This is one of the biggest tax reform budgets we have seen in years. The details are not law yet, so the usual warning applies: we need legislation before we make final calls. But there is enough in the Budget papers to know this is not business as usual.

Alan and Steph recorded a quick video this morning walking through what actually matters for small business owners, investors, SMSFs and individuals.

tl:dr

There is a $250 Working Australians Tax Offset from 1 July 2027.

The 16% tax rate drops to 15% from 1 July 2026, then 14% from 1 July 2027.

There is a new $1,000 standard deduction for work-related expenses from the 2027 tax return.

The $20,000 instant asset write-off is being made permanent.

Loss carry back is back for companies from 1 July 2026.

Negative gearing is being restricted for established residential property.

The 50% CGT discount is being replaced with indexation from 1 July 2027.

Discretionary trusts will have a 30% minimum tax from 1 July 2028.

Payday super is still coming from 1 July 2026.

ATO debt just got more painful because GIC and SIC are no longer deductible from 1 July 2025.

In short: if you own investment assets, operate through a family trust, or plan to sell a business or long-held asset, we will have some work to do between now and 30 June 2027.

the quick updates - for individuals

There are three simple individual tax measures worth knowing.

First, the tax rate on income between $18,201 and $45,000 drops from 16% to 15% from 1 July 2026.

If your taxable income is at least $45,000, that is worth up to $268 per year.

From 1 July 2027, that same tax rate drops again to 14%.

That takes the savings to up to $536 per year compared with the current 16% rate.

Second, the government is introducing a $250 Working Australians Tax Offset from the 2028 tax return.

This applies to income from work, including salary and wages and business income of sole traders. It does not apply to passive income, like rental income, dividends or retirement income.

Third, from the 2027 tax return, there will be a $1,000 standard deduction for work-related expenses.

Very important: this is not $1,000 back.

It is a tax deduction.

So if you are on a 30% marginal tax rate and you claim the $1,000 deduction, the tax saving is around $300.

This will be useful for simple returns where people have minimal deductions. If you already have more than $1,000 in work-related deductions, you keep claiming the actual amount as usual.

Also important: this does not apply to the 2026 tax return. The 2026 return is still under the old rules.

the quick updates - for small businesses

Instant asset write-off

Finally, some certainty.

The $20,000 instant asset write-off is being made permanent from 1 July 2026 for small businesses with turnover under $10 million.

This means eligible assets costing less than $20,000 can be claimed upfront instead of depreciated over time.

Example:

You buy a piece of equipment for $18,000.

If your company tax rate is 25%, the deduction can reduce your tax bill by $4,500.

That is useful.

But please do not hear "$20,000 write-off" and think "$20,000 back".

You still spent the money. The tax system just lets you claim the deduction faster.

Loss carry back

Loss carry back is back, and this is a proper cashflow measure for companies.

It starts from tax years commencing on or after 1 July 2026, so it is not a fix for the 2026 year.

The idea is simple: if your company paid tax in an earlier year and then makes a loss, you may be able to carry that loss back and get some of the earlier tax refunded.

Example:

In FY26, your company makes a $100,000 taxable profit and pays $25,000 tax.

In FY27, the company has a $60,000 loss.

Under the new rules, that $60,000 loss may be carried back against the earlier profit, triggering a $15,000 tax refund, assuming the company has enough franking credits.

That is real cashflow.

The fine print:

· Companies only.

· Revenue losses only.

· Refund limited by the franking account balance.

Start-up loss refundability

From 1 July 2028, small start-up companies with turnover under $10 million may be able to cash out losses made in their first two years.

The refund is limited to FBT and PAYG withholding on wages paid to Australian employees.

Translation: if a genuine start-up is hiring people and burning cash early, there may be some cashflow support.

PAYG instalments

From 1 July 2027, small and medium businesses can opt in to monthly PAYG instalments using an ATO-approved calculation embedded in accounting software.

Insert mild tax-agent nightmare here.

In theory, this is meant to make instalments match real-time business performance.

In practice, the software needs to be good, the data needs to be clean and business owners need to understand that "monthly" means the ATO is getting much closer to real-time tax collection.

This appears optional for compliant businesses. But if you have a history of non-compliance or tax debt issues, the ATO may require monthly instalments.

So yes, paying and lodging on time still matters.

The big changes

Now to the three headline changes.

These are the ones that will trigger the most planning work.

Negative gearing

This is a massive shift for property investors.

The aim of the reform is to restrict negative gearing to new builds.

If you already owned an investment property before 7:30pm AEST on 12 May 2026, you are essentially grandfathered. You can keep claiming rental losses against your other income, like salary and wages, until you sell that property.

If you buy an eligible brand-new build, you are also protected. The current negative gearing rules will continue to apply.

If you buy an established residential property after Budget night but before 1 July 2027, you get a short grace period. You can claim the losses against your broader income until 30 June 2027. From 1 July 2027, those losses can only be used against residential property income or capital gains from residential property.

If you buy an established residential property from 1 July 2027, negative gearing against salary and wages is off the table.

Example:

You buy an established investment property after Budget night.

It makes a $20,000 rental loss.

Under the old rules, if you were on a 47% marginal tax rate, that loss could reduce your tax by up to $9,400.

Under the new rules from 1 July 2027, that $20,000 loss cannot reduce your salary tax bill. It gets carried forward and locked away until you have residential property income or a residential property capital gain to use it against.

That is a very different cashflow outcome.

Important: this is aimed at residential property. Commercial property is not the target of this negative gearing change.

Properties held in super funds, including SMSFs, and widely held trusts are also excluded.

Capital gains tax

This is not just about property.

This applies to shares, business assets, farms, investment properties and other CGT assets held by individuals, trusts and partnerships.

From 1 July 2027, the current 50% CGT discount will be replaced with cost base indexation for assets held for more than 12 months.

There will also be a 30% minimum tax on net capital gains.

Under the current system:

You buy an asset for $500,000.

You sell it for $700,000.

The capital gain is $200,000.

If you are eligible for the 50% CGT discount, only $100,000 is taxable.

Under the new system, the cost base is indexed for inflation. You then pay tax on the real gain, with a minimum tax rate of 30% applying to that gain.

Example:

You buy an asset for $500,000.

You sell it for $700,000.

Assume indexation increases your cost base to $525,000.

Your indexed gain is $175,000.

That $175,000 is the amount exposed to tax under the indexation method, not $100,000 like under the old 50% discount method.

That is why this change can be brutal for high-growth assets.

The transition rules matter.

If you sell before 1 July 2027, the current rules apply.

If you already own an asset and sell after 1 July 2027, you are not grandfathered forever. The gain up to 1 July 2027 can still use the current rules, but the gain after 1 July 2027 falls into the new system.

That means valuations at 1 July 2027 are going to matter. A lot.

Pre-CGT assets are also caught for growth after 1 July 2027.

That is huge.

Normally, assets acquired before 20 September 1985 are outside the CGT system. Under this reform, the pre-1 July 2027 gain remains exempt, but growth after 1 July 2027 may be taxable.

So if Nan has a pre-CGT property that has always been thought of as "tax free", we now need to think very carefully about what happens from 1 July 2027 onwards.

What about new residential property?

This is the carve-out.

If you buy an eligible new residential property, you can choose either:

· the 50% CGT discount, or

· cost base indexation plus the 30% minimum tax.

So yes, if the property qualifies and you choose the 50% CGT discount, you are not also applying the 30% minimum tax method to that gain.

Example:

You buy an eligible new build.

You later sell it and make a $200,000 capital gain.

If you choose the 50% CGT discount, the taxable gain is $100,000.

You do not then apply the 30% minimum tax method on top.

It is an either/or choice.

We still need the legislation to tell us exactly what counts as an eligible new residential property, so do not sign a contract based on the headline alone.

What about selling a business?

This is the one that makes us nervous.

If you started a business from scratch, your cost base may be very low or even nil.

Indexation does not help much when there is nothing meaningful to index.

Example:

You started a company from scratch and your cost base is nil.

You sell it for $5 million.

Very rough model, assuming one owner, no 15-year exemption, the 50% active asset reduction applies and the owner can use the $500,000 retirement exemption:

Current rules:

$5 million capital gain.

Less 50% CGT discount = $2.5 million.

Less 50% active asset reduction = $1.25 million.

Less $500,000 retirement exemption = $750,000 taxable capital gain.

Under an indexation model, if the cost base is nil, there is basically nothing to index.

That could look like:

$5 million capital gain.

No 50% CGT discount.

Less 50% active asset reduction = $2.5 million.

Less $500,000 retirement exemption = $2 million taxable capital gain.

That is an extra $1.25 million exposed to tax in this simple model.

We need the final legislation to confirm how the new CGT rules interact with the small business CGT concessions, i.e. does the minimum 30% tax still apply to this? Do we need to value the business at 30 June 2027? The details will certainly matter here.

But the message is clear: if you are thinking about selling a business, land, shares or a long-held asset, timing and structure now matter more than they did yesterday.

Discretionary trusts

This is the family trust bombshell.

From 1 July 2028, discretionary trusts will have a 30% minimum tax on taxable income.

For anyone running a family trust, this is a very big deal.

At the moment, a discretionary trust generally distributes income to beneficiaries, and those beneficiaries pay tax in their own returns.

That has allowed family groups to distribute income to adult beneficiaries on lower tax rates.

The Budget is putting a floor under that strategy.

If you distribute to adult beneficiaries on low incomes

This is where the change bites.

Example:

A family trust distributes $20,000 to an adult child with no other income.

Under the current system, that adult child may pay little or no tax after the tax-free threshold and offsets.

Under the new rules, the trust income is subject to a 30% minimum tax.

That means $6,000 of tax on that $20,000 distribution.

That is the point of the reform. It is designed to stop discretionary trusts being used to spread income to lower-taxed family members.

If the beneficiary is already on a higher tax rate

The 30% minimum tax may not mean extra tax overall.

Individual beneficiaries should receive a non-refundable credit for the tax paid by the trustee.

So if the beneficiary is already paying tax at 30% or more, the trustee tax is more like a prepayment or tax floor.

It is annoying, but not necessarily an extra 30% on top.

If you distribute to a company

This is the ouch moment.

Corporate beneficiaries do not receive the credit for the tax paid by the trustee.

That means the old bucket company strategy may become much less attractive.

Example:

A discretionary trust distributes $100,000 to a company.

The trustee pays 30% minimum tax, being $30,000.

The company may still be assessed on the trust income without receiving credit for that $30,000.

Depending on the company tax rate and final legislation, that could mean another $25,000 to $30,000 of company tax.

That is potentially 55% to 60% tax at the company level before we even talk about what happens when profits are eventually paid out to individuals.

We are hoping the final legislation gives more sensible detail here. But for now, bucket company planning needs a big red flag.

If your trust is not discretionary

The rules do not apply to every trust.

The Budget says fixed trusts, widely held trusts, complying super funds, special disability trusts, deceased estates and charitable trusts are excluded.

Some income is also excluded, including primary production income, certain income relating to vulnerable minors, amounts subject to non-resident withholding tax and income from assets of discretionary testamentary trusts existing at Budget night.

The government has also flagged expanded rollover relief for three years from 1 July 2027 for small businesses and others that want to restructure out of discretionary trusts into another entity type, such as a company or fixed trust.

So the message is not "panic and restructure tomorrow".

The message is:

Family trusts are not dead, but the tax planning benefit has changed. Every discretionary trust needs a proper review before 1 July 2028.

But wait, there's more

There are a few other measures worth noting.

R&D Tax Incentive

Changes to the R&D Tax Incentive start from 1 July 2028.

Core R&D gets more support, but supporting R&D expenditure will no longer be eligible.

The minimum claim threshold is also increasing from $20,000 to $50,000 unless the work is done with a registered Research Service Provider or Cooperative Research Centre.

The kicker is the R&D offset will no longer be refundable if your business has been operating for more than 10 years! Huge cashflow implications. More to come on this.

Translation: R&D claims are going to need better evidence and cleaner project discipline.

Electric vehicles and FBT

The EV FBT concession is being wound back.

Existing eligible arrangements keep the discount that applied when the arrangement started.

EVs up to $75,000 provided before 1 April 2029 can still get the full discount.

EVs above $75,000 and up to the fuel-efficient luxury car tax threshold provided between 1 April 2027 and 1 April 2029 get a 25% discount.

From 1 April 2029, eligible EVs move to a permanent 25% FBT discount.

So EV salary packaging is not dead, but timing and vehicle value now matter a lot more.

Payday super

This was not a new Budget night announcement, but it is one of the biggest practical changes for employers.

From 1 July 2026, employers need to pay super when they pay wages, instead of quarterly.

If you pay fortnightly, super needs to become part of the fortnightly payroll process.

Example:

An employee earns $80,000.

At 12% super, that is $9,600 per year.

Instead of finding about $2,400 each quarter, the business needs to fund about $369 each fortnight.

That is better for employees, but it changes business cashflow habits.

Remember the ATO knows every time your payrun falls due. They get the info when you lodge single touch payroll, which means they also know when super should be paid.

Division 296 super tax

Division 296 is still the big issue for clients with super balances over $3 million.

This is not a fresh Budget night surprise, but it remains a planning issue for high-balance super members.

ATO debt is more expensive

From 1 July 2025, general interest charge and shortfall interest charge are no longer deductible.

That makes ATO debt more expensive. The interest rate the ATO is charging is currently 10.96%.

If you have been treating the ATO like a bank, that bank just got nastier.

ATO compliance and fraud

The ATO is getting more funding and more tools to detect fraud and monitor tax and super systems in real time.

Expect more data matching, more digital identity checks and less patience for messy records.

Director IDs, ABNs, myID and RAM are becoming the plumbing of business identity.

Admin is not glamorous, but it is absolutely becoming a risk area. Expect to be more frustrated with needing to use mygov more in the future.

Fuel excise

Fuel excise has been temporarily reduced by 32 cents per litre for petrol and diesel for three months from 1 April 2026.

Example:

A 65-litre tank saves about $20.80.

Useful, yes.

Life-changing, no.

Private health insurance

The age-based uplift of the Private Health Insurance Rebate will be removed from 1 April 2027.

Older clients may see higher net private health insurance costs. We need insurer-level detail before modelling individual outcomes.

As usual anything announced still needs to be legislated, so we will be bringing you updates as this happens over the next few months.

Any questions you have in relation to the budget feel free to shoot these through to one of the team or post up on our socials. We will keep the answers coming on Facebook, Instagram and in our client community.