Introduction From Justin Mastores
Last night the Federal Government released the Albanese Government’s fifth budget for Australia.
I must say — this is the most material change I have seen handed down in a budget in my entire working career, and it is primarily the impact on small business, high net worth individuals and the broader economy that I believe makes this so significant. In my view, this budget will reshape how many of our client’s structure, invest and plan their financial affairs for years to come.
What we’ve put together in this update is a clear, practical breakdown of the key changes that may affect you and your family directly — covering everything from capital gains tax and negative gearing, to trust taxation, business relief measures and more.
These are general outlines based on the announced changes. Please keep in mind that many of these measures still need to pass through Parliament to become law, and individual circumstances vary considerably. As always, we strongly encourage you to speak with your Rees Group advisor to understand exactly how these changes apply to your business and family’s unique situation.
1. Capital Gains Tax (CGT) — Major Overhaul
The 50% CGT discount — in place since 1999 — will be abolished for gains arising on or after 1 July 2027. Replaced by CPI cost base indexation and a 30% minimum tax, this is the most significant change to capital gains taxation in a generation and will affect virtually every investor.
Additional detail:
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Cost base indexation returns: the original purchase price is indexed annually by CPI after 12 months of ownership — only the inflation-adjusted gain is taxed.
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Pre-1985 CGT assets are brought into the net for gains arising after 1 July 2027, though transitional measures limit the impact on existing holdings.
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Superannuation funds retain their existing 33.33% discount. The small business CGT concessions are also unaffected.
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Investors in newly constructed residential properties can choose between the 50% discount or the new indexation/minimum tax method.
What this means for you:
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If you hold shares, property, business assets or any other CGT assets, you need to understand how your future capital gains will be calculated and taxed under the new rules.
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For many clients, selling assets before 1 July 2027 may lock in the 50% discount treatment — this is an important planning consideration, though it must be weighed against commercial and personal factors.
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Accurate valuations as at 1 July 2027 will be critical for existing assets. We anticipate significant demand for valuations around that date.
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Business owners holding assets — including goodwill — in their own names or through trusts will be especially impacted and should begin reviewing their position now.
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Clients with significant investment portfolios need to consider the timing of future disposals carefully.
2. Negative Gearing — Restricted to New Builds
From 1 July 2027, negative gearing on established residential properties acquired after 12 May 2026 will be quarantined — losses can no longer be offset against salary or other income. This is a significant shift for property investors, though existing holdings are protected.
Additional detail:
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Excess losses are carried forward and can be used against future residential property income — they are not lost, just deferred.
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Commercial property, shares and other non-residential investments are unaffected — negative gearing continues as normal on these assets.
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Exemptions apply for widely held trusts, managed investment trusts, superannuation funds, build-to-rent developments and private investors in government housing programs.
What this means for you
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Considering a new established residential investment? The tax benefit of negative gearing will be quarantined from 1 July 2027 — factor this into your return calculations before purchasing.
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Existing negatively geared properties are fully protected — no immediate action required, though disposal planning should account for the new CGT rules.
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If you currently rely on property losses to offset salary or business income, speak to us now about your strategy.
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The changes improve the relative case for investing in new residential property — new builds retain full negative gearing.
3. Discretionary Trusts — 30% Minimum Tax Introduced
This is arguably the single most significant change for our clients. From 1 July 2028, a 30% minimum tax will apply to the taxable income of discretionary trusts — the cornerstone structure for most of our clients. Early planning is essential.
Additional detail:
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Beneficiaries other than companies receive non-refundable tax credits for the trustee’s 30% tax — any top-up at their marginal rate still applies.
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Franking credits held by the trust must first offset the minimum tax liability before being distributed to beneficiaries.
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Excluded trusts and income: fixed trusts, widely held trusts, complying super funds, special disability trusts, deceased estates, charitable trusts, testamentary trusts existing at announcement, primary production income, and income for vulnerable minors.
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The definition of ‘discretionary trust’ is yet to be legislated — the final scope may be broader than expected and could capture structures not commonly considered discretionary.
What this means for you
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If your business or family wealth sits in a discretionary trust, this demands immediate attention — the 3-year rollover window is your opportunity to restructure without triggering capital gains.
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Bucket company structures face effective double taxation — distributions into a company beneficiary will carry no credit for the 30% tax already paid by the trustee.
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Clients should engage us to assess whether a company, partnership or fixed trust is a better fit post-2028 — the answer will differ for every client which we can advise you on.
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We strongly recommend a full review of your trust structures with us before the end of 2026. The earlier you act, the more options you have.
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Watch this space — significant legislative detail is still to come. We will update clients as the law is clarified.
4. Personal Income Tax Relief
The budget delivers three practical tax relief measures for working Australians — including business owners, sole traders and employees of our SME clients.
What this means for you
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Sole traders and small business owners drawing work income benefit from the $250 offset — permanent and ongoing from 2027–28.
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The $1,000 instant deduction applies this income year — factor this into your 2026–27 tax return planning now.
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Employees will see the benefit flow through — worth considering in the context of salary reviews and remuneration planning.
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Small business owners and sole traders will benefit from the $250 Working Australians Tax Offset from 2027–28.
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Employees of our SME clients will also receive this benefit, which may have flow-on effects for salary negotiations and workforce considerations.
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The $1,000 instant deduction takes effect this income year — worth noting for 2026–27 returns.
5. Small Business Tax Relief — Simplification & Asset Write-Off
Four practical measures that directly benefit our SME clients — reducing compliance burden, improving cash flow and providing genuine tax relief. This is a section worth reading carefully.
1. Permanent $20,000 Instant Asset Write-Off
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The $20,000 instant asset write-off is now permanent for businesses with turnover up to $10 million — ending years of stop-start annual extensions.
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Assets at or above $20,000 can continue to be pooled under the simplified depreciation regime. The 5-year lockout for re-entry remains suspended until 30 June 2027.
Action point: Plan your capital expenditure now. Certainty around the write-off means you can invest with confidence — talk to us before purchasing equipment or assets.
2. Loss Carry-Back for Companies — Reintroduced as at 1 July 2026
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Companies with global turnover under $1 billion can carry back revenue losses and offset them against tax paid in the prior two income years — generating a cash refund.
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The refund is limited by the company’s franking account balance. Revenue losses only — capital losses are excluded.
Action point: Had a tough year or two? You may be sitting on a tax refund you don’t know about. This is one to review with us immediately — it could mean real money back.
3. PAYG Instalment Improvements
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From 2027–28, businesses can opt into monthly PAYG reporting and payment, with ATO-approved software calculating instalments in real time based on actual activity.
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Better alignment between tax payments and business performance — particularly valuable for businesses with seasonal or variable income.
4. Loss Refundability for Start-Up Companies
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Start-ups with turnover under $10 million can access a refundable tax offset for losses in their first two years of operation — capped at FBT and withholding tax on Australian employee wages.
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A genuine incentive for early-stage businesses to invest in people and growth without bearing the full tax burden of early-year losses.
What this means for you
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The permanent write-off removes annual uncertainty — budget your asset purchases with confidence.
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Loss carry-back is the standout measure for businesses that have had a difficult period — contact us now if this applies to you.
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Monthly PAYG is opt-in — we will help you assess whether it suits your cash flow profile when it becomes available.
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Start-up clients should note the new loss refundability rules coming in 2028 — worth factoring into early-stage structuring decisions now.
6. Research & Development Tax Incentive — Significant Reforms
The R&D Tax Incentive is being restructured from 2028 — offset rates are going up, but the scope of eligible expenditure is narrowing. For clients currently claiming R&DTI, this is a mixed picture that requires a review of your program before the changes take effect.
What’s also changing
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‘Supporting R&D’ expenditure is removed from eligibility entirely — only core R&D activities will qualify. This will reduce claimable amounts for many businesses.
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Maximum claimable R&D expenditure threshold increases from $150 million to $200 million.
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Refundability is now limited to companies under 10 years old, even within the $50M turnover threshold.
Watch out: If you currently claim R&DTI for supporting activities, your eligible claim will shrink under the new rules. Don’t wait until 2028 — review your R&D program with us now.
What this means for you
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Currently claiming supporting R&D expenditure? Your eligible claim will be smaller from 2028 — restructure your program now to maximise what you can claim under core R&D.
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Previously locked out by the 2% intensity threshold? The drop to 1.5% may now bring you in — worth reassessing your eligibility.
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Growing businesses near the $20M turnover mark benefit from the lift to $50M — more runway to access refundable offsets.
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Smaller claimants under $50,000 in R&D spend will no longer qualify — consider whether partnering with a Research Service Provider is the right path forward.
7. Electric Vehicles & FBT — Transitioning the Discount
The full FBT exemption for electric vehicles is being phased down to a permanent 25% discount from April 2029. Existing arrangements are protected — but timing matters for anyone considering a new EV arrangement.
What this means for you
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Existing EV salary sacrifice or novated lease arrangements are fully grandfathered — no immediate action required.
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Considering a new EV arrangement? Act before April 2029 to lock in the 100% exemption on vehicles under $75,000.
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Businesses providing EVs to employees should review fleet and salary packaging structures with us to optimise the FBT position before the transition.
8. Superannuation — Governance & Performance Test Reforms
No sweeping super tax changes this budget — but several previously announced measures are now law, and the 33.33% CGT discount for super funds has been explicitly protected from the broader CGT overhaul.
What this means for you
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Clients using super for wealth and succession planning should review how the better-targeted concession changes — now law — affect their contribution strategies.
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SMSF owners should confirm their fund’s compliance position with their Rees Group advisor.
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The protection of the 33.33% CGT discount for super funds is a meaningful carve-out — superannuation remains one of the most tax-effective structures for long-term wealth accumulation.
9. Fuel Excise — Temporary Reduction
From 1 April 2026, the Government temporarily reduced fuel excise by 32 cents per litre on petrol and diesel, and reduced the road user charge for heavy vehicles from 32.4 cents per litre to zero. Both applied for three months and standard rates will be restored from 1 July 2026.
What this means for our clients
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Businesses with significant fuel costs — transport, logistics, primary production — should ensure fuel budgets reflect the return to standard excise rates.
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Heavy vehicle operators should confirm current road user charge obligations are accounted for.
A Message From Justin Mastores
If I’m being direct with you — and I always will be — this is a budget that requires action, not just awareness. The changes to discretionary trust taxation, capital gains, and negative gearing represent the most significant structural shift to the Australian tax system in a generation.
Some of these changes are designed to fund others. The 30% minimum trust tax and the CGT changes are expected to raise billions, which are in turn being used to fund the Working Australians Tax Offset and business relief measures. The Government has been strategic in this budget — and our clients need to be equally strategic in response.
What gives me confidence is that for clients who plan well and act early, there are real opportunities here. The rollover relief window for discretionary trusts is generous. The loss carry-back for companies could generate meaningful refunds for businesses that had a tough year or two. The permanent instant asset write-off gives businesses the certainty to invest.
My message to you is this: do not wait. The window to restructure, plan and position yourself ahead of these changes is open now — but it will not stay open indefinitely. I encourage you to reach out to your Rees Group advisor at your earliest convenience.
At Rees Group, our role is not just to explain what has changed — it is to help you navigate it. We will be proactively reaching out to clients whose circumstances we believe are most immediately affected. But please do not hesitate to call us. This is exactly the kind of moment where having a trusted advisor in your corner makes the difference.
