Federal Budget Changes - what is now legislation and what isn’t?
The 2026 Federal Budget introduced significant changes affecting property investors, capital gains tax (CGT) and family or discretionary trusts.
Some measures have now been legislated, while others remain in draft form and are subject to consultation and Parliamentary approval. This update summarises what is now law and where we are awaiting further detail before recommending specific strategies.
Our key message is to avoid rushed decisions and make sure you seek advice before buying an investment property, plan for valuations at 30 June 2027, and await the final trust legislation before restructuring.
Here’s a summary of the changes and our recommendations:
Changes to Negative Gearing (Now Law)
The negative gearing reforms have been legislated and commence from 1 July 2027. Properties owned, or under contract, at 7:30pm AEST on 12 May 2026 (Budget Night) are exempt and continue under the existing negative gearing rules.
For residential properties acquired after Budget Night, negative gearing concessions are generally limited to qualifying new residential builds. Established residential properties purchased after that time will be subject to the new restrictions from 1 July 2027, which are that any property losses ie negative gearing are carried forward and can be used to offset future residential property income and residential property capital gains; you just cant offset the losses against other income such as salary and wage income.
Our recommendation: Existing property investors generally do not need to take action. Anyone considering a new investment property should seek advice before signing a contract.
Changes to Capital Gains Tax (Now Law)
The CGT changes are not, by themselves, a reason to sell assets if a sale was not already planned.
Under the transitional rules, gains accrued up to 30 June 2027 continue to be dealt with under the current methodology, including the 50% CGT discount where eligible. Only gains accruing from 1 July 2027 will be subject to the new regime.
The new law replaces the 50% CGT discount with CPI indexation and introduces a minimum 30% tax rate on capital gains accruing from 1 July 2027.
Our recommendation: Arrange supportable market valuations of significant assets as at 30 June 2027, particularly property, businesses, rural land and pre-CGT assets. For most clients, obtaining a valuation will be more important than bringing forward an asset sale.
Changes to Family or Discretionary Trusts (Awaiting Final Legislation)
A 30% minimum tax is proposed for affected discretionary trusts from 1 July 2028. Recent exposure draft legislation indicates that some existing trusts may be able to nominate fixed percentage beneficiary entitlements and effectively operate as a fixed trust for these rules.
The draft legislation also proposes an exclusion for certain primary production income. Further detail is required before determining whether broader concessions will apply to farming trusts or farming property structures.
Our recommendation: No immediate restructuring is recommended. We are awaiting the detailed legislation to be finalised and passed before developing strategies. With the proposed 1 July 2028 commencement date, there is time to assess the final rules and determine the appropriate course of action.
