The 2026–27 Federal Budget has landed — and if you’re a business owner, investor, or anyone who has spent the last decade building wealth with some degree of strategic intent, you need to read past the government’s carefully curated press release.
Because buried beneath the warm language about fairness, housing affordability, and intergenerational equity is something far more consequential: a proposed structural shift in how Australia taxes investment, entrepreneurship, family wealth, and the tools you’ve used to build it.
Let me walk you through what’s actually on the table, what it means for your situation, and what I’d be doing about it right now — before the legislation even lands.
And yes, I’ll give you my honest opinion along the way. That’s what you’re here for.
The Big Picture First
The government has wrapped these proposals in five key themes:
- Housing affordability
- Fairness
- Tax system integrity
- Budget sustainability
- Intergenerational equity
I’ll address that last one at the end, because I have thoughts. Strong ones.
For now, understand this: many of these measures are still proposed only. They require legislation before becoming law. But the direction of travel is unmistakably clear, and the clients who start thinking strategically now will have meaningfully more options than the ones who wait for royal assent.
1. Negative Gearing — The Renovation May No Longer Pay Off the Way You Think
What’s Being Proposed
Negative gearing benefits would be largely restricted to newly constructed residential housing. Losses on established property may no longer be immediately deductible against your salary and wages.
The important nuance — and one most media coverage has glossed over — is that rental losses may not disappear entirely. They may instead be quarantined and carried forward to offset:
- Future rental profits from that property
- Capital gains when you eventually sell
So you’re not necessarily losing the deduction. You’re losing the timing of it. That’s a crucial distinction for planning purposes.
Why the Government Says It’s Doing This
The stated rationale is to cool investor demand for established housing stock, redirect capital toward new construction, and take some pressure off first-home buyers. Economically tidy in theory.
The Problems Nobody Wants to Talk About
Rental supply gets worse before it gets better. We are already in a housing supply crisis. Reducing the financial viability of holding established rental properties doesn’t magic new supply into existence — it risks reducing the private capital funding the rental accommodation that millions of Australians rely on right now.
Value-add strategies take a significant hit. Some of the most effective wealth-building strategies involve manufacturing equity through:
- Adding bedrooms or granny flats
- Duplex developments
- Substantial renovations
- Subdivision projects
These strategies often produce improved rental yields over time, but they typically generate accounting losses in the early years through interest costs, capital works deductions, and depreciation. If those losses can’t offset personal income immediately, many projects simply won’t stack up commercially — which is the opposite of encouraging new housing supply.
Borrowing capacity may compress — and this is the sleeper issue. Currently, many lenders partially add back non-cash deductions like depreciation and capital works when assessing serviceability. Why? Because those deductions genuinely improve after-tax cashflow. If losses are quarantined and the immediate tax benefit disappears, lenders may:
- Reduce or remove depreciation add-backs in serviceability calculations
- Apply harsher rental shading policies
- Assess investment properties more conservatively overall
For investors already near their serviceability limits, or who rely on equity manufacturing or high-depreciation properties, this could translate to a material reduction in what the bank will lend them. Combined with elevated interest rates and tighter living expense assessments, future portfolio expansion may require significantly larger deposits or stronger income than previously.
The irony is devastating: measures designed to improve housing supply may reduce the private capital available to fund it.
What I’d Be Doing Now
- Review your existing ownership structures — debt positioning, trust arrangements, and future acquisition plans all deserve fresh eyes under this framework.
- Consider whether company structures deserve a closer look. If rental losses can only offset company income rather than personal income, and the CGT discount is simultaneously being wound back (more on that shortly), traditional individual ownership becomes less of an automatic default. Companies aren’t a silver bullet — land tax, asset protection, and estate planning still matter enormously — but structure selection is about to become a much more consequential conversation.
- Get your serviceability assessed now, before policies tighten. Lenders haven’t updated their policies yet. That window won’t stay open indefinitely.
- For those with accelerating plans — check transitional rules carefully. Depending on commencement dates, there may be planning opportunities for acquisitions still in the pipeline.
2. Capital Gains Tax Discount Reform — The Rules You Built Your Business Around May Change
What’s Being Proposed
The government is reportedly considering replacing the 50% CGT discount with an inflation indexation model, where only real gains above inflation attract concessions. Long-term CGT outcomes could change materially.
Why the Government Says It’s Doing This
The argument: the 50% discount disproportionately benefits wealthier taxpayers, encourages speculative asset inflation, and reduces revenue. You’ve heard this framing before.
The Problems Nobody Wants to Talk About
Let me say something directly to every business owner reading this: you built your business under a set of rules. You took the risk, absorbed the losses in the early years, paid yourself less than you were worth, and deferred your reward. That reward was partly underwritten by the reasonable expectation that when you eventually sold, the government would take roughly 25 cents in the dollar rather than 47.
That expectation now appears to be changing — and there appears to be little to no grandfathering protection proposed for existing business owners.
That is a sovereign risk issue. Full stop.
The government will point to the Small Business CGT Concessions as the safety net. And they exist — I know them well. But here’s the reality: they are highly conditional. Access depends on satisfying:
- Turnover thresholds
- Net asset value limits
- Active asset tests
- Ownership requirements
- The retirement exemption rules
- Significant individual tests
- Timing rules
Not every business owner qualifies. Many partially qualify. Some fail on a technicality they didn’t see coming. And these tests are assessed at the point of sale — not when you first started the business.
What we know with certainty is that the standard 50% discount was historically available to virtually every qualifying taxpayer who held an asset for more than 12 months. That certainty may now disappear.
There are also real downstream consequences:
- Indexation is more complex. More record-keeping, more disputes over cost base calculations, more compliance cost.
- Structure selection becomes more nuanced. If the CGT discount advantage of individual or discretionary trust ownership narrows, company structures may become comparatively more attractive in certain scenarios — particularly where assets are held long term, profits are distributed strategically, and franking credits can be utilised effectively.
- Investment and entrepreneurship incentives weaken. Many business owners don’t build businesses purely for annual income. They build them as long-term capital assets intended to fund retirement, family wealth, and succession. Change the exit economics, and you change the risk calculus at the formation stage.
And let’s be very clear about something the housing-focused headlines keep missing: this isn’t just a property investor problem. The CGT discount applies to all capital assets held for more than 12 months. That means shares, ETFs, cryptocurrency, managed funds, and any other investment vehicle where capital growth is part of the return. This proposal hits every asset class simultaneously.
Why does that matter? Because for many younger Australians, investing in shares or crypto is the plan. It’s how they’re trying to build a deposit for their first home or investment property when they can’t get there via the property market directly. A 25-year-old contributing to an index fund portfolio, or accumulating a crypto position over several years, is doing exactly what a financially responsible person should be doing. They’re putting their already heavily-taxed PAYG income to work, taking a long-term view, and trying to get ahead of inflation. Under the proposed changes, the reward for that patience and discipline gets taxed more heavily. That’s not a policy designed to help younger Australians build wealth. It’s one that makes the path harder.
What I’d Be Doing Now
- Review exit timing strategies immediately if a sale, disposal, or restructure is already in contemplation.
- Sharpen your record keeping. If indexation returns, historical acquisition costs, improvement costs, and dates become critically important.
- Don’t assume you qualify for all small business concessions. Get a proper eligibility analysis done before you need it, not during a transaction under time pressure.
- Model your succession and exit options now — management buyouts, family transfers, partial sales, external acquisitions. The earlier you map this, the more flexibility you retain.
3. Proposed 30% Minimum Tax on Discretionary Trust Distributions — This Is the One That’s Alarming Estate Planners
What’s Being Proposed
A proposed minimum 30% tax rate would apply to certain discretionary trust distributions, regardless of the beneficiary’s actual marginal tax rate.
This is a fundamental structural change. Discretionary trusts have historically operated as flow-through structures — income is distributed and taxed at the beneficiary’s personal rate. Under this proposal, distributions would face a minimum tax floor.
Why the Government Says It’s Doing This
The government argues discretionary trusts are used to stream income to lower-taxed family members, creating inequity relative to salaried employees. They’ve also been at pains to say this is “not a death tax.”
Why Many Advisers Respectfully Disagree
Let me explain why this one is giving estate planning lawyers and tax advisers genuine heartburn.
Discretionary trusts aren’t just a tax vehicle. They are routinely used for:
- Asset protection from litigation and creditor risk — particularly important for professionals, directors, builders, and business owners who carry personal liability exposure
- Estate planning and succession
- Managing distributions to vulnerable beneficiaries, including those with disabilities
- Protecting family wealth during divorce or bankruptcy events
- Providing flexibility to respond to changing family circumstances over time
The people most commonly using these structures are not billionaires. They are small business owners, medical practitioners, tradies who’ve built something, and professionals protecting their family’s financial security from the inherent risks of their work.
Testamentary trusts may also be captured — and this is deeply concerning. Testamentary trusts are created under a Will after someone dies, specifically to carry out the wishes of the deceased in a responsible, flexible way. They are commonly used to:
- Manage controlled distributions for disabled or vulnerable children
- Prevent reckless spending by young beneficiaries
- Protect assets in the event of a beneficiary’s divorce or insolvency
- Allow trustees to adapt to circumstances the testator couldn’t anticipate
These are not tax-minimisation strategies. They are responsible estate planning instruments. If the proposed rules capture testamentary trusts, the practical impact falls squarely on ordinary Australian families managing difficult situations.
Here’s the technical point that matters most — and that most reporting has missed entirely. This proposal does not appear to work like company tax. With a company:
- Profits are taxed at the company rate
- That tax generates franking credits
- Those franking credits can be refunded to lower-income shareholders when profits are distributed
Under the proposed trust framework, the 30% minimum tax may operate more like a non-refundable withholding tax. That means beneficiaries who are genuinely on low incomes — pensioners, those on maternity leave, disabled beneficiaries, retirees — may not be able to claim back any excess tax paid. The credits may simply not be refundable.
That creates a materially harsher outcome than company taxation, despite the optics suggesting they’re equivalent.
What I’d Be Doing Now
- Don’t wait for the legislation. Start modelling now. The direction is clear enough to begin scenario planning.
- Review your trading trust structure. For some businesses, restructuring into a company via the Small Business Restructure Rollover may be worth serious analysis. Potential advantages include fixed tax rates, greater control over dividend timing, and franking credit outcomes for shareholders. But — and I mean this — restructuring should never be tax-driven in isolation. Asset protection, land tax, succession planning, Division 7A implications, and future CGT consequences all need to be considered.
- Review your Will and any testamentary trust arrangements. Families with existing estate plans built around testamentary trusts should seek advice early. Depending on how the legislation is ultimately drafted, existing plans may need revision.
4. Permanent $20,000 Instant Asset Write-Off — One of the Good Ones
What’s Being Proposed
The $20,000 instant asset write-off for eligible small businesses would become permanent.
My Take
This is genuinely business-friendly and I’ll give credit where it’s due. Simplifying depreciation rules and removing the annual uncertainty around whether the threshold will be extended is a practical win for small business.
The caveats: $20,000 buys meaningfully less equipment than it once did, and many businesses remain reluctant to invest regardless of the depreciation treatment — because the issue is confidence and borrowing costs, not accounting rules. But as a signal of policy intent toward small business, it’s a positive one.
What I’d Be Doing Now
- Review technology upgrades, office equipment, tools, machinery, and vehicle replacement timing to take advantage where it makes commercial sense.
- The best tax deduction is still one that genuinely improves your business — not one you made purely for the write-off. Don’t buy the ute you don’t need.
5. Increased ATO Compliance Funding — Time to Get Your House in Order
What’s Being Proposed
Additional ATO compliance and enforcement funding, expected to generate material additional tax collections.
What This Means in Practice
Expect intensified scrutiny on:
- Division 7A loan arrangements
- Trust distributions and resolutions
- GST compliance
- Work-related expenses
- Property deductions
- Crypto transactions
- Unpaid tax debt
- FBT compliance
That last one deserves special attention. FBT is a potent audit tool because it allows the ATO to target undocumented private spending flowing through a business structure. Motor vehicles, entertainment, travel, accommodation, club memberships, and private expense reimbursements can all trigger FBT liabilities — sometimes at the top marginal rate — even where the underlying expense was deductible to the company.
Many business owners still believe that if something is deductible to the business, it’s automatically exempt from FBT. It isn’t. These are different legislative regimes, and confusing them can be expensive.
There’s also a lending dimension worth flagging: ATO debt is increasingly damaging borrowing capacity. Lenders now scrutinise outstanding tax liabilities, overdue BAS obligations, and payment arrangements with the ATO. Significant ATO debt can reduce access to home loans, investment lending, commercial finance, and equipment finance — even in your personal name.
One practical option worth considering: ATO General Interest Charge (GIC) is no longer tax deductible. That changes the refinancing maths. In some circumstances, refinancing ATO debt into a structured business lending facility may reduce your effective interest cost, restore deductibility, and improve how future lenders view the liability. A formalised repayment structure typically reads better than an open ATO debt in a lending assessment. It’s worth modelling before you assume the ATO payment arrangement is your only option.
What I’d Be Doing Now
- Improve your documentation. Poor record keeping is the single most preventable audit problem I see.
- Proactively review trust resolutions, Division 7A loan accounts, payroll, contractor classifications, GST treatment, and FBT exposure.
- Review any spending that creates personal benefits for directors, shareholders, employees, or their associates — vehicles, entertainment, travel, accommodation, memberships.
- Don’t ignore ATO debt. Early engagement genuinely matters. The ATO’s patience has shortened considerably.
The View From Here — An Honest Assessment
Let me be direct with you, because I think you deserve it.
The government has framed these measures around intergenerational equity. I respectfully disagree with that framing — and here’s why.
If genuine intergenerational equity was the objective, policy would focus on increasing housing supply, reducing regulatory barriers to construction, improving productivity, and creating conditions where younger Australians can access the same wealth-building mechanisms their parents used.
Instead, many of these proposals reduce the incentives available to younger Australians to invest their already heavily-taxed incomes into property, shares, ETFs, cryptocurrency, side businesses, and entrepreneurial ventures — while existing asset holders retain the benefits of prior growth, accumulated equity, and in some cases grandfathered arrangements. This isn’t selectively targeting one asset class. It captures every meaningful vehicle ordinary Australians use to build wealth outside of superannuation.
That looks less like intergenerational equity and more like intergenerational wealth restriction.
And I’ll say this plainly: this is not genuine tax reform. Real tax reform improves productivity, investment incentives, and economic efficiency. If these measures were accompanied by meaningful indexation of personal income tax brackets to address bracket creep, there would at least be an argument for structural balance. That is not what’s happening here. What’s happening is revenue expansion — dressed in the language of fairness.
The long-term risk is a gradual transition from an economy that rewards productive risk-taking to one that penalises capital formation. History is not kind to that transition.
What This All Means For You
The concern for most clients I work with isn’t simply that tax rates may increase. It’s the combination:
- Borrowing capacity may reduce
- Access to finance may tighten
- Investment feasibility may weaken
- Succession planning becomes more complex
- Long-standing financial assumptions may no longer hold
For business owners, investors, and wealth-builders, the gap between reactive taxpayers and proactive strategic planners is about to widen substantially.
But I want to say something to the PAYG employees reading this too — because you’re not off the hook, and frankly, you shouldn’t be sitting on the sidelines anyway.
If you are employed and your entire financial plan is “work hard, get promoted, maybe buy a house one day,” you are falling behind. Inflation doesn’t wait. Bracket creep doesn’t wait. And the window to build meaningful wealth outside of superannuation is not getting wider.
Every PAYG employee should be actively building something on the side — a business idea, a consulting income stream, a small portfolio of shares or ETFs, a crypto position they actually understand, a property investment when the numbers work. Not because it’s guaranteed to replace their income tomorrow, but because the skills, assets, and cashflows you build today are what give you options in ten years. The side hustle that feels like a hobby at 30 has a habit of becoming the main act at 45 — if you start.
This is exactly why the CGT changes matter to people who don’t yet think of themselves as “investors.” If you’re a 28-year-old contributing $500 a month to an ETF portfolio or accumulating shares in a sector you know well, you are an investor. You’re doing the right thing. And the proposed changes to the CGT discount would make the eventual reward for that discipline meaningfully smaller.
My position is simple: you should be doing it anyway. Build the asset base, invest consistently, start the side hustle, get comfortable with the tax system rather than afraid of it — and then structure intelligently to protect what you build. The tax environment is going to be more demanding going forward. That’s not a reason to stop. It’s a reason to be smarter.
The clients who continue to build and protect wealth will be those who:
- Adapt their structures early
- Manage debt and cashflow deliberately
- Treat tax planning as part of a wealth strategy — not just an annual compliance chore
- Build income streams outside their employment — businesses, investments, or both
- Review succession and exit plans before they need to execute them
- Resist making emotional decisions based on headlines
Most importantly: many of these proposals are still subject to consultation, legislative drafting, and political negotiation. The details will change. But the direction won’t. And the earlier you understand where this is heading, the more options you’ll have when it arrives.
Ready to review your structures before the legislation lands?
Contact OnVenture today for a strategic consultation.
From the Budget to 30 June — Your EOFY Action List
The measures covered above don’t just affect your long-term planning — several have direct implications for what you need to do before 30 June 2026. Trust distribution resolutions, Division 7A loan accounts, super contributions, and payroll compliance all have hard deadlines in the next few weeks.
We’ve put together a practical checklist covering everything Australian business owners need to action before the clock runs out: EOFY 2026 Checklist: What Australian Business Owners Must Do →
This article is general commentary and does not constitute personal tax or financial advice. Always seek advice specific to your circumstances before taking action.