Federal Budget updates 2026

Federal Budget tax reforms: what is law, what is still proposed and what should you do?

The 2026–27 Federal Budget included some of the most significant changes to the taxation of investments, property, capital gains and discretionary trusts in over a quarter of a century.

Since the Budget was handed down on 12 May 2026, the measures have progressed at different speeds. Some of the core reforms have been legislated, others have been released as exposure draft legislation, while several important measures remain at consultation or policy design stage.

Understandably, this creates uncertainty for taxpayers. It may not be clear which changes are now law, which details could still change, or whether existing structures need to be reconsidered. This article provides a practical update on the position as of 14 September 2026.

Although immediate restructuring of existing structures will generally be premature, the reforms should not be underestimated. Many private groups are likely to require detailed reviews of their structures, assets and future plans. In some cases, significant restructuring may ultimately be appropriate over the coming 24 months. The nature and timing of that work will depend on the final form of the outstanding legislation and the particular commercial, legal and tax circumstances of each group. The reforms should also shape how new business and investment ventures are structured from the outset.

What has been legislated?

Capital Gains Tax and negative gearing reforms

The first tranche of legislation received Royal Assent on 26 June 2026. It established the core framework for changes to Capital Gains Tax (CGT) and negative gearing from 1 July 2027.

For affected taxpayers, the existing 50 per cent CGT discount will be replaced with an inflation-based indexation approach for gains accruing from 1 July 2027 with a minimum tax rate of 30 per cent also applying to affected capital gains accruing from that date.

The legislation includes transitional rules for assets already held on 1 July 2027. Broadly, these rules are intended to preserve the existing CGT discount treatment of gains accruing before that date, even where the relevant asset is sold later. The new arrangements will apply to gains accruing from 1 July 2027, including gains accruing on assets originally acquired before the introduction of CGT in 1985 (pre-CGT).

The negative gearing reforms will generally restrict the ability to offset losses from established residential property against income from other sources. Properties held before 12 May 2026 are protected, while eligible ‘new residential dwellings’ can continue to access negative gearing treatment.

The first tranche also legislated an increase in the aggregated turnover threshold for access to the small business 50 per cent active asset reduction from $2 million to $10 million, commencing from 1 July 2027. The other existing small business CGT concessions and broader eligibility criteria have remained unchanged.

Although the core CGT and negative gearing framework is now law, important aspects of its practical operation remain subject to further legislation. These include the final method for allocating gains between the periods before and after 1 July 2027 and the final definition of a new residential dwelling.

Loss carry-back and the instant asset write-off

A second package of legislation received Royal Assent on 26 August 2026.

The loss carry-back measure applies to income years beginning on or after 1 July 2026. The first relevant year for a standard 30 June balancing entity will therefore be the income year ending 30 June 2027.

Broadly, an eligible corporate tax entity with annual global turnover of less than $1 billion may choose to carry-back a revenue tax loss against tax paid in either or both of the previous two income years. The benefit is provided through a refundable tax offset claimed in the loss year, rather than through amendments to the earlier assessments.

The offset is subject to several limitations, and in particular, it cannot exceed the relevant tax paid for the earlier year and may be limited by the entity’s franking account balance. Capital losses also cannot be carried back against prior year capital gains under the measure.

The $20,000 instant asset write-off has also been made permanent for eligible small business entities with aggregated turnover of less than $10 million. It applies to eligible depreciating assets first used, or installed ready for use for a taxable purpose, on or after 1 July 2026.

Transfers following death or relationship breakdown

The August legislation also addressed an unintended consequence of the original CGT and negative gearing transitional rules, sometimes referred to colloquially as the ‘widow tax’.

Broadly, the amendments preserve negative gearing and CGT discount treatment where an interest in an eligible residential property passes to a surviving spouse or co-owner following death, or to a spouse following a relationship breakdown.

This is an important clarification for affected families. However, the precise consequences of a transfer will continue to depend on the particular ownership, succession and family law arrangements.

What remains under development?

The passage of the first two legislative packages does not mean that the entire Budget reform program is settled, as some of the most significant issues remain under development.

Tranche 2 CGT and negative gearing legislation

The Government has released exposure draft legislation dealing with the more complex aspects of the CGT and negative gearing reforms.

The draft materials address matters including:

the definition of a ‘new residential dwelling’;
the treatment of certain affordable housing, social housing, NDIS housing, public housing and build-to-rent developments;
the methodology for allocating capital gains and losses between periods before and after 1 July 2027;
the treatment of certain trusts and Attribution Managed Investment Trusts;
taxpayers who are Australian residents for only part of the period in which they hold an asset;
certain deferred capital gains; and
other technical, integrity and transitional issues.

The proposed definition of a ‘new residential dwelling’ is particularly important for property owners, investors and developers. Under the exposure draft materials, a dwelling would generally be treated as ‘new’ where it genuinely adds to housing supply. While this may be conceptually understood, the proposed eligibility conditions may be problematic to apply in practice for many taxpayers.

The proposed CGT apportionment methodology is also significant. The legislation will potentially allow affected taxpayers who own assets as at 30 June 2027 to determine the division of an overall gain between the CGT discount and indexation periods by reference to market value or, for certain assets, a prescribed alternative methodology.

Much has been said about the potential need to value assets around 1 July 2027. However, private groups do not need to commission formal valuations at this stage. The alternative methodology and related rules have not yet been finalised, and the appropriate approach may differ between assets and taxpayers. This is an issue to keep under review as the legislation develops, rather than an immediate action item.

Minimum tax on discretionary trusts

The Government has released exposure draft legislation covering the proposed 30 per cent minimum tax on discretionary trusts which is proposed to apply from 1 July 2028.

Under the exposure draft, the existing basis for taxing trust income would remain, but trustees of affected discretionary trusts would separately pay a 30 per cent minimum tax on the trust’s taxable income. Beneficiaries may receive an associated non-refundable tax offset, subject to the final design of the measure. In practical terms, the proposal could significantly reduce the tax advantages currently associated with distributing income through discretionary trusts.

Further details on the exposure draft measures are contained here.

Innovative Business CGT Concession

The proposed Innovative Business CGT Concession also remains at exposure draft form.

The measure is intended to provide a 50 per cent CGT concession to qualifying early-stage investors, founders and employee share scheme participants in eligible innovative businesses. The detailed eligibility requirements, qualifying business criteria and interaction with the broader CGT reforms remain subject to the final design.

Research and Development Tax Incentive

The Government has also announced significant changes to the R&D Tax Incentive from 1 July 2028, with exposure draft legislation having just been released.

The proposals include higher offset rates for core experimental R&D, removal of eligibility for supporting R&D activities, changes to refundability based on company age and increases to the turnover, minimum expenditure and maximum expenditure thresholds.

The changes could produce very different outcomes across businesses. Some younger, research-intensive companies may benefit from higher offset rates and the increased refundable turnover threshold, while established companies and businesses with material supporting R&D activities may receive a lower overall benefit.

What has William Buck been doing?

While some of the practical recommendations for mid-market clients should await the final legislation, William Buck has not been standing still. We have been taking steps to appropriately guide you through the changes.

Our tax team have been working behind the scenes to understand how the separate measures may operate together and to identify the issues that may arise for private businesses, family groups, investors and other affected taxpayers.

William Buck has made formal submissions as part of the consultation processes for:

the proposed minimum tax on discretionary trusts;
the Tranche 2 CGT and negative gearing exposure draft legislation; and
the proposed Innovative Business CGT Concession.

In parallel with the submission process, William Buck has been:

analysing interactions between the various measures, such as CGT and use of discretionary trusts;
developing tools and modelling approaches to assess potential impacts;
considering alternative restructuring pathways and their tax and non-tax consequences;
upskilling our teams on the enacted and proposed changes;
identifying the information and analysis that may ultimately be required; and
developing approaches to educate and support clients as further legislation is released.

This work is important because there is unlikely to be a single or straightforward answer for an affected group. The appropriate response will depend on the nature of the assets involved, how income and capital are expected to be used, financing arrangements, succession objectives, asset protection requirements and the costs and legal feasibility of changing the structure.

For some groups, a detailed review may confirm that the existing structure remains appropriate. For others, a substantial restructure may ultimately be required. Those alternatives will need to be considered against the final legislation and the broader commercial circumstances of the group.

What should you do now?

Do not ignore the reforms, but do not rush just yet

The broad direction of the reforms is now clear, and important elements are already law. However, key design features remain unresolved.

Premature action could produce unnecessary income tax, duty, GST, legal, financing or commercial consequences. In most cases, the better approach is to maintain flexibility until the final scope of the outstanding measures and transitional relief is known over the coming months.

Begin considering the broader role of your existing structure

Mid-market and private groups should start considering how their current arrangements support asset protection, succession, governance, financing, ownership flexibility, profit retention and future investment or exit plans.

Your William Buck adviser has already started considering these types of issues in the background as the measures have been developing. Identifying matters that may warrant closer attention, without assuming that an immediate restructure or formal valuation exercise is required, are important activities at this stage.

The complexity extends well beyond the headline tax rates. Existing structures may hold different types of assets, be subject to finance and security arrangements, rely on third-party contracts or licences, or form an important part of a family’s asset protection and succession strategy. Any future response will need to address those matters as part of an integrated review.

Be prepared for detailed analysis and potential action during 2027

Further legislation is expected over the coming months. Once the outstanding measures and transitional arrangements are known, we anticipate that most mid-market groups will require significant detailed analysis during the 2027 year.

For some groups, that work may lead to a decision to retain and adapt the existing structure. For others, it may result in a significant restructure before the relevant measures commence.

The appropriate response will not necessarily be simple, even once the legislation is settled. Tax outcomes will need to be considered alongside duty, legal ownership, finance, asset protection, succession, governance and implementation costs.

William Buck will continue to analyse the developing legislation and keep you informed as the position becomes clearer.

If you have questions about the measures or are considering a significant transaction that may be affected, please contact your William Buck adviser.

Related budget analysis