This article is for business owners, investors, and taxpayers seeking clear, practical guidance on the key tax changes and policy shifts expected in the Australian Federal Budget 2026. With significant reforms on the horizon, understanding what’s likely to change, and why, will help you make informed decisions and stay ahead of the curve.
The 2026 Federal Budget is shaping up as a pivotal moment for Australia’s tax landscape, with major changes to capital gains tax (CGT), negative gearing, and trusts firmly on the agenda. Here’s what you need to know and how it could affect your financial strategy.
Key Government Priorities
Cost-of-Living Relief: Ongoing support for households, including new personal income tax cuts and targeted assistance for low and middle-income earners.
Housing Affordability: Policy focus on making housing more accessible, with changes to tax settings for property under discussion.
Fiscal Responsibility: Balancing new spending with the need to manage debt and deficits, seeking long-term budget savings.
Tax Integrity: Expanding compliance programs to address tax avoidance and ensure fairness.
Major Tax Changes to Watch
1. Capital Gains Tax (CGT) Discount Reform
Current Setting: Individuals and trusts can claim a 50% CGT discount on assets held for more than 12 months.
Potential Changes: The government is considering reducing the CGT discount, possibly to 25%–33%, or introducing a tiered system based on asset type or holding period. This may apply to all assets, not just property, impacting investment portfolios broadly.
Rationale: Aimed at addressing housing affordability and rebalancing incentives between property investors and owner-occupiers.
Implications: A lower CGT discount would increase tax payable on the sale of investment properties and other assets, potentially cooling investor demand and impacting after-tax returns. Transitional rules and grandfathering provisions may apply, but details will depend on the final Budget announcement.
📌 Action Point: Review your portfolio and consider the timing of asset sales in light of possible changes.
2. Negative Gearing Reform
Current Setting: Negative gearing allows investors to deduct losses from investment properties (or other assets) against other income, reducing their overall tax bill.
Potential Changes: The government may limit negative gearing to new properties only, cap the number of properties eligible per taxpayer, or phase out the concession over time.
Rationale: Intended to improve housing affordability by reducing speculative demand and redirecting investment towards new housing supply.
Implications: Limiting or removing negative gearing would increase the after-tax cost of holding investment properties, especially for highly leveraged investors. This could affect property prices, rental supply, and investor behaviour.
📌 Action Point: Model the impact of potential changes on your cash flow and tax position, and seek advice on restructuring investments if needed.
3. Changes to Family Trusts: Minimum Tax Rate and Company-Like Treatment
There is growing speculation that the 2026 Federal Budget may introduce significant reforms to the taxation of family trusts, moving beyond administrative changes to address perceived inequities in how trust income is taxed compared to other structures.
Potential Minimum Tax Rate on Distributions:
Treasury and pre-Budget commentary have highlighted the possibility of imposing a minimum tax rate on trust distributions, sometimes described as a non-refundable withholding tax. This would mean that all distributions from discretionary trusts could be subject to a set minimum tax rate (for example, 30%), regardless of the beneficiary’s marginal tax rate.
The aim is to reduce the tax planning advantages of streaming income to beneficiaries on lower tax rates, thereby increasing overall tax integrity and aligning trust taxation more closely with company tax outcomes.
Treatment of Trusts Like Companies:
Another reform under discussion is the potential for trusts to be taxed in a manner more akin to companies. This could involve taxing retained earnings at the corporate tax rate, or even requiring trusts to pay tax on income before distributions, with beneficiaries receiving a credit (similar to franking credits in the company system).
Such a change would represent a fundamental shift in the taxation of trusts, potentially reducing the flexibility and tax efficiency that have made discretionary trusts a popular vehicle for family wealth management and business succession.
Implications:
These reforms would have a major impact on family groups and private businesses that rely on trusts for income distribution and tax planning. The introduction of a minimum tax rate or company-like treatment could increase the effective tax paid on trust income, reduce the benefits of income splitting, and require a reassessment of existing structures.
Transitional rules and grandfathering provisions may be considered, but details will depend on the final Budget announcement.
📌 Action Point: Trustees and beneficiaries should closely monitor Budget developments and be prepared to review their trust arrangements. Early engagement with advisers will be essential to understand the impact of any new rules and to plan for compliance and tax efficiency under the new regime.
4. Personal Income Tax: Potential for Unannounced Changes or $300 Earned Income Offset
While the government has announced staged personal income tax cuts, there is growing speculation, highlighted in recent ABC coverage, that the Budget may include unannounced changes or a new flat $300 earned income offset for all taxpayers. This offset would provide a one-off reduction in tax payable, targeting cost-of-living pressures for working Australians.
Potential Offset: The $300 earned income offset would apply to all individuals with employment income, regardless of tax bracket, and would be delivered automatically through the tax system.
Unannounced Changes: There is also the possibility of further tweaks to tax thresholds or rates, depending on fiscal conditions and political priorities at Budget time.
Implications: These measures would provide immediate relief for wage earners but may be temporary or subject to annual review.
📌 Action Point: Stay alert for Budget announcements and check your eligibility for any new offsets or changes to personal tax rates.
5. Fringe Benefits Tax (FBT) and Electric Vehicles (EVs): Reduced Tax Incentive and Personal Implications
Changes to the fringe benefits tax (FBT) exemption for electric vehicles (EVs) have been announced pre Budget, with a tightening of eligibility across a transitional period. This will likely increase the cost of providing EVs as employee benefits. As announced by Government, the changes will be brought in progressively through three phases and are estimated to save the Budget $1.7 billion over the five years from 2025-26. Current arrangements will be grandfathered.
- The existing electric vehicle discount will continue in full until March 2027.
- Between 1 April 2027 and 1 April 2029, the full FBT discount will apply only for EVs costing $75,000 or less. EVs costing more than $75,000 but below the luxury car tax threshold will receive a 25 per cent discount on their payable FBT.
- From 1 April 2029, all EVs below the luxury car tax threshold will receive the 25 per cent discount on payable FBT.
Key Point: Review your fleet strategy and consider the timing of EV acquisitions.
Personal Implications: For employees considering a novated lease or salary packaging an EV, the reduced incentive could increase the after-tax cost of acquiring and running an electric vehicle. This may affect the affordability and attractiveness of EVs for personal use.
📌 Action Point: If you are planning to purchase or lease an EV, consider acting before any changes take effect, and seek advice on the likely impact on your total cost of ownership.
What This Means for You
Taxpayers of all types should prepare for significant tax changes, particularly to property-related concessions and trust administration. Now is a good time to review your portfolio, consider the timing of asset sales, and model the impact of possible CGT and negative gearing reforms. Business owners and employees considering EVs should review the potential impact of reduced FBT incentives.
Next Steps
The 2026 Federal Budget is expected to deliver the most significant suite of tax reforms in years, especially for those utilising negative gearing, holding assets affected by CGT discount changes, or managing family trusts. Andersen Australia will provide detailed analysis and practical guidance as soon as the Budget is released.
Stay Ahead of Federal Budget Night
This article is part of Andersen Australia’s ongoing Federal Budget 2026–27 coverage.
For detailed analysis across CGT, negative gearing, business tax, and more visit our dedicated Budget Page:
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