📢 Federal Budget 2026-27: What It Means for Business Owners, Investors & Families

A Budget Focused on Fairness, Housing and Productivity

The Federal Government has positioned the 2026-27 Budget as a package designed to improve fairness, housing affordability and economic productivity.

For small and medium business owners, investors and private family groups, however, the implications extend far beyond these themes.

The Budget proposes significant changes to the taxation of trusts, capital gains, residential property investments and long-held assets. These reforms have the potential to impact business ownership structures, succession plans, family wealth strategies, asset protection arrangements and investment portfolios.

While there are welcome measures such as the permanent $20,000 Instant Asset Write-Off and expanded business loss relief, many of the broader tax reforms are likely to generate considerable discussion and concern.

Key Message

This is a time for review, not reaction.

Business owners should avoid rushing into restructures before legislation is released, but should begin identifying structures, investments and planned transactions that could be affected by the proposed changes.

👤 Personal Tax Measures

New Working Australians Tax Offset

From 1 July 2027, a new Working Australians Tax Offset (WATO) will provide a $250 annual tax offset for individuals earning income from employment or business activities.

Importantly, the offset will also apply to sole traders.

What this means:

✅ $250 tax offset for working Australians
✅ Available to employees and sole traders
✅ Commences from the 2027-28 financial year

Personal Income Tax Rates

No additional changes have been announced to personal tax rates.

Previously legislated tax cuts remain scheduled to commence from 1 July 2026.

$1,000 Instant Work-Related Deduction

From the 2026-27 financial year, taxpayers will be able to claim up to $1,000 in work-related expenses without retaining receipts.

Individuals claiming deductions above $1,000 will still need to substantiate all claims with supporting documentation.

Additional deductions such as:

  • Charitable donations
  • Union fees
  • Professional memberships

can still be claimed on top of the new standard deduction.

Medicare Levy Relief

The Government will increase Medicare Levy low-income thresholds by 2.9% from the 2025-26 income year, providing modest tax relief for lower-income households.

🏠 Investment & Property Tax Changes

Capital Gains Tax Reform

One of the most significant Budget announcements is the proposed reform of Capital Gains Tax from 1 July 2027.

Proposed Changes

The current:

✅ 50% CGT discount

would be replaced with:

✅ Cost-base indexation
✅ A minimum 30% tax rate on indexed capital gains

Important Exemptions

The following remain unchanged:

  • Main residence exemption
  • Small business CGT concessions

New Residential Developments

The 50% CGT discount will continue for gains related to new residential builds.

Pre-CGT Assets

Perhaps the most controversial aspect is that gains accruing after 1 July 2027 on previously exempt pre-CGT assets may become subject to tax.

This measure has implications well beyond residential property and could impact:

  • Business sales
  • Family investment portfolios
  • Share investments
  • Unit trusts
  • Start-up equity holdings
  • Long-held family assets

Negative Gearing Changes

From 1 July 2027, negative gearing will be restricted.

New Rules

Negative gearing will continue to apply to:

✅ Newly constructed residential properties

However:

❌ Existing residential properties purchased after 12 May 2026 will no longer receive unrestricted negative gearing benefits.

Losses from these properties will only be deductible against:

  • Rental income from residential investments
  • Capital gains from residential property

Unused losses can be carried forward for future use.

Grandfathering Protection

Properties owned as of the 12 May 2026 will remain unaffected.

Exclusions

The proposed restrictions do not apply to:

  • Commercial property
  • Shares
  • Widely held trusts
  • Superannuation funds
  • SMSFs

🏛 Trust Taxation Reforms

30% Minimum Tax on Discretionary Trusts

From 1 July 2028, discretionary trusts may be subject to a new 30% minimum tax on trust income.

The trustee will pay the tax, while beneficiaries will receive tax credits reflecting tax already paid at the trust level.

The Government’s stated objective is to ensure trust income is not ultimately taxed below 30%.

Areas Still Unclear

Significant details remain unresolved, including:

  • Treatment of corporate beneficiaries
  • Interaction with existing trust structures
  • Franking credit treatment

The Government has indicated further consultation will occur before implementation.

Excluded Trusts

The new measure will not apply to:

  • Fixed trusts
  • Testamentary trusts
  • Widely held trusts
  • Superannuation funds
  • Special disability trusts
  • Charitable trusts
  • Deceased estates

Restructuring Relief

To facilitate transition, the Government proposes a three-year rollover relief period commencing 1 July 2027.

This would allow eligible taxpayers to restructure from discretionary trusts into companies or fixed trusts without immediate CGT consequences.

💼 Business Measures

Permanent $20,000 Instant Asset Write-Off

Good news for small businesses.

From 1 July 2026, the $20,000 Instant Asset Write-Off becomes permanent.

Eligible businesses with turnover under $10 million can immediately deduct qualifying assets costing less than $20,000.

Key Benefit

✅ Greater certainty for business investment decisions
✅ Permanent access to accelerated deductions

Company Loss Carry-Back Returns

From 1 July 2026, companies with turnover up to $1 billion can permanently carry losses back for up to two years.

This allows businesses to claim tax refunds for taxes paid in previous profitable years.

For many businesses facing uncertainty, this may provide valuable cash flow support.

Start-Up Loss Refunds

From 1 July 2028, eligible start-ups will be able to receive refunds for early-stage tax losses.

Refunds will be limited by employee withholding tax and Fringe Benefits Tax paid by the business.

The measure aims to encourage:

  • Start-up activity
  • Employment
  • Staff retention during early growth stages

PAYG Instalment Flexibility

From 1 July 2027, businesses will gain additional flexibility through:

✅ Optional monthly PAYG instalments
✅ ATO-approved software calculations based on real-time performance

These changes are designed to improve business cash flow management.

Electric Vehicle Changes

The Government will begin winding back some EV tax concessions.

From 1 April 2027

Vehicles valued above $75,000 will receive a reduced Fringe Benefits Tax concession of 25%.

From 1 April 2029

All eligible vehicles below the Luxury Car Tax threshold will move to the reduced 25% concession framework.

🚀 Innovation & Growth Initiatives

Venture Capital Support

To encourage investment in high-growth businesses, the Government will increase eligibility thresholds from 1 July 2027.

Key changes include:

  • VCLP asset threshold increased from $250 million to $480 million
  • ESVCLP asset threshold increased from $50 million to $80 million
  • ESVCLP growth threshold increased from $250 million to $420 million
  • Maximum committed capital increased from $200 million to $270 million

These changes are intended to improve access to capital for start-ups and growing Australian businesses.

Research & Development Tax Incentive Reform

From 1 July 2028, the Government will reform the R&D Tax Incentive framework.

Proposed Changes

✅ Increased tax offsets for core R&D activities
✅ Offset rates increased by 4.5 percentage points
✅ Lower R&D intensity threshold of 1.5%

However:

❌ Supporting activities will no longer qualify for incentives.

Refundable credits will also be restricted to businesses operating for less than 10 years, with older businesses accessing equivalent non-refundable offsets.

Final Thoughts

The 2026-27 Federal Budget introduces some of the most significant tax proposals affecting private groups, trusts, property investors and business owners in recent years.

While several measures offer meaningful support for SMEs and innovation-focused businesses, the proposed changes to discretionary trusts, capital gains tax and negative gearing could materially alter long-term tax planning strategies.

At this stage, many details remain uncertain and subject to consultation and legislation.

The best course of action is to review, assess and plan, rather than react. Business owners, investors and family groups should begin evaluating how these proposals may affect their structures and future plans while awaiting further legislative detail.