Federal Budget 2026–27: Key Takeaways for Individuals,Investors & Business Owners
The 2026–27 Federal Budget delivered a mix of modestcost-of-living relief alongside some of the most significant proposed taxreforms in decades.
While many measures are still subject to legislation, thedirection is clear: greater scrutiny on investment structures, tighterconcessions around property, and continued pressure on higher wealth balancesand discretionary entities.
Below are the key measures we believe clients should be paying attention to.
Property & Investment Changes
The Budget’s biggest talking point is the proposed reform to capital gains tax and negative gearing.
The Government has announced plans to:
- Replace the current 50% CGT discount with an inflation indexation model from 1 July 2027
- Introduce a proposed 30% minimum tax on certain capital gains
- Restrict negative gearing on established residential properties purchased after Budget night, while retaining concessions for new builds
Existing property holdings are expected to be grandfathered under the current rules.
If legislated in their current form, these measures could materially change long-term investment strategies for property and non-superinvestment portfolios.
For investors considering asset sales or restructures, timing and advice will become increasingly important over the next 12–24months.
Discretionary Trusts Under Review
Another significant proposal is the introduction of aminimum 30% tax rate for discretionary trusts from 1 July 2028.
The Government has indicated carve-outs for:
- Fixed trusts
- Complying superannuation funds
- Charitable trusts
- Deceased estates
- Certain primary production arrangements
Importantly, transitional rollover relief is proposed from 1July 2027 for entities looking to restructure.
For business owners and family groups currently operatingthrough discretionary trusts, this is likely to trigger a review of existingstructures, distribution strategies and succession planning arrangements.
Business
For businesses, the Budget delivered several targetedmeasures aimed at supporting investment, innovation and cash flow during achallenging economic environment.
The Government has committed approximately $3.5 billion inbusiness tax measures, headlined by the permanent extension of the instantasset write-off, removing the ongoing uncertainty of annual extensions andallowing businesses to plan capital expenditure with greater confidence.
Loss carry-back provisions, originally introduced duringCOVID, will also return on a permanent basis from 1 July 2026. Eligiblecompanies will again be able to carry back tax losses and claim refundable taxoffsets against prior year tax paid, creating a valuable cash flow mechanismduring periods of softer trading conditions or investment-heavy growth phases.
The R&D Tax Incentive has also been significantlyreshaped.
Key proposed changes include:
- Increasing the eligible R&D expenditure cap from $150 million to $200 million
- Raising the minimum claim threshold from $20,000 to $50,000
- Restricting smaller claims unless conducted through a registered Research Service Provider or Cooperative Research Centre
The policy intent is clear — to direct the incentive towardlarger-scale, high-impact innovation activity while tightening access tolower-value claims.
Treasury estimates the reforms could drive a additional $400 million annually in R&D investment, particularly among emerging and growth-stage businesses.
For investors and founders operating in the start-up andventure capital space, expanded venture capital tax concessions are alsoscheduled to commence from 1 July 2027.
The changes include:
- Increasing the ESVCLP asset cap from $250 million to $420 million
- Increasing maximum fund size limits to $270 million
Expanded access opportunities for institutional and superannuation investors,including SMSFs
While these measures will be welcomed by many businesses,the compliance environment is also tightening.
The ATO has received more than $700 million in additional compliance funding, with R&D claims specifically identified as an area off focus. Businesses currently accessing R&D incentives should ensure their documentation, substantiation and governance processes are robust and up to date.
Superannuation & SMSFs
The Budget did not introduce major new superannuationreforms, however previously announced changes remain highly relevant.
Key measures include:
- Paydaysuper commencing from 1 July 2026
- Division 296 tax for super balances above $3 million proceeding from 1 July 2026
- Existing SMSF CGT concessions and negative gearing arrangements remaining largely unchanged under the proposed reforms
For clients with larger super balances or complex estateplanning structures, proactive planning remains essential.
Our View
This Budget reflects a broader shift in tax policy direction, particularly around wealth, investment structures and intergenerational equity.
For many clients, the immediate impact may be limited.However, the longer-term structural implications could be significant,particularly for:
- Property investors
- Family groups using discretionary trusts
- High net worth individuals
- Business owners considering succession or restructuring
As always, the detail matters, and many of these measuresare still subject to legislation and further clarification.
If you would like to discuss how the proposed Budgetmeasures may affect your personal situation, business structure or investmentstrategy, please contact the team at Prime Financial Group.
This article contains general information only and doesnot constitute financial or taxation advice. Clients should seek advicespecific to their circumstances before acting on any proposed Budget measures.
Capital Gains Tax – Structural Reform for Investors
The most significant announcement relates to capital gains tax.
From 1 July 2027, the Government proposes replacing the 50% CGT discount with an indexation-based system. A minimum effective tax outcome of 30% on realised capital gains is also proposed.
In practice, this introduces a meaningful shift in after-tax investment returns for individuals, trusts and partnerships, particularly where assets are held outside superannuation or corporate structures.
Importantly, the effective tax outcome may exceed the 30% floor depending on income level, with outcomes for higher-income individuals potentially reaching up to marginal rates.
We are already seeing increased client focus on ownership structures for future investments, particularly where asset realisation is part of longer-term planning.
Negative Gearing – Repositioning Toward New Housing Supply
From 1 July 2027, negative gearing is proposed to be limited to new residential builds.
Under the proposal, losses on established residential properties acquired after Budget night would no longer be deductible against other income, although they could still be carried forward and offset against future rental income or capital gains.
Existing properties are expected to be grandfathered.
This represents a clear policy shift toward incentivising new housing supply. Over time, it is likely to influence investor preferences between new and established residential property.
A key outstanding issue remains the definition of a “new build”, which will determine the practical impact.
Discretionary Trusts – Significant Structural Change
From 1 July 2028, the Government has proposed a minimum 30% tax rate on discretionary trusts.
While detail is still emerging, the intent is to reduce the effectiveness of income splitting and discretionary distribution strategies within private groups.
Certain exclusions are expected, including fixed trusts, superannuation funds, charitable trusts and deceased estates. A three-year rollover relief period from 1 July 2027 is also proposed to support restructuring into companies or fixed trusts.
In practical terms, this effectively aligns discretionary trust taxation more closely with corporate tax outcomes, reducing flexibility around distribution planning.
For many family groups and privately held businesses, this is likely to become one of the most important planning considerations arising from the Budget.
At this stage, we would not recommend immediate structural change, but we do think it is appropriate to begin modelling future scenarios.
Business Measures – Support for Investment, Innovation and Cash Flow
For business, the Budget delivers a combination of certainty, targeted support and tighter integrity settings.
The instant asset write-off is proposed to be permanently extended at $20,000 for small businesses with turnover up to $10 million. This provides welcome certainty for short-term capital investment planning.
Loss carry-back provisions also remain in place for eligible companies, allowing tax losses to be offset against prior year tax paid and potentially generating cash refunds during lower profitability periods.
Startup Loss Cash-Out – Early-Stage Cash Flow Support
From 1 July 2028, eligible startups in their first two years will be able to cash out tax losses against PAYG withholding and Fringe Benefits Tax (FBT) paid.
In practical terms, this is designed to support early-stage employer startups that are generating payroll costs but not yet profitable, effectively providing liquidity support during the critical scaling phase.
Company Loss Cash-Out – Franking Account Linked Relief
From 1 July 2026, companies will also be able to cash out tax losses, limited to the balance of their franking account.
This is a meaningful cash flow measure for previously profitable companies that have accumulated franking credits but are currently in a loss position.
However, it also reduces future franking capacity, meaning companies may face constraints in paying franked dividends in later periods. In effect, it trades near-term liquidity for reduced long-term dividend flexibility.
R&D Tax Incentive – Meaningful Structural Overhaul
The R&D Tax Incentive is proposed to be significantly restructured from 1 July 2028.
Key changes include:
- Increasing the core R&D offset by around 25% (via a 4.5 percentage point uplift)
- Reducing the intensity threshold from 2% to 1.5%, broadening access to the higher rate
- Increasing the refundable offset turnover threshold from $20 million to $50 million
- Limiting refundability to firms under 10 years old, with older firms receiving a non-refundable offset
- Removing eligibility for certain supporting R&D expenditure
- Increasing the maximum R&D expenditure cap from $150 million to $200 million
- Raising the minimum claim threshold from $20,000 to $50,000, with lower-value R&D requiring use of a registered Research Service Provider or Cooperative Research Centre
Overall, the direction is toward stronger support for scalable, commercially meaningful innovation, alongside tighter eligibility and increased compliance thresholds.
Given additional ATO funding, we expect R&D claims will remain a key audit focus area.
Venture Capital – Expanded Investment Capacity
From 1 July 2027, venture capital tax incentives are proposed to be expanded.
Key changes include:
- Increasing the asset size cap for investee companies under VCLPs to $480 million
- Increasing the ESVCLP investee asset cap to $80 million
- Increasing the ESVCLP tax exemption cap on investee asset size to $420 million
- Increasing maximum ESVCLP fund size to $270 million
These changes broaden access to venture capital structures and are expected to improve capital flow into growth-stage and emerging businesses.
Electric Vehicles – FBT Concession Recalibration
The Budget also proposes changes to FBT treatment of electric vehicles under novated lease arrangements.
Key features include:
- Existing arrangements retain the FBT treatment applicable at commencement
- EVs valued up to $75,000 provided before 1 April 2029 remain eligible for a 100% FBT exemption
- EVs above $75,000 (up to the luxury car tax threshold) provided between 1 April 2027 and 1 April 2029 will receive a 25% FBT discount
These changes introduce a staged reduction in concessional treatment, particularly for higher-value vehicles.
Compliance – Increased ATO Scrutiny Across Key Areas
The ATO has received additional funding of more than $700 million, with a focus on integrity programs and high-risk areas including R&D claims and private group arrangements.
We are already seeing increased scrutiny in these areas, and this is expected to continue.
For clients, this reinforces the importance of strong documentation, clear structuring and ongoing tax governance.
Our View
This Budget reflects a broader shift in tax policy direction,particularly around wealth, investment structures and intergenerational equity.
For many clients, the immediate impact may be limited. However, the longer-term structural implications could be significant,particularly for:
- Property investors
- Family groups using discretionary trusts
- High net worth individuals
- Business owners considering succession or restructuring
If you would like to discuss how the proposed Budget measures may affect your personal situation, business structure or investment strategy, please contact the team at Prime Financial Group.
This article contains general information only and does not constitute financial or taxation advice. Clients should seek advice specific to their circumstances before acting on any proposed Budget measures.
If you would like to discuss how these announcements may impact your personal, business or investment position, please contact the team at Prime Financial Group.
