Federal Budget 2026: Key Legal and Tax Implications for Business Owners, Investors and High Net Worth Individuals6 min read

Treasurer Jim Chalmers handed down the Federal Budget 2026–27 on 12 May 2026, describing it as the most significant tax reform package in over 25 years. For business owners, investors, and high net worth individuals, several of these reforms carry immediate structural and planning implications.

This article focuses on the changes most relevant to GRM LAW’s clients — those with commercial property interests, investment portfolios, discretionary trust structures, and substantial superannuation balances.

1. Discretionary Trusts: A 30% Minimum Tax and a Narrow Restructuring Window

This is arguably the most consequential announcement for privately held business and investment structures.

From 1 July 2028, a 30% minimum tax will apply to income distributed through discretionary trusts. The tax is levied at the trust level; non-corporate beneficiaries receive a non-refundable credit, but corporate beneficiaries — including the “bucket company” structures commonly used in tax planning — receive no credit at all. This effectively eliminates the rate arbitrage that has made discretionary trusts attractive for income splitting and income redirection.

Carve-outs apply to primary production trusts, fixed and widely-held trusts, superannuation funds, special disability trusts, deceased estates, and testamentary trusts that were in existence as at Budget night (12 May 2026).

Critically, the Government has announced a three-year CGT-relief restructuring window from 1 July 2027 to 30 June 2030, during which assets can be moved out of discretionary trusts without triggering CGT. This window is finite and will not be extended.

For GRM LAW clients: If you hold business assets, commercial property, or investment portfolios in a discretionary trust structure, a review of your current arrangements is warranted now — before the 2028 commencement date and while the restructuring window remains available. The interaction between the trust minimum tax, the CGT relief window, and your broader structuring objectives requires careful legal and tax analysis.

2. Capital Gains Tax: Significant Changes to the Discount and Pre-CGT Assets

From 1 July 2027, the 50% CGT discount for assets held more than 12 months will be replaced with a new model: cost-base indexation (CPI uplift of the cost base) plus a 30% minimum effective tax rate on the resulting real gain. This applies to individuals, trusts, and partnerships across all CGT asset classes — including commercial property, business goodwill, and share investments.

Several points warrant attention:

• Gains accruing before 1 July 2027 continue to benefit from the 50% discount. The ATO will apply an apportionment formula (or accept a formal valuation) to split gains on assets held across both regimes. For clients holding appreciated assets, obtaining a formal valuation before 1 July 2027 may be strategically valuable.
• Pre-CGT assets (acquired before 20 September 1985) are brought into the regime for gains accruing after 1 July 2027. Long-held commercial property, rural land, or business assets assumed to be CGT-free on disposal may no longer be. This requires urgent review for clients with legacy holdings.
• The main residence exemption is unchanged, as are the small business CGT concessions, which remain a critical planning tool for business owners approaching exit.
• Business sale transactions: The interplay between the new CGT regime and the small business CGT concessions (15‑year exemption, 50% active asset reduction, retirement exemption, rollover) remains intact. However, the baseline CGT cost for those who do not qualify for the concessions increases materially.

Important: These changes require legislation to pass the Senate and are not yet law. They are announced policy only. Clients should plan on the basis they will be enacted but take advice before acting.

3. Negative Gearing: Commercial Property Is Unaffected — But Residential Portfolios Need Review

The Budget restricts negative gearing on residential investment property to new builds only from 1 July 2027. Commercial property — including office, retail, industrial, and mixed-use assets — is explicitly excluded from this change and retains full negative gearing on interest and holding costs regardless of when the property was acquired.

For clients with residential investment property:

• Property owned or under a binding contract before 7:30pm AEST on 12 May 2026 is fully grandfathered — negative gearing is preserved indefinitely on those assets.
• Residential property acquired after Budget night will lose negative gearing from 1 July 2027.
• New residential builds — including off-the-plan, vacant land construction, and build-to-rent — retain full negative gearing under the new rules.

The practical implication for commercial property investors and funds is that the investment case for commercial property assets relative to established residential property has strengthened from a tax perspective. Build-to-rent structures are also explicitly carved out and treated favourably under the new regime.

4. Division 296 Super Tax: Now Law — Effective 1 July 2026

Division 296 is no longer a policy proposal. It passed Parliament on 10 March 2026 and received Royal Assent on 13 March 2026. From 1 July 2026, the following applies:

• Super balances between $3 million and $10 million: Total effective tax rate rises to 30% (an additional 15% on earnings attributable to that portion of the balance).
• Super balances above $10 million: Total effective tax rate rises to 40% (an additional 25%).
• Both thresholds are indexed — $3 million threshold adjusts in $150,000 increments; the $10 million threshold in $500,000 increments.
• The final design taxes realised earnings only — the earlier proposal to tax unrealised gains was removed.
• SMSFs can opt into CGT relief that rebases unrealised gains as at 30 June 2026, preventing double taxation when assets are eventually sold.

For high net worth clients with substantial SMSF or industry fund balances approaching or above the $3 million threshold, the optimal contribution, withdrawal, and investment strategy within super should be reviewed before 1 July 2026.

5. Business Tax: Permanent Instant Asset Write-Off and Loss Carry-Back

Two measures that benefit business-owning clients are now permanent fixtures rather than temporary annual extensions:

• $20,000 instant asset write-off is made permanent from 1 July 2026 for businesses with aggregated turnover under $10 million. Assets costing up to $20,000 can be immediately deducted rather than depreciated over time.
• Two-year loss carry-back is made permanent for companies with turnover up to $1 billion, allowing current-year losses to be offset against prior-year taxable income and generating a tax offset.

These are straightforward measures that reduce the compliance burden of annual uncertainty and allow businesses to plan asset purchases and loss utilisation with confidence.

Key Action Dates for GRM LAW Clients

How GRM LAW Can Assist

The reforms announced in this Budget create genuine planning opportunities — but most of them are time-limited. The window between now and mid-2028 is the period in which structuring decisions will have the greatest impact.

GRM LAW advises business owners, investors, property developers, and high net worth families on commercial property transactions, business acquisitions and disposals, trust restructuring, and corporate structuring. To navigate these complex reforms and safeguard your wealth, contact the experienced structuring and asset protection lawyers at GRM LAW to discuss how these changes affect your specific situation.

This article is general information only and does not constitute legal or financial advice. The legislative changes described herein are announced policy and are subject to passage through Parliament. You should seek independent legal and financial advice specific to your circumstances before making any decisions.