The Federal Government released its 2026 Budget on 12th May 2026.

It’s been several weeks now since the Federal Government released its 2026 Budget on 12 May 2026, and everyone has had time to digest some of the biggest changes to the tax regime in Australia for a long, long time. Changes that will have a big impact on most Australian taxpayers and the way they structure their business and investment affairs moving forward.

For those of you who need a recap, in essence the major changes announced include:

• Changing the way Capital Gains Tax (CGT) is calculated moving forward. Instead of allowing individuals a 50% reduction on any gain before tax is calculated, now the cost base will be indexed to inflation.

• Bringing pre-1985 assets into the system, to be subject to CGT on gains moving forward, but grandfathered on previous gains.

• Removing the ability to negatively gear existing residential housing for individuals and limiting this ability to new houses only. Existing negatively geared houses will be grandfathered.

• Setting a minimum tax on discretionary trust distributions at 30%, payable by the trustee. Tax credits will flow to individuals, but not companies.

These changes are designed to try to stop people seeing housing as an investment and remove speculative buying. Only time will tell if this is successful. It is the last item above that will have a big impact on a lot of Australian’s and especially those who run a business.

A very common structure in Australia is operating a business through a discretionary trust (or a company owned by a discretionary trust) and distributing profits directly or via dividends to low-income earners, or to bucket companies. This strategy was designed generally to both minimize tax and keep cash inside a business where it could be used to grow the business. Bucket companies were used to invest excess monies in a lower taxed environment than what an individual would pay. This structure is now essentially dead, unless you are prepared to pay the top marginal tax rate or higher.

There will be many strategies that come out over time to try and curb the effects of these changes. As the legislation is yet to be released, and any provisions allowed for restructuring, it is too early to comment on what these strategies may be. What it does suggest though is that, as superannuation was largely left alone in this year’s budget, superannuation funds will continue to be the lowest taxing structure in Australia. Taking advantage of a superannuation fund’s 15% tax rate, and 10% rate for capital gains, will now be the preferred method for investing. If that investment is a property, then an SMSF will be the only way to do this.

Geoff Morris 5 June 2026