What Investors, Business Owners and Families Need to Know
The Federal Government has now passed one of the most significant tax reform packages in decades.
The reforms affect investment property, capital gains tax, discretionary (family) trusts, self-managed superannuation funds (SMSFs), employers and superannuation contributions. While some measures commence immediately, others are phased in over the next two years, giving taxpayers time to plan.
Below is a summary of the key changes.
1. Capital Gains Tax (CGT) Discount Replaced
From 1 July 2027, the long-standing 50% Capital Gains Tax discount for individuals, discretionary trusts and partnerships will be replaced.
Under the new rules:
the cost base of an asset will be indexed for inflation;
tax will generally apply only to the real (inflation-adjusted) capital gain; and
a minimum effective tax rate of 30% will apply to capital gains.
Importantly, the reforms only apply to capital gains that accrue from 1 July 2027 onwards. Capital growth that accrued before that date will continue to be taxed under the existing rules through transitional provisions.
The main residence exemption remains unchanged.
2. Negative Gearing Limited to New Residential Properties
From 1 July 2027, investors purchasing existing residential properties after 7:30pm (AEST) on 12 May 2026 will no longer be able to offset rental losses against salary, wages or other non-property income.
Instead, excess rental losses will generally be carried forward and may be applied against:
future rental income from residential property; or
future capital gains from residential property.
Properties owned (or under contract) before the Budget announcement are generally grandfathered and will continue to qualify under the existing rules.
Investors purchasing new residential dwellings will continue to have access to traditional negative gearing, with the Government aiming to encourage additional housing supply.
3. SMSFs Can No Longer Borrow to Purchase Residential Property
One of the most significant changes for SMSFs is the restriction on new residential property borrowing.
Following negotiations in Parliament, SMSFs will no longer be permitted to enter into new Limited Recourse Borrowing Arrangements (LRBAs) to acquire residential property once the legislation commences.
The good news is that:
existing residential LRBAs are grandfathered;
SMSFs can continue to hold residential properties already financed under an LRBA;
commercial property borrowing (including business real property) remains available under the existing rules.
This change only affects new residential borrowings and does not require existing arrangements to be unwound.
4. New 30% Minimum Tax for Discretionary (Family) Trusts
From 1 July 2028, discretionary trusts will be subject to a minimum tax rate of 30%.
Under the new regime:
trustees will generally pay a minimum 30% tax on the trust's taxable income;
beneficiaries will receive a tax credit for the tax already paid by the trustee;
beneficiaries whose personal tax rate exceeds 30% will pay additional tax; and
beneficiaries on lower tax rates will generally not receive refunds of excess credits.
The reforms substantially reduce the tax advantages traditionally associated with income splitting through family trusts.
Importantly, the Government has announced a three-year rollover relief period from 1 July 2027, allowing eligible taxpayers to restructure out of discretionary trusts without the usual immediate tax consequences.
5. Superannuation Capital Gains Remain Unchanged
The new CGT rules do not apply inside superannuation.
SMSFs and other complying superannuation funds continue to receive their existing concessional treatment, including:
the one-third CGT discount in accumulation phase; and
tax-free capital gains on assets supporting retirement phase pensions (subject to the existing superannuation rules).
Other Important Changes to Be Aware Of
Payday Super Has Commenced
The new Payday Super regime now applies to all salary and wages paid on or after 1 July 2026.
Instead of paying superannuation quarterly, employers are generally required to ensure that employees' superannuation contributions are received by the employee's superannuation fund within 7 days of each payday.
This is an important distinction — it is not enough to simply process or send the payment within 7 days. The contribution must actually reach the employee's superannuation fund within that timeframe.
Employers should review their payroll processes and clearing house arrangements to ensure sufficient time is allowed for payments to be processed. Businesses that continue to operate under the old quarterly payment cycle may be exposed to Superannuation Guarantee penalties and additional interest charges.
Superannuation Contribution Caps Have Increased
From 1 July 2026, the annual contribution caps have increased:
Concessional (before-tax) contributions: $32,500 per year (previously $30,000)
Non-concessional (after-tax) contributions: $130,000 per year (previously $120,000)
These increases provide additional opportunities for individuals looking to maximise their retirement savings in a tax-effective environment. They may be particularly valuable for those able to utilise unused concessional contribution caps carried forward from prior years.
What Should You Do?
Although some of these reforms do not commence until 2027 or 2028, the legislation has now been enacted, allowing taxpayers to plan with greater certainty.
If you own investment property, operate through a discretionary trust, are considering purchasing property through an SMSF, employ staff, or simply want to ensure you're making the most of the new superannuation contribution limits, now is an excellent time to review your position.
Many taxpayers may benefit from restructuring or adjusting their long-term investment strategy before these changes take effect.
If you would like to discuss how these reforms affect your individual circumstances or business, please contact Bentley & Co. We would be happy to help you understand the new rules and develop a strategy tailored to your goals.
The Federal Government has now passed one of the most significant tax reform packages in decades.
The reforms affect investment property, capital gains tax, discretionary (family) trusts, self-managed superannuation funds (SMSFs), employers and superannuation contributions. While some measures commence immediately, others are phased in over the next two years, giving taxpayers time to plan.
Below is a summary of the key changes.
1. Capital Gains Tax (CGT) Discount Replaced
From 1 July 2027, the long-standing 50% Capital Gains Tax discount for individuals, discretionary trusts and partnerships will be replaced.
Under the new rules:
the cost base of an asset will be indexed for inflation;
tax will generally apply only to the real (inflation-adjusted) capital gain; and
a minimum effective tax rate of 30% will apply to capital gains.
Importantly, the reforms only apply to capital gains that accrue from 1 July 2027 onwards. Capital growth that accrued before that date will continue to be taxed under the existing rules through transitional provisions.
The main residence exemption remains unchanged.
2. Negative Gearing Limited to New Residential Properties
From 1 July 2027, investors purchasing existing residential properties after 7:30pm (AEST) on 12 May 2026 will no longer be able to offset rental losses against salary, wages or other non-property income.
Instead, excess rental losses will generally be carried forward and may be applied against:
future rental income from residential property; or
future capital gains from residential property.
Properties owned (or under contract) before the Budget announcement are generally grandfathered and will continue to qualify under the existing rules.
Investors purchasing new residential dwellings will continue to have access to traditional negative gearing, with the Government aiming to encourage additional housing supply.
3. SMSFs Can No Longer Borrow to Purchase Residential Property
One of the most significant changes for SMSFs is the restriction on new residential property borrowing.
Following negotiations in Parliament, SMSFs will no longer be permitted to enter into new Limited Recourse Borrowing Arrangements (LRBAs) to acquire residential property once the legislation commences.
The good news is that:
existing residential LRBAs are grandfathered;
SMSFs can continue to hold residential properties already financed under an LRBA;
commercial property borrowing (including business real property) remains available under the existing rules.
This change only affects new residential borrowings and does not require existing arrangements to be unwound.
4. New 30% Minimum Tax for Discretionary (Family) Trusts
From 1 July 2028, discretionary trusts will be subject to a minimum tax rate of 30%.
Under the new regime:
trustees will generally pay a minimum 30% tax on the trust's taxable income;
beneficiaries will receive a tax credit for the tax already paid by the trustee;
beneficiaries whose personal tax rate exceeds 30% will pay additional tax; and
beneficiaries on lower tax rates will generally not receive refunds of excess credits.
The reforms substantially reduce the tax advantages traditionally associated with income splitting through family trusts.
Importantly, the Government has announced a three-year rollover relief period from 1 July 2027, allowing eligible taxpayers to restructure out of discretionary trusts without the usual immediate tax consequences.
5. Superannuation Capital Gains Remain Unchanged
The new CGT rules do not apply inside superannuation.
SMSFs and other complying superannuation funds continue to receive their existing concessional treatment, including:
the one-third CGT discount in accumulation phase; and
tax-free capital gains on assets supporting retirement phase pensions (subject to the existing superannuation rules).
Other Important Changes to Be Aware Of
Payday Super Has Commenced
The new Payday Super regime now applies to all salary and wages paid on or after 1 July 2026.
Instead of paying superannuation quarterly, employers are generally required to ensure that employees' superannuation contributions are received by the employee's superannuation fund within 7 days of each payday.
This is an important distinction — it is not enough to simply process or send the payment within 7 days. The contribution must actually reach the employee's superannuation fund within that timeframe.
Employers should review their payroll processes and clearing house arrangements to ensure sufficient time is allowed for payments to be processed. Businesses that continue to operate under the old quarterly payment cycle may be exposed to Superannuation Guarantee penalties and additional interest charges.
Superannuation Contribution Caps Have Increased
From 1 July 2026, the annual contribution caps have increased:
Concessional (before-tax) contributions: $32,500 per year (previously $30,000)
Non-concessional (after-tax) contributions: $130,000 per year (previously $120,000)
These increases provide additional opportunities for individuals looking to maximise their retirement savings in a tax-effective environment. They may be particularly valuable for those able to utilise unused concessional contribution caps carried forward from prior years.
What Should You Do?
Although some of these reforms do not commence until 2027 or 2028, the legislation has now been enacted, allowing taxpayers to plan with greater certainty.
If you own investment property, operate through a discretionary trust, are considering purchasing property through an SMSF, employ staff, or simply want to ensure you're making the most of the new superannuation contribution limits, now is an excellent time to review your position.
Many taxpayers may benefit from reviewing their current structure or adjusting their long-term tax strategy before these changes take effect.
If you would like to understand how these reforms may affect your tax position, please contact the team at SJB Accounting Services to arrange a consultation.
Disclaimer: This article is intended as general information only and should not be relied upon as taxation, financial or legal advice. SJB Accounting Services provides taxation and accounting advice only. We do not provide financial product or investment advice, and no part of this article should be interpreted as a recommendation to buy, sell or retain any investment or financial product. You should obtain independent financial advice from a licensed financial adviser before making investment decisions. Tax outcomes will depend on your individual circumstances, and professional advice should be sought before acting on any of the information contained in this article.