Federal Budget Update 2026-2027: A summary of key measures
This week, the Federal Budget was handed down. You will find a summary of some of the key measures below.
For a more detailed review of the budget changes, please click here.
Importantly, there was no mention of any changes to Superannuation or SMSFs, apart from the already known “Pay Day Super” measures that will soon come into effect.
From 1 July 2026, you will need to pay your employees’ super guarantee for each payday, instead of needing to pay it quarterly. To avoid penalties, your employees’ super fund must receive the payment within 7 business days after each payday.
If you would like to discuss how any of these measures may affect you, please don’t hesitate to get in touch.
Kind regards,
Andrew Martin
Fundamental reforms to the CGT regime
Replacing the 50% CGT discount with indexation
From 1 July 2027, the 50% CGT discount will be replaced by cost base indexation for assets held for more than 12 months, with a 30% minimum tax on net capital gains.
These changes will apply to all assets, including pre-CGT assets, held by individuals, trusts and partnerships.
Transitional arrangements will limit the impact on existing investments by ensuring the changes only apply to gains accruing on or after 1 July 2027. The 50% CGT discount will continue to apply to gains that accrued before 1 July 2027.
Capital gains on pre-CGT assets that accrued before 1 July 2027 will remain exempt from CGT.
Furthermore, investors in new residential properties will be able to choose either:
- the 50% CGT discount; or
- cost base indexation and the 30% minimum tax.
Income support payment recipients, including Age Pension recipients, will be exempt from the minimum tax.
Assets that are sold prior to 1 July 2027 will continue to be subject to the existing rules.
Reforming negative gearing for residential property investments
From 1 July 2027, losses from established residential properties will only be deductible against rental income or the capital gains from residential properties. Excess losses will be carried forward and are able to be offset against residential property income in future years.
These changes will apply to established residential properties acquired from 7:30 PM (AEST) on 12 May 2026. Properties acquired prior to this time (including contracts entered into but not yet settled) will be exempt from the changes until disposal.
Eligible new builds will be exempt from the changes.
Properties in superannuation funds and widely held trusts will be excluded, alongside targeted exemptions for build-to-rent developments and private investors supporting government housing programs.
Reforming the taxation of discretionary trusts
The Government will introduce a minimum 30% tax on discretionary trusts.
From 1 July 2028 (i.e., from the 2029 income year), trustees will pay a minimum tax of 30% on the taxable income of discretionary trusts. Beneficiaries, other than corporate beneficiaries, will receive non-refundable credits for the tax payable by the trustee.
Under the minimum tax, corporate beneficiaries will be assessed based on the trust income to which they are entitled, without being able to claim credits for tax payable by the trustee.
The minimum tax will not apply to other types of trusts such as fixed trusts, fixed testamentary trusts, complying superannuation funds, special disability trusts and deceased estates.
Some types of income such as primary production income, certain income relating to vulnerable minors, amounts to which non-resident withholding tax applies, and income from assets of discretionary testamentary trusts existing at announcement will also be excluded.
The Government will provide expanded rollover relief for three years from 1 July 2027 for small businesses and others that wish to restructure out of discretionary trusts into another type of entity, such as a company or fixed trust.
Personal income tax rates – 2026, 2027 and 2028 income years
(Reflecting the previously announced tax cuts: the 16% rate is reduced to 15% from 1 July 2026 and further reduced to 14% from 1 July 2027.)
Measures impacting businesses
Permanent $20,000 instant asset write-off
From 1 July 2026, the Government will permanently extend the $20,000 instant asset write-off for small businesses with turnover of less than $10 million.
Assets valued at $20,000 or more can continue to be placed into the small business depreciation pool. The provisions that prevent small businesses from re-entering the simplified depreciation regime for five years after opting out will continue to be suspended until 30 June 2027.
Reintroducing ‘loss carry back’ for companies
The Government will provide tax relief to businesses by reforming the treatment of tax losses.
For tax years commencing on or after 1 July 2026, companies with aggregated annual global turnover of less than $1 billion will be able to carry back a tax loss and offset it against tax paid up to two years earlier.
Loss carry back will apply to revenue losses only and will be limited to a company’s franking account balance.
Loss refundability for small start-up companies
The Government will introduce loss refundability for small start-up companies.
For tax years commencing on or after 1 July 2028, start-up companies with aggregated annual turnover of less than $10 million that generate a tax loss in their first two years of operation will be able to utilise the loss to generate a refundable tax offset.
The offset will be limited to the value of fringe benefits tax (FBT) and withholding tax on wages paid in respect of Australian employees in the loss year.
IMPORTANT INFORMATION
This is general advice only and does not take into account your financial circumstances, needs and objectives. Before making any decision based on this document, you should assess your own circumstances or seek advice from your financial adviser and seek tax advice from your MartinCo accountants. Information is current at the date of issue and may change.
At MartinCo we’re the Sydney Accountancy and Finance firm that makes a difference for their clients. We help you build your wealth so that you can achieve your goals! With the convenience of two Sydney offices, one in Hurstville and the other in Edgecliff, we’re more than equipped for you to contact us today!
If you have any questions feel free to contact MartinCo for more information.
The bottom line
Division 296 represents one of the most significant changes to Australia’s superannuation tax framework in recent years. While the number of affected individuals is relatively small today, the policy signals a broader shift toward limiting tax concessions for very large retirement balances.
For high-balance members and SMSF trustees, the next 12-18 months will be a critical period for reviewing strategies and ensuring their super structures remain efficient under the new rules.