The Budget that was handed down on 12 May 2026 included a number of significant measures which are outlined below:

For Businesses

1. Loss Carry -Back rules will return to allow companies in a loss position to recover some tax paid in earlier years to support cash flow.
   1. Changes to start from 1/7/2026
   2. Companies with aggregated turnover up to $1 billion.
   3. Losses can be carried back for up to 2 years and offset against tax previously paid.
   4. Subject to limits including company franking account balance.
2. Instant Asset Write Off Now Permanent
   1. Current $20,000 threshold will continue
   2. Businesses with aggregated turnover less than $10 million.
3. Start Loss Concessions- companies that generate a loss in their first two years of operations will be able to utilise the loss to generate a refundable tax offset
   1. Changes to start from 1/7/2026
   2. Businesses with aggregated turnover less than $10 million.
   3. Provide loss refundability for small start up companies.
   4. Limited to the value of FBT and withholding tax on wages paid during the year.
4. Changes to the FBT exemption for electric vehicles
   1. FBT for electric vehicles will receive a permanent 25% discount.
   2. Changes to start from 1/4/2029.
5. Changes to R & D Tax Incentive
   1. Increasing offset for core activities to 50%
   2. Increasing the turnover threshold for refundable offset to $50 million
   3. Increasing maximum expenditure cap to $200 million
   4. Increasing minimum expenditure threshold to $50 million
   5. Changes to start from 2029 financial year

For Trusts

1. Discretionary Trust trustees to pay a minimum tax of 30% on taxable income, rather than being taxed at the beneficiaries marginal tax rates.
   1. Changes to start from 1/7/2028
   2. Trustee to pay tax with beneficiaries (other than corporate beneficiaries) to receive a non refundable credit for the tax payable by trustee.
   3. Will not apply to deceased estates, fixed trusts, complying super funds, special disability trusts or charitable trusts
   4. Will exclude primary production income.
   5. Rollover relief to restructure into a company or fixed trust will be available for 3 years from 1/7/2027

Given how widely discretionary trusts are used in family business and investment, this proposal may have significant implications. Depending on the final legislation, it may reduce the flexibility that has traditionally made these structures attractive for income distribution, asset protection and succession planning.

For Investors

1. Negative Gearing for residential homes will be limited to newly built properties.
   1. Losses from established rental properties will only be deductible against rental income or capital gains from residential rental properties.
   2. Established residential properties acquired prior to budget night will be grandfathered, meaning if you already own a property (or have signed a contract to purchase one) the existing rules will continue to apply.
   3. Changes to start from 1/7/2027.
   4. Will not apply to properties held in SMSF’s
2. Significant changes to capital gains tax
   1. 50% CGT discount will be relaced by cost base indexation for assets that have been held from ore than 12 months.
   2. 30% minimum tax on net capital gains (excluding recipients of Age Pension, Job seeker or other means tested income support)
   3. All assets held by individuals, trusts and partnerships to be impacted including pre CGT assets
   4. Investors in new residential properties will be able to chose either 505 CGT discount OR cost base indexation and the minimum tax.
   5. Changes to start from 1/7/2027
   6. Assets owned prior to 1/7/2027 but sold after that date will be eligible use the discount for gains made prior to this date (based on valuation at this date), but under the new arrangements for gains made after this date.

For Individuals

1. Working Australian Tax Offset-  a $250 offset will be available for employees from 2028 financial year.
2. Proposed standard deduction of $1,000 for the 2027 financial year and later for work related expenses without requiring substantiation.

Other income tax measures that were previously announced and are now law

• From 1/7/2026 the tax rates which applies from income between $18,201 and $45,000 will be reduce from 16% to 15%.
• From 1/7/2027 this will be reduced further to 14%
• Changes to increase the Medicare levy and Medicare levy Surcharge low income threshold for singles, families and seniors in line with CPI.
• Low income superannuation tax offset (LISTO) threshold will increase to $45,000 from the 2028 ear with the maximum amount increasing to $810 (reflecting 12% rate)

What business owners should do now

At this stage, the most important point is that many of these measures still require legislation. Until then we cannot fully understand the implications of the above changes.

Once full details and legislation has been released, investors and business owners should work with their accountants to consider:

• whether their structure remains appropriate;
• the potential impact of the proposed CGT changes on future asset sales;
• whether property investment strategies need to be revisited; and
• how to position the business to benefit from loss carry-back and immediate deductions where available.

Author: Donna Bruce