WHAT THE 2026 TAX REFORMS MEAN FOR YOUR FAMILY GROUP AND BUSINESS

If you have been watching the news recently, you have likely heard whispers of sweeping changes coming to Australia’s tax and superannuation landscape. Following a series of legislative deals in Canberra, those whispers are officially reality.

The Federal Government has locked in a major legislative package. Combined with the recently enacted Division 296 super laws, we are looking at the most significant structural shake-up to our tax system in nearly thirty years. What this means is that business-as-usual planning will not work. With these changes, planning is more important than ever.

Below, we have broken down exactly what is changing, when it happens, and most importantly, the strategic actions we need to take together to protect your wealth.

1. The Abolition of the 50% CGT Discount

Effective Date: 1 July 2027

For decades, if an individual or trust held a capital asset (such as shares or property) for longer than 12 months, you only paid tax on half the profit upon sale. The general 50% Capital Gains Tax (CGT) discount is being repealed.

In its place, the ATO is returning to a dual system:

• The CPI Indexation Method: For assets held over 12 months, your asset's original cost base will be adjusted upwards for inflation using the Consumer Price Index (CPI). You will only pay tax on the "real" profit above inflation.

• The 30% Minimum CGT Floor: To prevent taxpayers from waiting until retirement or a low-income year to realise gains, a mandatory 30% minimum tax rate will apply to net capital gains. If your personal tax bracket is lower than 30%, a top-up tax will bring the gain up to that 30% floor.

What stays safe? Your family home (Principal Place of Residence) remains entirely tax-free. Crucially, the Small Business Active Asset Concessions (Division 152) remain completely untouched. This is fantastic news for business owners looking to exit.

Our Strategy Behind the Scenes

We are entering a complex transition phase. Anything settled before 30 June 2027 still secures the legacy 50% discount. For assets held past that date, we will need to calculate an apportionment, splitting the gain up to 1 July 2027 using a market valuation, and applying the new indexation rules to the remainder.

Over the coming months, we will be reviewing your asset portfolios to evaluate whether it makes financial sense to bring forward any planned divestments into the 2026–27 financial year.

2. Negative Gearing Banned on Established Property

Effective Date: 1 July 2027 (Grandfathered from 12 May 2026)

The rules around using investment property losses to reduce your personal salary or business tax have been completely rewritten to drive new housing supply.

• The New Rule: You can now only offset negative gearing deductions against your ordinary income if you invest in eligible new residential builds.

• Established Properties: If you purchase an established residential property going forward, any rental losses are quarantined. These losses can only be used to offset future rental profits within your portfolio, or carried forward to lower your CGT when you eventually sell the asset.

Are you already grandfathered? Yes. If you bought your established investment property (or signed a fully binding contract) before 7:30 PM AEST on 12 May 2026, your current negative gearing structure is legally locked in and protected indefinitely.

3. A 30% Minimum Tax on Family Trusts

Effective Date: 1 July 2027

Discretionary Family Trusts have long been the gold standard for asset protection and legitimate tax planning. Historically, we have optimised a family’s global tax position by distributing trust income to adult children at university or elderly parents in lower tax brackets.

The government is shifting the goalposts by introducing a 30% minimum tax rate on distributions made via discretionary trusts.

If we distribute trust income to a beneficiary whose personal tax rate sits below 30%, a top-up tax will be levied to ensure the distribution bears a minimum tax drag of 30%. This also significantly dampens the strategy of routing trust distributions through "bucket companies" to lock in corporate tax rates. We are already building fresh tax models to analyze how this alters your family group's global effective tax rate.

4. SMSF Overhauls: The $3M Super Cap & The Home Loan Ban

Effective Date: 1 July 2026 (Division 296) & Imminent (Residential Borrowing Ban)

For clients running or looking to establish a Self-Managed Super Fund (SMSF), two major changes require immediate structural attention:

• Division 296 is Now Law: This bill has received Royal Assent and officially goes live on 1 July 2026. If your Total Superannuation Balance (TSB) exceeds $3 million, you face an additional tiered tax on your fund's earnings: 30% on earnings for balances between $3 million and $10 million, jumping to 40% if you cross the $10 million threshold.

• The Residential Borrowing Ban: Following a political deal to pass the budget, the government is completely banning SMSFs from using Limited Recourse Borrowing Arrangements (LRBAs) to purchase residential property.

  
  

Critical Pipeline Planning: Existing property loans inside super are safe and grandfathered. There will be a strict 45-day transition window starting from the day this new bill officially passes and receives Royal Assent. If you are currently in the process of purchasing a residential property via super, we have a narrow window to execute your Bare Trust and sign a contract of sale.

Note: Commercial property (such as purchasing your own business premises through super) remains completely exempt from this ban.

5. Quick-Fire Updates: Business Compliance & Personal Tax

Effective Date: 1 July 2026

Several immediate, practical compliance changes take effect this financial year, altering how we manage day-to-day operations.

For Our Business Owners

• Payday Super is Live: Superannuation Guarantee (SG) contributions can no longer be paid quarterly. You must remit your employees' SG contributions at the exact same time you run your payroll. Funds must clear into their accounts within 7 days.

• ATO Clearing House is Closed: The ATO’s Small Business Superannuation Clearing House has been permanently decommissioned. We need to ensure your Xero Payroll or external clearing house is perfectly configured to handle automated Payday Super immediately.

• Loss Carry-Back Returns: If your business is incorporated with an annual turnover under $1 billion, loss carry-back rules return. If your company incurs a tax loss in the 2026–27 year, we can use it to claim a direct cash refund on taxes your company paid over the prior two years.

  
  

For You as an Individual Taxpayer

• Income Tax Cuts: The tax bracket for income between $18,201 and $45,000 drops from 16% to 15% for this upcoming financial year, improving personal cash flow.

• The $1,000 Standard Deduction: If you prefer to bypass keeping track of every individual work receipt, the ATO is introducing a flat $1,000 standard work deduction. You can claim this flat amount without needing to substantiate individual receipts, provided you choose it over itemizing actual costs.

  
  

Our Next Steps Together

While these changes are sweeping, they also create unique windows of opportunity before the harsher structural rules take effect on 1 July 2027.

Over the coming months, please reach out to the team to schedule a comprehensive structural review. We will evaluate your current trust deeds, property pipelines, and super balances to ensure your wealth is perfectly positioned for this new era.