Federal Budget 2026-27: Critical Tax Changes for Family Offices, Property Investors & Businesses

The Australian Federal Budget 2026-27 heralds a suite of significant tax reforms poised to reshape financial planning for Family Offices, Investors and Businesses. These announcements, intended to commence from various future dates but as early as 12 May 2026, will demand a proactive and strategic review of current legal structures and investment approaches. This article provides an overview of the critical changes, offering an advisory perspective on their practical implications.

It is important to note that the announcements have not been implemented. The Government will need to introduce legislation through Parliament and have it passed through both houses prior to it becoming effective. Through this process, we will find out the important finer details which will help guide what adjustments need to be made and when.

Family Trusts

A pivotal change is the introduction of a 30% minimum tax on family trusts, effective 1 July 2028. This measure targets the long-standing practice of income-splitting, where trust income is distributed to beneficiaries in lower tax brackets to reduce the overall tax liability. In addition to this, companies will not obtain any tax credits for the tax paid on the trust income which will impact the distribution of income to “bucket companies”.  The detail with this reform is important as the exact mechanics of how the trust tax play out is not known.

Investors

Investors face substantial changes impacting capital gains and income deductions.

Effective 1 July 2027, the 50% Capital Gains Tax (CGT) discount will be abolished for assets held for more than 12 months. In its place, a cost base indexation (CPI) method will be introduced, allowing investors to adjust for inflation when calculating a capital gain. This aims to tax only the real gain. Concurrently, a new minimum 30% tax on net capital gains will be applied. This new rate will apply to the inflation-adjusted capital gain, replacing the prior marginal income tax rate application after the 50% discount. An important exception exists for capital gains derived from new builds, which may retain more favourable treatment or exemptions, encouraging new housing supply.

Further, the tax-free status for pre-CGT assets (acquired before 1 September 1985) will be abolished from 1 July 2027. These assets will now fall under the new CGT framework, meaning any capital gain realised post-1 July 2027 will be subject to the new indexed cost base and 30% tax rate.

Finally, negative gearing will be abolished from 1 July 2027. This means investors will no longer be able to deduct property investment expenses (such as interest on loans) against other income streams where those expenses exceed rental income. Deductions will be limited to the rental income generated by the property, or carried forward to offset future rental income or capital gains from that specific property. This change profoundly impacts the cash flow and viability calculations for new and existing leveraged property investments.

Strategic considerations for property investors include re-assessing investment entry and exit points, the financial long-term viability of negatively geared properties, and the potential impact on portfolio diversification. Expert financial and legal advice will be critical in navigating these complex changes.

Business

The Budget introduces several measures designed to stimulate business growth and innovation.

From 1 July 2028, the R&D Tax Offset will see a significant uplift and expanded qualification criteria. The offset rates will increase, potentially ranging from 25% to 50%, depending on the entity’s turnover and expenditure. Furthermore, the qualification criteria are expected to broaden, making more innovative activities eligible for the incentive. This reform aims to encourage greater investment in research and development, enhancing Australia’s competitive edge. Businesses are encouraged to review their R&D expenditure and project eligibility under the new, more generous terms, potentially unlocking substantial tax benefits and fostering innovation-driven growth.

For companies with a turnover of under $1 billion, new loss carry-back provisions will be introduced, effective from 1 July 2026. This measure allows eligible companies to offset current year tax losses against tax paid in previous years, up to two years earlier. This provides a mechanism for companies experiencing a downturn to receive a refund of tax previously paid, significantly improving cash flow and providing a financial buffer during challenging periods. This enhanced flexibility in managing tax losses will contribute to greater financial resilience, particularly for SMEs. Companies should understand the eligibility criteria and operational aspects of these provisions to optimise their financial planning.

The tax landscape as outlined in the 2026-27 Federal Budget is undergoing a profound transformation. While providing certain benefits, these reforms introduce complexities and will necessitate a review of existing structures, property strategies and business exit plans.  Proactive engagement with taxation professionals and financial advisors will be paramount in understanding the specific impacts on individual circumstances and to adapt strategies effectively to these impending changes.