Property, Trusts and Tax: Key Federal Budget 2026-27 Announcements

The Federal Budget handed down on 12 May 2026 introduces some of the most significant tax reforms Australia has seen in decades. The changes impact property investors, discretionary trusts, business owners, employees, and electric vehicle users, with several measures aimed at reshaping investment behaviour and improving budget sustainability.

While many reforms will not take effect immediately, taxpayers should begin reviewing their structures and long-term strategies now. Here is a breakdown of the key announcements and what they could mean for Australians.

Property Investors Face Major Changes

• Negative Gearing Restricted to New Builds

One of the headline reforms is the limitation of negative gearing to newly built residential properties from 1 July 2027.

Under the new rules, investors purchasing established residential properties after this date will no longer be able to offset rental losses against salary or other personal income. Instead, those losses can only be used against future rental income or capital gains from residential property investments.

Importantly, existing property owners are protected under grandfathering provisions. Any residential investment property held before 7:30pm AEST on 12 May 2026, including contracts exchanged but not yet settled will continue to operate under the current negative gearing rules until the property is sold.

The government’s intention is to encourage investment into new housing supply while reducing speculative demand for existing homes.

• Capital Gains Tax Discount Overhauled

Another significant reform affects Capital Gains Tax (CGT). From 1 July 2027, the current 50% CGT discount for assets held longer than 12 months will be replaced with a CPI-linked cost base indexation method.

In addition, a minimum 30% tax rate will apply to net capital gains accruing after 1 July 2027.

These changes apply broadly to individuals, trusts, and partnerships across all CGT assets. However, investors in new residential properties will have the option to choose between the existing 50% discount method or the new indexation model.

The government has also provided relief for pensioners and welfare recipients, with Age Pension and JobSeeker recipients exempt from the minimum tax in the year of sale.

These reforms are likely to significantly alter long-term investment calculations, especially for high-income earners and property investors.

• Discretionary Trusts Under Pressure

From 1 July 2028, discretionary trusts will face a minimum 30% tax on taxable income distributed through the trust.

While beneficiaries will receive non-refundable tax credits for tax already paid by the trustee, the reform effectively removes many of the traditional tax advantages associated with discretionary trust structures.

Several trust categories are excluded, including:

• Fixed and widely held trusts 
• Complying superannuation funds 
• Charitable trusts 
• Deceased estates 
• Special disability trusts 

Certain income categories are also excluded, particularly primary production income and income linked to vulnerable minors.

To ease the transition, the government has announced a three-year roll-over relief period from 1 July 2027, allowing eligible taxpayers to restructure into companies or fixed trusts without immediate tax consequences.

Business owners and family groups using discretionary trusts should seek advice well before these rules commence.

Relief for Employees and Individuals

• New Working Australians Tax Offset

A new permanent Working Australians Tax Offset (WATO) will provide eligible workers with a $250 annual tax offset from the 2027–28 income year.

The offset applies to individuals earning wages, salaries, or sole trader business income and is designed to provide modest cost-of-living relief for working Australians.

• $1,000 Instant Work-Related Deduction

From the current 2026–27 income year, employees will be able to claim up to $1,000 in work-related expenses without needing receipts or itemised substantiation.

Taxpayers with expenses above $1,000 can still use the traditional itemised deduction method if it provides a larger claim.

Importantly, charitable donations, union fees, and professional memberships remain separately deductible in addition to the standard deduction.

This measure is expected to simplify tax returns for millions of Australians while reducing administrative burden.

• Private Health Insurance Rebate Changes

The 2026–27 Federal Budget continues the Australian Government’s commitment to strengthening Medicare, ensuring Australians have access to affordable, high-quality healthcare services whenever and wherever they are needed.

The government will also simplify the Private Health Insurance rebate system by removing higher rebate rates for individuals aged 65 and over from 1 April 2027.

All eligible policyholders will instead receive the same base-tier rebate regardless of age.

Budget savings from this measures are expected to be redirected into aged care services, including additional residential aged care places and expanded home care support.

Business Measures and Start-Up Support

• Instant Asset Write-Off Made Permanent

Small businesses with annual turnover under $10 million will welcome the permanent extension of the $20,000 instant asset write-off from 1 July 2026.

Eligible businesses can immediately deduct assets costing less than $20,000 in the year they are purchased or installed, while higher-cost assets will continue to be depreciated through existing pooling rules.

This measure provides greater certainty for small businesses planning equipment and technology investments.

• Loss Carry-Back Returns

The government has also reintroduced loss carry-back provisions for companies with aggregated turnover below $1 billion.

Eligible companies can carry tax losses back against profits from the previous two years, potentially generating refunds of previously paid tax. The refund remains limited by available franking credits.

• Refundable Tax Losses for Start-Ups

From 1 July 2028, eligible start-up companies with turnover under $10 million will be able to convert tax losses from their first two years into refundable tax offsets.

The refundable amount will be capped based on PAYG withholding and Fringe Benefits Tax paid during the loss year, helping early-stage businesses improve cash flow during critical growth phases.

• Electric Vehicle FBT Changes

The current Fringe Benefits Tax exemption for electric vehicles will gradually transition to a permanent 25% FBT discount arrangement.

From 1 April 2029, EVs under the fuel-efficient luxury car tax threshold will qualify for a reduced statutory rate equivalent to a 25% FBT concession.

However, transitional rules preserve the existing full exemption for eligible EVs valued up to $75,000 and provided before 1 April 2029.

How Boutique Accounts Can Help

At Boutique Accounts, we understand that major tax reforms can create uncertainty for investors, business owners, and working professionals. Our team works closely with clients to help them navigate changing tax laws, review existing structures, and identify opportunities to remain tax-effective under the new rules. Whether you need advice on property investments, trust restructuring, business tax planning, CGT implications, or cash flow strategies, we provide practical and personalised guidance tailored to your circumstances. With proactive planning and ongoing support, Boutique Accounts helps clients stay compliant while positioning themselves for long-term financial success.

Final Thoughts

The 2026–27 Federal Budget introduces sweeping reforms that will reshape investment, tax planning, and business structuring across Australia.

Property investors, trust beneficiaries, and business owners are likely to face the greatest impact, while employees and start-ups gain targeted relief measures.

With several reforms commencing over the next two years, now is the ideal time to review investment strategies, trust structures, and business arrangements to ensure they remain effective under the new tax landscape.

As always, taxpayers should seek professional advice tailored to their specific circumstances before making financial or structural decisions.