The Federal Government’s 2026/2027 Budget has drawn a line in the sand for property investors and private practice owners. Delivered on 12 May 2026, the announcements signal a sweeping overhaul of long-standing tax concessions in favour of housing policy reforms. For health practitioners juggling active clinics and substantial investment portfolios, the wealth management landscape is shifting rapidly.
Below is a summary of the key measures likely to impact your practice, your investments and your wealth.
Shifts in Negative Gearing
The Government is planning to disallow the offsetting of tax losses from negatively geared established residential properties against other income such as salary and wages and business income. As such any losses can only be carried forward and offset against future residential property income. This will only apply to properties purchased after 12 May 2026, including those where a contract has been entered into prior to that day but not yet settled. For properties purchased after this date, negative gearing will only apply until 20 June 2027.
This change will not apply to negative gearing on new residential builds, commercial properties and other investments such as listed shares. There is, therefore, no impact if you make a profit on the rental property income or if you hold investment properties in a trust, company or self managed super fund structure.
| Example |
| Amy, an anaesthetist, owns a residential townhouse that was previously her main residence before starting a family. She rents the property for $800 per week and incurs $36,800 interest expense on the loan as well as $10,500 of other expenses such as rates, depreciation and strata fees. The total annual income received is $36,400 and the total expenses are $47,300 which results in a loss of $5,700 per annum.
She offsets this loss against her private practice income, which results in a tax saving of $2,679 for the year. If Amy were to have purchased this residential property after 12 May 2026, she would not be able to offset the $5,700 loss against her other income, but instead would carry forward the loss to apply against future earnings from the property. |
Considerations for medical practitioners
For existing property owners, there is no change – you can continue to enjoy the benefits of negative gearing. For investors looking to purchase an existing residential property, you will need to consider the impact of not being able to offset net rental losses against other income and perhaps consider other structures to hold your investment.
Changes to Capital Gains Tax (CGT)
- End of the 50% discount
Currently, all capital gains earned by individuals, partnerships and trusts are eligible for a 50% discount if the asset is held for more than 12 months, but from 1 July 2027 this will be removed and replaced by an indexation method of calculating the taxable gain, an approach first introduced when capital gains tax commenced in 1985. The change applies to capital gains on both property and other investments such as listed shares and managed funds.
The 50% discount will continue to be available for new builds to incentivise investors to invest in new housing and help combat the housing crisis, with investors able to choose between the 50% discount or the indexation method. Transitional provisions will also apply for assets purchased before 1 July 2027 and sold after that date, whereby part of the capital gain would be subject to the 50% discount and part would be subject to the indexation rules.
This will impact health practitioners who have investments in assets like property, listed shares or another practice.This will particularly affect founding owners of practices whose original cost base is $0, as there is nothing to index, meaning the full sale proceeds would be taxable.
There are transitional arrangements proposed so that the portion of the gain made prior to 1 July 2027 will apply the 50% discount. It will be important to ensure the value of assets is determined at 1 July 2027 for future calculations. Valuations are required to be based on comparable sales.
There is no change to the Small Business CGT concessions, so if eligible, these concessions should continue to be applied to reduce capital gains on active assets such as ownership in practices.
| Example |
| Barry purchases an investment property for $800,000 on 31 July 2027 and then sells it on 31 August 2028 for $1,000,000. Assuming indexation at an inflation rate of 2.5%, the indexed cost base is $820,000. The capital gain would be $180,000 ($1,000,000 less the indexed cost base of $820,000). |
Considerations for medical practitioners
Taxpayers considering selling a CGT asset could consider the timing of selling the asset, giving consideration to the ‘old’ rules, the ‘new’ rules and the ‘transition’ rules, while keeping in mind that the contract date is the relevant date in respect of reporting capital gains.
- Taxation Pre-September 1985 assets
When the capital gains tax regime was introduced in 1985, all assets acquired before 20 September 1985 remained ‘CGT free’, meaning no capital gains tax was payable on their sale. This is set to change from 1 July 2027, when capital gains tax will apply to those assets. The cost base can be reset based on the 1 July 2027 value of the asset, though this change is only likely to impact more experienced practitioners who established practices or purchased property or other investments before September 1985
| Example |
| Chris purchased a commercial property on 1 January 1982 for $100,000. Chris obtains a formal valuation of the property as at 1 July 2027 at $1,500,000, which will form the cost base of the property. On 30 June 2032, Chris sells the property for $2,000,000. Chris’s capital gain will be $500,000 ($2,000,000 proceeds less the cost base of $1,500,000). Please note this example excluded the application of indexation to the cost base as discussed above. |
Considerations for medical practitioners
Taxpayers who own assets acquired before 20 September 1985 should consult their advisor to either obtain a formal valuation of their asset or apply the ATO-specified methodology to reset their cost base as at 1/7/2027. This change also opens up the opportunity to transfer assets for either asset protection or succession planning reasons without any additional tax consequences.
- 30% minimum tax on capital gains
The Government has announced a minimum 30% tax on real capital gains from 1 July 2027 for assets held by individuals, trusts and partnerships, regardless of their marginal tax rate. People on income support payments, including the age pension, will be exempt from this minimum tax and will instead pay tax on the capital gain at their marginal tax rate.
| Example |
| David is a retired GP and proceeds with the sale of a rental property he has held for two years in July and makes a capital gain of $45,000. He has no other taxable income and is not eligible for an income payment due to his superannuation balance. Under the usual tax rules, David’s tax payable at the end of the year would ordinarily be $4,652, including Medicare levy if this were another type of income. However, as the 30% minimum tax on capital gains applies, he ends up paying $14,400 tax, including Medicare levy. |
Considerations for medical practitioners
The introduction of this minimum tax reduces the effectiveness of the strategy of delaying the sale of investment assets to a later income year when they anticipate having a lower marginal tax rate. However, practitioners in the higher income tax brackets may still benefit from delaying the sale.
Minimum tax on discretionary trusts
The Treasurer announced the introduction of a minimum 30% tax payable on discretionary trust income from 1 July 2028. This will affect the many Australians who currently use discretionary trusts to minimise tax among the family group by distributing trust income to family members in a lower tax bracket. Currently, a beneficiary with no other income could receive up to around $20,000 or more without paying any tax.
Under the new rules, the 30% tax would be payable by the trustee, with beneficiaries then receiving a non-refundable credit for the tax paid. This means that if a beneficiary is on a lower marginal tax rate, for example, with taxable income of less than $45,000, they will still pay tax at 30%. Corporate beneficiaries will not be eligible for the tax credit, which effectively means the end of using ‘bucket’ or ‘dump’ companies, as doing so would double the tax on the income. There is no ‘grandfathering’ of existing trusts, and the changes will apply to all discretionary trust structures from 1 July 2028.
Example
Eva is the Trustee of Feat Family Trust, a discretionary trust that earns $100,000 of income during the 2028/2029 income year. Eva decides to distribute the income 50% to her spouse, Gerry, and 50% to her daughter, Harriet. Gerry works as an educator and earns $90,000, while Harriet is a university student and does not earn any other income. The tax position would be:
| Feat Family Trust | Gerry | Harriet | |
| Investment Income | $100,000 | ||
| Salary income | $90,000 | ||
| Trust income | $50,000 | $50,000 | |
| Total income | $100,000 | $140,000 | $50,000 |
| Tax payable | $30,000 | $35,402 | $6,244 |
| Less: Credit for tax paid by trustee | ($15,000) | ($15,000) | |
| Total tax payable | $30,000 | $20,402 | nil |
| Unused tax credits | $8,756 |
Harriet ends up paying tax at 30%, and the remaining tax credits of $8,756 are effectively lost.
Considerations for medical practitioners
Practices that are operated through a discretionary trust should review their business structure and consider whether there are more tax-effective options available to them. The way that owners are remunerated for their services could also be reviewed, and consideration should be given to paying wages rather than trust distributions. For practitioners with discretionary trusts holding investment assets, now is the time to review their structure, particularly where there are significant retained profits in ‘bucket’ or ‘dump’ companies with shares owned by a discretionary trust. There are rollover relief provisions which may be relevant for those seeking to restructure.
Other Budget announcements
- Immediate asset tax deduction – The instant asset write off will finally be set permanently at $20,000, after being temporarily increased from the usual $1,000 for many years. This means an asset costing less than $20,000, exclusive of Goods and Services Tax (GST), can be claimed outright as a tax deduction in the year the asset is first used. This will apply to all assets used in the business, like medical or technological equipment, furniture and cars.
- PAYG calculations – Small businesses like sole trader practitioners or small to medium practices will be able to opt in to an ATO-approved calculated PAYG instalments embedded in their accounting software to calculate and vary their instalments based on current business performance. This might be a good reason for sole practitioners to consider introducing an online cashbook subscription if they do not already have one in place.
- Loss carry back – From 1 July 2026, this measure will allow losses incurred in one financial year to be applied against income earned in one or more of the previous two tax years, resulting in a refund of tax previously paid. It applies to companies with a turnover of up to $1b, which is significantly higher than the turnover threshold in the previous iteration of this measure during the pandemic years.
These measures represent a generational shift in how health practitioners will be taxed on their investments, business interests and wealth. Getting ahead of these changes before they take effect will be critical.
Contact your local William Buck advisor to review your current structure and plan accordingly.
