With the current economic forecast in Australia, it was anticipated that the government would be introducing significant changes to the tax system which we have not seen occur for the last few years. Whilst many of the announcements are significant particularly for businesses, investors and those operating through a Trusts. We urge you to remember that Budget announcements are not law. They are proposals only.
Nothing takes effect until legislation passes Parliament.
With that in mind, here is a practical, easy‑to‑understand summary of the key measures that may affect you, your business and your investment structures, along with our guidance on what to do next.
1. Overview of the Budget:
This year’s budget will affect most taxpayers in some form.
For business owners, the main changes are as follows:
- Continued support for investment and productivity
- A focus on compliance and tax integrity
- Adjustments to personal tax settings already announced earlier in the year
The Budget has reinforced the Government’s ongoing interest in tightening tax rules around capital gains, distributions and high‑wealth groups — but again, these are proposals only.
2. Business Measures That May Affect You
Instant Asset Write‑Off Extension (Proposed)
The Government has proposed extending the instant asset write‑off for eligible small businesses. This allows businesses with an aggregated turnover of less than $10 million to claim an immediate deduction for the business portion of depreciating assets less than $20,000. Assets with a value of more than $ 20,000 the business will be able to claim 15% in the first year and 30% in subsequent years.
Please note that the amount of the depreciable asset needs to be less than $20,000.
Therefore:
- If you are registered for GST, the prices paid including GST would need to be $21,999.
- If you are not registered for GST, the price paid needs to be $19,999 or lower.
Support for Energy Efficiency and Technology Adoption
The Budget includes targeted incentives to encourage businesses to adopt energy‑efficient equipment and digital tools. These measures are designed to reduce operating costs and improve productivity.
Again, the details — including eligible assets and timing — will only be confirmed once legislation is enacted.
Compliance and ATO Funding
The ATO will receive additional funding to continue its focus on:
- GST compliance
- Trust distributions
- Capital gains tax reporting
- High‑wealth individuals and private groups
This is not new, but it reinforces the importance of maintaining strong documentation, accurate reporting and proactive tax planning.
If you are not certain on your tax and lodgement obligations as with this additional fund the ATO is now stricter with deadlines. We are seeing more often many of the strategies implemented to protect clients’ assets outside of their businesses are undone due to late lodgement of documentation.
If you envision that you are not going to be able to pay your tax obligations, it is crucial that you still lodge all documents on time.
3. Trusts, Capital Gains and Investment Structures
The budget included many measures which changes the taxing of profit from Trust Structures. These include:
- Streaming of income
- Distribution rules – the proposal of a flat tax rate of 30% on income
- Reporting obligations
At this stage, these are policy intentions, not law. The Government has signalled a desire to tighten certain areas, but we will not know the final form until draft legislation is finalised.
Due to the complexity of these changes, we do need to wait for the final legislation for to provide accurate advice as to how these changes will impact your situation especially if you are in retirement, have a testamentary Trust , distribute to charities or are using a bucket company as part of your investment strategy.
In general, if your beneficiaries are receiving a Trust distribution and they have more than $45,000 of other income the 30% flat tax is not going to be an additional tax. If have less than this in other income, then you will be paying more in tax.
Once the legislation is clearer, we can then provide further information for your personal situation.
4. Capital Gains
The changes to this legislation as proposed are complex and contained some unexpected changes.
At present if you held assets on budget night you will still be eligible for a 50% discount on the capital gain up to the 1st of July 2027. You don’t need to sell the asset on the 1st of July 2027 there will be multiple steps to calculating your gain in the future.
If you hold assets that were purchased prior to the 20th September 1985 from 1st July 2027 these assets will then be taxed for capital gains tax purposes from 1st July 2027 when sold.
The new method of calculating capital gains tax will be the use of indexation. In context the indexation method is used to adjust the original purchase price (cost base) of an asset upward to account for inflation. These means your taxable gain is calculated on your real profit rather than the nominal cash profit.
For example:
- Cash Profit- Capital Gain is paid on the Sale price less purchase price. Ie if Sale price less purchase price is $100,000 you pay tax on this.
- Indexation- Capital Gain is paid on the gain adjusted by inflation ie if inflation is 4.2% you would pay tax on $95,980.
- Discount- the current method which is being discontinued is the gain is on the cash profit discounted by 50% (when the asset is held longer than 12 months) ie if a was $100,000 tax would be paid on $50,000.
The other measure proposed is that there is a minimum tax paid on capital gains of 30%. This means if you have a Capital Gain in a year where you have other income less than $45,000 you will pay more tax on your gain as an individual taxpayer compared as your tax rate would be less than $45,000.
There is proposed to be assets such as new builds which will remain eligible to use the 50% discount method.
It should also be noted that Small Businesses will still be eligible to the small business Capital Gain rules. It is only the 50% discount rule for holding the asset personally longer than 12 months that will not be available.
Please note Superannuation Funds will still be eligible for the 1/3rd discount if the asset is held longer than 12 months.
Due to the complexities of the calculation of Capital Gains, we need to wait for the legislation and advise on a case-by-case basis as to how your personal situation will be affected.
Once we have the final legislation, we will be able to review your current plans for your assets sales and how these adjustments will affect your plans.
5. Residential Investment Properties- Negative Gearing
From the 1st July 2027 the proposal is that only newly build residential properties will be eligible for full negative gearing deductions.
This will mean if you purchase an established property after budget night (12th May 2026) will not be able to offset the rental loss against other income.
If you held a property at the 12th May 2026 you will be able to continue with the current negative gearing rules. It is only if you buy another property it then won’t be eligible unless it meets the eligibility criteria.
The issue we need to wait for at present is the definition of new residential property ie if you someone has purchase a residential unit off the plan and it has never been rented or lived in when it is then sold is it a new residential property? With the negative gearing and capital gains benefits of new residential this definition will be important.
How we understand the property deductions will work is as follows:
If you were to purchase a residential property on 1st July 2027 that was negative geared (that is your expenses ie interest etc. is more than your rental income) the calculation is as follows:
Losses can be offset against other residential Property income ie if you have a positively geared property or a Capital Gain from the sale of a residential property. You will then reduce this income.
It won’t be offset against Salary and wages, business income or Investment income (ie shares, interest etc).
The losses that you cannot claim will be carried forward and offset against gains in future years.
Please note that Superannuation Funds and the purchase of Commercial Properties are not affected by this legislation change.
6. Personal Tax Changes
The Budget reiterates the previously announced changes to personal income tax rates. These adjustments are intended to provide cost‑of‑living relief and simplify the tax brackets.
What You Should Do Now
1. Avoid making decisions based solely on Budget announcements
Nothing announced on Budget night is guaranteed to become law. Measures can be amended, delayed or withdrawn entirely during the legislative process.
2. Keep documentation and reporting up to date
With increased ATO funding for compliance, it is more important than ever to ensure:
- Trust distribution resolutions are completed correctly
- Capital gains are reported accurately
- Business records are maintained to a high standard
- GST and BAS lodgements are timely and consistent
3. Speak with us before making major investment or structural decisions
If you are considering:
- Selling a business
- Triggering a capital gain
- Restructuring a trust
- Purchasing significant assets
- Changing your business structure
…please contact us first. The Budget may influence the timing or tax treatment of these decisions, but we need to wait for final legislation before acting.
Our Commitment to You
We will continue to:
- Monitor all Budget measures
- Review draft legislation as it is released
- Assess how each change affects your business or investment structure
- Provide clear, practical advice tailored to your circumstances
Once the Government releases final legislation, we will prepare a detailed update outlining:
- What has passed
- What has changed
- What actions you may need to take
- Any opportunities or risks to consider
Final Thoughts
The Federal Budget provides useful insight into the Government’s priorities, but it is not the final word. For now, the best approach is to stay informed, stay steady and avoid making decisions based on proposals alone.
If you have questions about how the Budget may affect your business, trust or investment strategy, please reach out. We are here to help you navigate the changes with clarity and confidence.
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