detail on the proposed minimum tax rate of 30% (to be imposed after indexation has been applied). So watch this space for more details in how this is to be rolled out, and what implications this has for using existing capital losses etc.

- The changes will also include pre-1985 CGT assets, which previously have been tax exempt. Any pre-1985 assets realised before 1 July 2027 will remain exempt from CGT, but expect to need to have a valuation on any pre-CGT assets held at this date that you will continue to hold into the future, with capital gains tax applicable for any gain post 1 July 2027 over this valuation amount.

• Who it affects: Anyone holding assets to be disposed of after 1 July 2027

• What to pay attention to: This doesn’t instantly mean that you need to sell your assets before 1 July 2027. It means that you need to be aware of what the tax on capital gains will look like after 1 July 2027 and how this may impact the assets you hold.

‍

3. Changes to Negative Gearing

• What’s changing:  Negative gearing to be limited to new builds from 1 July 2027.

Residential properties currently owned at budget time will be excluded until they are sold.

• Who it affects: Those looking to buy existing property after budget time, as losses from established residential properties will only be deductible against rental income or the capital gains from residential properties. Excess losses will be carried forward and able to be offset against  residential property income in future years. However, there will be no restrictions affecting investment properties owned at budget time until they are sold.
• What to pay attention to: There is now a distinction between newly constructed dwellings, which are exempt from the negative gearing changes, and established residential property. Whether this will change investors decisions on what properties are being purchased will be interesting to see.

It was also interesting to note there appears to be no limitation on the number of properties that an investor can negatively gear in these changes.

‍

4. Personal Tax Changes

• What’s changing:  A number of new tax changes will affect personal tax positions:

-  $250 working Australians tax offset (WATO) from 1 July 2027

From 1 July 2027, a permanent annual $250 tax offset to all eligible Australian workers for their income derived from work (such as wages & salaries and the business income of soletraders).

-  $1000 instant tax deduction for work related expenses from the 2026/27 income year. If work related expenses are over $1000, then receipts will still need to be kept.

-  Resident tax rate changes

The tax rate which applies to income thresholds between $18,201 – $45,000 will be reduced over the coming 2 financial years from:

2025/26  16%

2026/27   15%

2027/28   14%

What We’re Watching Closely

Beyond the headline measures, these are the areas we’ll be keeping a close eye on:

• Once the headlines and spin dies down, what the final passed legislation looks like, and what the new rules to be followed are in their final form.
• What changes need to be made to structures before 1 July 2028 trust tax reforms come into effect.
• What opportunities present themselves in these changes which we need to make changes for to best take advantage of the tax advantages on offer.

Often, the flow-on effects of a budget matter more than the announcement itself.
‍

What You Should Do Next

At this stage, the most important thing isn’t reacting - it’s understanding where you sit, and waiting to see what the final changes look like. None of these changes are to take effect until 1 July 2027 and beyond, so there is no hurry to make changes now.

For most businesses, that means:

✔ Reviewing how these changes apply to your structure
✔ Looking at your projected position for the rest ofthe financial year
✔ Identifying any opportunities to adjust early

The businesses that get the most value from changes like this are the ones that act early, not the ones rushing in June.

If a discretionary trust is part of your existing structures, rest assured we will be in touch in the coming months to confirm what needs to be done, if anything, in response to these changes. But not until we know what the passed legislation looks like, not just these proposed changes.

How We Can Help

Over the coming weeks and months, we’ll be working with clients to:

• Break down how these changes apply specifically to them
• Adjust  EOFY strategies where needed
• Identify opportunities that may not be obvious at first glance

If you’d like clarity on how this year’s budget impacts you,  this is the right time to have that conversation.

‍

As always, our focus is simple:

Not just understanding the numbers but helping you make better decisions because of them.

‍