On 12 May 2026, the Federal Government delivered its fifth Budget. It was one of the most dramatic and significant budgets in decades. Among other things, it announced that negative gearing would be abolished for property purchased after 1 July 2027 (albeit, grand-fathering pre-Budget arrangements).

It also announced that the CGT discount will not be available from 1 July 2027 (except in respect of qualifying “new builds”). It also proposed a minimum 30% tax on trusts (with certain exceptions). There are also several other significant changes.

We have put together a summary of these key changes and how they may affect taxpayers – especially small to medium business. So, it is important to come and speak to us. However, the proposed measures may be subject to changes before their implementation.

CGT discount replaced

BUDGET MEASURE: From 1 July 2027, the 50% CGT discount is replaced with cost base indexation plus a 30% minimum tax on real gains. Applies to all CGT assets including pre-1985 assets, with gains accrued before 1 July 2027 grandfathered. Investors in eligible new builds can elect either system, and income support recipients are exempt from the 30% minimum tax.

How it works in practise

IN A NUTSHELL: if you buy and sell an asset after 30 June 2027, the new rules apply (ie indexation and minimum 30% tax rate); if you buy and sell an asset before 1 July 2027, the existing 50% discount applies and there is no minimum tax rate; and if you buy an asset before 1 July 2027 but sell it after that date, then you will get the discount up to the asset’s market value on 1 July 2027 and thereafter you will only get indexation plus a minimum 30% tax rate on any gain from that date.

Importantly, the new rules apply to all assets (eg shares) and not just real property.

However, for “new builds” (as defined) they will be entitled to choose either the 50% discount or indexation and the minimum 30% tax rate. But it is not clear if this only applies to new builds after 1 July 2027.

One bit of tax planning you may consider: is that if you intend to sell an asset to use a low tax rate, it may be best to try to do this by 1 July 2027 – before the minimum 30% rate kicks in.

Also note that if you own a pre-CGT asset (ie one acquired before 20 September 1985), they will no longer be excluded from CGT but will be subject to CGT after 1 July 2027 – but with a cost base equal to its market value at that date.

But the devil will be in the legislative detail – and after a year of consultations and submissions.

Negative gearing limited to new builds

BUDGET MEASURE: From 1 July 2027, losses on established residential property acquired after 7:30pm AEST 12 May 2026 can only be deducted against rental or residential property capital gains income. Properties held (or under contract) before that time are grandfathered.

Our analysis

This aligns the Australian tax system with other jurisdictions and, together with the CGT indexation changes, should have some impact on the demand side for residential housing. But importantly, note the “grandfathering” of negative gearing arrangements already in place. (How far it shifts the affordability dial for young people trying to get a foothold in the housing market remains to be seen – especially in the light of ongoing supply problems.)

30% minimum tax on discretionary trusts

BUDGET MEASURE: From 1 July 2028, a 30% minimum tax will be applied to the taxable income of discretionary trusts, payable by the trustee, with exemptions for unit and widely-held trusts, complying super funds, special disability trusts, deceased estates and charitable trusts. Primary production income, certain vulnerable minor income, and income from existing testamentary trust assets are also excluded. Three-year rollover relief from 1 July 2027 will be provided to assist restructuring.

What to watch

Presumably this new trustee tax only applies to income to which beneficiaries are made presently (or specifically) entitled to during the particular tax year and that the current 47% tax rate will continue to apply to income to which no beneficiary is presently entitled – otherwise trusts might still be a useful accumulation vehicle.

In other words, it is in effect a 30% minimum tax on trust distributions. Also note despite the carve out for deceased estate trusts etc, this does not include testamentary discretionary trusts (as opposed to testamentary fixed trusts) – which will be subject to the 30% minimum tax rate.

But, again, the devil will be in the legislative detail – and after a year of consultations and submissions.

$20,000 instant asset write-off made permanent

BUDGET MEASURE: The $20,000 instant asset write-off will be permanently extended for small businesses with aggregated turnover under $10 million. It will apply to eligible assets first used or installed ready for use from 1 July 2026.

Our analysis

Three years of annual extensions made permanence almost inevitable but the real win is ending the late-legislation cliffhanger that had become a genuine planning headache. The threshold itself is unchanged and won’t be indexed, meaning its real value continues to erode. The Opposition proposed lifting it to $50,000 in the Budget reply. Worth noting the per-asset basis still applies, so multiple sub-$20,000 purchases can each be written off, and the measure pairs usefully with the reintroduced loss carry-back rules.

Loss carry-back reinstated

BUDGET MEASURE: Companies with global turnover under $1 billion can carry losses back two years, from 1 July 2026. Separately, loss refundability for start-ups (turnover under $10 million, first two years of operation) applies from 1 July 2028.

Key Features and what’s new

This is a permanent measure, unlike the temporary loss carry-back rules that applied during the COVID years. Treasury estimates it will reduce receipts by $2.3 billion over five years and benefit around 85,000 companies.

Key features to note:

• Revenue losses only (capital losses don’t qualify)
• Available only to companies — not trusts, partnerships or sole traders
• Delivered as a refundable tax offset, not a deduction
• Capped by the company’s franking account balance at year-end
• Losses can be carried back against tax paid in the prior two income years

The start-up loss refundability measure is new and shouldn’t be confused with carry-back. Because new companies typically have no prior tax to recover, the refund is instead capped at the FBT and PAYG withholding paid on Australian employee wages in the loss year — effectively rewarding early-stage hiring. It applies for the first two years of operation only and starts from 1 July 2028, so there’s a long lead time before it bites.

$1,000 instant tax deduction

BUDGET MEASURE: From the 2026–27 income year, individuals can claim a flat $1,000 for work-related expenses without itemising (charitable donations and professional memberships still claimable on top).

Practical implications

This is a welcome simplification and replaces the long-standing $300 substantiation threshold, which had been left unchanged for many years and fallen well behind inflation. Treasury expects 6.2 million workers (around 42% of taxpayers) to benefit, with an average saving of about $205. Keep in mind it’s a deduction, not a refund, so the cash benefit depends on your marginal tax rate. This translates into roughly $160 at the bottom rate to $450 at the top (excluding Medicare levy).

More deductions are always welcome, especially where they don’t have to be substantiated. But it’s still worth keeping written evidence of work-related expenses for at least one year to confirm which option suits. The $1,000 threshold is easy to exceed. Keep in mind the ATO’s fixed-rate WFH method alone (70c per hour) reaches it at around 27 hours per week of home-based work. This is before adding car use, tools, self-education or professional subscriptions. Charitable donations and union/professional fees remain separately claimable on top, so they don’t need to be weighed against the $1,000 instant tax deduction choice.

Working Australians Tax Offset

BUDGET MEASURE: A new $250 permanent tax offset for income from work, from the 2027–28 income year, lifting the effective tax-free threshold to $19,985 (or $24,985 with LITO).

Key points

The impact of this measure is to effectively increase the tax-free threshold for work income by to $19,985, or up to $24,985 when combined with the Low Income Tax Offset. The Treasurer has called it the largest permanent increase in the effective tax-free threshold since 2012–13.

A FEW POINTS WORTH NOTING:

• It’s automatic, meaning no claim required on the return.
• Limited to work income (wages, salaries and sole trader business income). Investment income, trust distributions and company dividends don’t qualify. This is consistent with the budget’s broader shift in tax weight from labour toward capital, paired with the negative gearing and CGT reforms.
• It’s a non-refundable offset, so it reduces tax payable but doesn’t generate a cash refund of its own. 97% of the 13 million eligible workers are expected to receive the full $250 and the remaining 3% are very low earners whose tax bill is already below that.
• The first cash impact lands when 2027–28 returns are lodged from mid-2028.

Worth being precise with clients: the WATO stacks with the legislated rate cuts (16% → 15% from July 2026, then 14% from July 2027), the $1,000 instant tax deduction, and the existing LITO. The government’s “five tax cuts” headline figure combines all of these — the WATO alone is a modest $250.

Superannuation – no changes

No super changes were announced in this Budget. Keep in mind that from 1 July already legislated changes such as the Division 296 tax on balances above $3m and Pay day super start. So “no new changes” doesn’t mean that nothing changes on 1 July.

Superannuation funds (including SMSFs) are explicitly excluded from both the new CGT regime and the negative gearing restrictions on residential property. This widens an already meaningful gap:

• SMSFs retain the one-third (33.3%) CGT discount on assets held over 12 months. Combined with the 15% accumulation-phase rate, that’s an effective CGT rate of around 10% on long-held assets and 0% in pension phase. Keep in mind the new Division 296 tax on higher super balances can change this. Outside super, the new regime delivers a minimum 30% on real gains for individuals and most trusts.
• SMSFs can continue to fully deduct losses on both new and established residential property against other fund income. This is a structural advantage now unavailable to individuals buying established property after Budget night.

With the end of the financial year coming up, now’s a great time to get on top of your tax and super. A little planning before 30 June can help you make the most of any opportunities to reduce tax, boost your super, and avoid last-minute surprises.

This checklist outlines key things to consider and action before the financial year wraps up. It’s a simple way to stay on track and finish the year with confidence.

TAX CHECKLIST

Here are some practical things to consider before 30 June to help you tidy up your tax position and potentially reduce your bill.

Bad Debts

If you’re running a business, write off any bad debts that won’t be recovered before 30 June so they can be claimed.

Employee Bonuses and Director Fees

Planning to pay employee bonuses or director fees? Make sure they’re confirmed in writing and communicated to recipients by 30 June, even if payment happens later.

Charitable Donations

Bring forward any planned donations and have the highest-earning family member make the gift.

Remember:

• Donations must be to registered charities.
• They can’t create a tax loss.
• Keep receipts.

Prepay Interest on Loans

If you have a loan for an income-generating asset (like an investment property), consider prepaying interest before 30 June to bring forward the deduction.

Claim Work-Related or Business Costs

Bring forward costs such as repairs, stationery, or supplies by 30 June 2026. These small deductions can add up. This applies to all taxpayers, not just businesses.

Prepay Expenses

You can claim prepaid expenses, such as insurance or subscriptions.

Where the expense is:

• Under $1,000 – all taxpayers can claim the expense
• Over $1,000 – fully deductible if you’re a small business if the expense relates to a period of 12 months or less. Note that this is also available if it’s a non-business expense of individuals, such as work related expenses or rental property costs.

Write Off Old Stock

If you hold stock, write off any damaged, outdated or unsellable items before 30 June 2026.

Review Assets & Depreciation

Small businesses (turnover under $10m) can immediately deduct assets under $20,000 that were acquired from 1 July 2025 and ready to use by 30 June 2026.

Also, remove any old equipment from your depreciation schedule if it’s been sold, thrown out, or is no longer usable.

Electric Vehicles

If your business provides an electric vehicle to an employee, you may be eligible for depreciation deductions and Fringe Benefits Tax (FBT) concessions.

Defer Income

If possible, delay receiving income (like issuing invoices) until after 30 June to push tax into next year.

Offset Capital Gains

Selling an asset this year with a profit? You could crystallise capital losses before 30 June to offset that gain.

Watch out: ‘wash sales’ (selling and rebuying the same asset just to get a loss) are not allowed.

Personal Services Income (PSI)

If you’re working in your own name (like a contractor or freelancer), check that your income qualifies as a business under PSI rules.

Business Losses

If your business runs at a loss, you may not be able to claim that loss if you carry on a “non-commercial business” – unless you pass one of the ATO’s tests (eg, income, asset, or profit test).

Company Loans to Shareholders (Division 7A)

If you’ve borrowed from your company, the loan needs to be properly documented, put on commercial terms and repaid.

If repaying through dividends, make sure the dividends are legally declared and paid prior to 1 July (with appropriate documentation in place).

Trust Distributions

If you’re a trustee, resolutions must be made before 30 June to properly distribute income to beneficiaries.

You also need to let your beneficiaries know what they’re entitled to.

Beneficiary TFN Reporting

If new beneficiaries gave you their TFN between April -June, you must lodge a TFN report by 31 July 2026.

Motor Vehicle Logbook

Planning to claim car expenses using the logbook method? Start now and track 12 weeks of usage (can span over two tax years). Also record your odometer readings and remember to fill out the logbook at the end of each business journey.

Private Health Insurance

Make sure you have the right level of cover to avoid the Medicare Levy Surcharge, especially if your family situation has changed (eg. new baby, separation, adult children moving off your policy).

Check Your Insurance Cover

Review your personal and business insurance needs. Not only does this provide peace of mind, some policies may also be tax deductible, especially if prepaid.

Review Your Business Structure

Is your current setup still the right one? Changes in income, family, or risk levels may mean a trust, company, or restructure could be more effective. We can help you weigh up your options.

TIP
Unused limits for 2020–21 expire after 30 June 2026 so don’t miss out.

SUPER CHECKLIST

Make the most of your super before 30 June 2026 with these smart, simple tips.

Check Your Contribution Limits

Before adding more to super, log in to myGov > ATO > Super > Information to check how much you’ve already contributed.

Tip: If you’re in an SMSF, your info may not be up to date in myGov but we can help you work this out.

Add to Super and Claim a Tax Deduction

You may be able to make a personal deductible contribution and claim it at tax time.

To be eligible:

• You must be over 18
• If you’re 67–74, you must meet the work test or qualify for a work test exemption
• If you’re over 75, you must contribute within 28 days of your birthday month

Don’t forget: To claim a tax deduction, submit a Notice of Intent to Claim a Deduction to your super fund and get their confirmation before lodging your tax return or making withdrawals, rollovers, or starting a pension.

Use Up Unused Contribution Limits

Haven’t used your full concessional contribution cap in recent years? You may be able to catch up using the carry-forward rule if your total super balance is under $500,000 on 30 June 2025.

Split Contributions with Your Spouse

You can split up to 85% of your 2024–25 concessional (pre-tax) contributions with your spouse before 1 July 2026.

This is a great way to even out your balances and plan ahead for retirement.

Note – To use this strategy, your spouse must be under their preservation age or aged 64 or younger and not retired when you make the request to your fund.

Get a Tax Offset for Spouse Contributions

If your spouse earns less than $40,000, consider making an after-tax contribution to their super.

By doing so, you could get up to a $540 tax offset while boosting their retirement savings.

Grab a Government Co-Contribution

If you earn less than $60,400 and at least 10% comes from work or running a business, you could be eligible for a government co-contribution. All you need to do is add up to $1,000 to your super and the government may add up to $500 extra.

Avoid the Division 293 Tax Trap

If your income (plus employer contributions) is over $250,000, you may pay an extra 15% tax on some of your super contributions.

Strategies like bringing forward expenses or deferring income may help keep you below the threshold.

Maximise Non-Concessional (After-Tax) Contributions

If you’re under 75, you may be able to contribute up to $360,000 in one year using the bring-forward rule.

New rules from 1 July 2026 may allow you to contribute even more – speak with us about getting the timing right.

Take Your Minimum Pension Payment

If you’re drawing a pension from your super, make sure you take the minimum amount by 30 June.

Missing the minimum may affect your fund’s tax benefits for the whole year.

Need Help?

We’re here to help you make the most of EOFY tax and super opportunities. Contact us to discuss what options might work best for your situation.

If you’ve turned 67 and want to top up your super and claim a tax deduction for doing so, there’s one extra hurdle to clear: the work test. It’s a simple requirement, but it catches people out, so it’s worth understanding when it applies and how to meet it.

What the work test is

The work test requires you to be gainfully employed for at least 40 hours in any 30 consecutive day period during the financial year you make the contribution. “Gainfully employed” means working for payment or reward as an employee or self-employed, in a business, trade or profession. Unpaid work, including volunteering, doesn’t count.

The 40 hours needs to be completed over a 30-day window in the financial year. You only need to meet it once in the year.

When it applies

Since 1 July 2022, the work test no longer applies to non-concessional contributions. However, the test still applies if you’re aged 67 to 74 and want to claim a tax deduction for a personal contribution. It’s the gateway to turning a personal contribution into a concessional (tax-deductible) one. Once you turn 75, you generally can’t make personal contributions, except for Downsizer contributions, so deductible contributions are not ordinarily available from 75.

However, there is a small window which allows personal contributions received within 28 days after the end of the month you turn 75 to be accepted.

Who checks it?

Your super fund used to ask for a work test declaration before accepting your contribution. Now, the ATO checks at the time you lodge your tax return and claim the deduction. The responsibility sits with you to keep evidence of having met the test. For example payslips, invoices, or a record of self-employed work and hours.

The work test exemption

If you’re recently retired and didn’t work in the year you made the contribution, you may still claim a deduction using the one-off work test exemption.

You must:

• have met the work test in the previous financial year
• have had a total super balance under $300,000 at the end of the previous financial year, and
• not have used the exemption before.

It’s a once-only opportunity, designed to give recent retirees a final chance to make a deductible contribution.

Claiming the deduction

Meeting the work test is only one step. To claim the deduction, you must make the contribution into your super fund and

• Lodge a “notice of intent to claim a deduction” with your fund, and
• Receive an acknowledgment from the fund before lodging your tax return.

Without that acknowledgment, the deduction can’t be claimed, even if you met the work test. The deduction also can’t create a tax loss, so size the contribution against your taxable income.

The bottom line

If you’re between 67 and 74 and planning a personal deductible super contribution, remember the work test. Forty hours of paid work in a 30-day window. Speak to us if you’re unsure whether your situation qualifies.

Even before the current war in the Middle East, the Budget has clearly been under somepressure. Recent comments from various government sources suggest that changes to the tax rules around investment properties could be under serious consideration. So, what sort of changes could we see on 12th May? And how might they affect you?

While there has been a lot of focus on the 50% CGT discount, there is also a push to restrict negative gearing – ie, the ability to offset rental losses against other income, such as salary and wages. Most other countries don’t permit this.

The 50% discount

Arguments have been advanced that the 50% discount is too generous, especially for assets that have not been held for a long time, and there are calls for reducing the discount to 331/3 % or even 25%.

Even before the current war in the Middle East, the Budget has clearly been under some pressure. Recent comments from various government sources suggest that changes to the tax rules around investment properties could be under serious consideration.

So, what sort of changes could we see on 12th May? And how might they affect you?

Another idea is to have a staggered discount, depending on how long the asset has been held.

There have also been calls to extend the existing 12 month holding period before a capital gain can qualify for the discount to, say, 18 months or 24 months.

Negative gearing

On the negative gearing issue, reform ideas range from quarantining losses altogether and offsetting them against future rental profits or against the CGT gain that arises when the property is sold to limiting negative gearing to two properties per taxpayer or to some dollar amount.

All assets or just residential property?

While many people view housing as special, the government may consider whether to apply any changes to assets more broadly, including commercial property, shares and the like.

Date of effect

If any changes made only apply to assets acquired by a taxpayer after the Budget date, then any significant revenue gains would be a long way off.

But Australians generally don’t like retrospective tax changes and the way these things have generally been handled is to make any adverse tax changes operate prospectively. After all, people have invested under the rules which existed at the time.

Applying any changes to the CGT discount or negative gearing to existing assets would be a courageous decision (in a “Yes Minister” sense), and one that the Opposition parties would relish.

WHAT SHOULD YOU DO NOW?

Anyone who owns an investment property or is considering buying or selling one should probably sit back and wait for the Budget to land. There may be nothing of any consequence in it after all, but if there is you’re welcome to come and speak to us about how you are affected and what your options are.