The 2026 Federal Budget has introduced some of the most significant tax and business changes in recent years, creating both opportunities and risks for individuals, business owners, investors, and employers. Now more than ever, proactive advice can make a substantial difference to your financial position. Our team is already helping clients identify tax savings, optimise structures, maximise available incentives, and prepare for upcoming compliance changes. We encourage you to contact us to discuss how these announcements may impact you personally or your business, and more importantly, how we can help you take advantage of the opportunities available.
The 30% Floor on Family Trusts
For decades, discretionary trusts have been the standard for business owners looking to manage tax through income splitting. From July 1, 2028, that strategy hits a wall.
- The Minimum Tax: Discretionary trusts will face a 30% minimum tax on distributions.
- The Hit: If you’ve been distributing to a spouse or adult children in lower tax brackets, those tax credits are now non-refundable. If their marginal tax rate is under 30%, the difference stays with the ATO.
- Bucket Companies: It gets worse for corporate beneficiaries. They won’t get the tax credits at all, which could push effective tax rates on those funds as high as 60% or more. It is highly unlikely that distributions from trusts to companies after this date will not be justifiable, and management of existing retained income in companies will need to be strategically addressed.
- Consequences for Middle-Income Family Trusts: This measure has its harshest consequences for middle-income level family trusts operating investment portfolios or businesses. It will have minimal or no impact on trusts with high levels of income. Once a trust is distributing at least $181,000 of taxable income to an individual, their average tax rate is 30%. For trusts with 3 adult beneficiaries with no other income in their name, an existing trust distributing $543,000 in taxable income will have no impact other than cashflow timing differences. For trusts distributing significantly less than $181,000 to an adult, alternative strategies will need to be utilised to mitigate this aspect of the new laws. A high level of strategic taxation planning will be necessary to manage these changes.
- The Plan: There is a three-year window starting in July 2027 to restructure out of these trusts without triggering massive Capital Gains Tax (CGT) bills. We need to look at whether a company or fixed trust is now a better home for your assets.
Property and the CGT Reset
The government is moving the goalposts on property investment to favour new housing over established homes.
- Negative Gearing: If you bought an established investment property after 7:30 pm last night, your ability to offset those losses against your business or salary income expires on June 30, 2027. From that point, you can only offset losses against other residential property income. Only “new builds” stay fully deductible.
- The End of the 50% Discount: The flat 50% CGT discount is being scrapped from July 1, 2027. It’s being replaced by “indexation”—which adjusts your cost base for inflation—and a 30% minimum tax floor on the gain.
- The Reality: If you’re holding long-term assets or pre-1985 shares, your cost base will effectively “reset” on July 1, 2027. Gains after that date are in the new net.
- We note that under the existing system, the maximum CGT rate was effectively 23.5% (being 50% of the top tax rate plus the Medicare levy). From July 2027, tax on gains made after that date will be 30% of the profit after CPI indexation. Unless your property rises in value above the inflation rate after that date, there will be no further taxes.
Operational Reality for Perth Businesses
For those running the engine room of the WA economy -mining services, construction, and healthcare-there are two immediate things for your radar:
- Payday Super: From July 2026, you must pay super at the same time as wages. You can no longer use that 90-day super cycle as a cash flow buffer for the business.
- The $20k Write-Off: On the plus side, the $20,000 instant asset write-off is finally permanent for businesses with turnover under $10 million. If you need a new ute or a tech upgrade, the deduction is locked in.
The FBT and EV Lease Phase-Out
The 2026 Budget signals the end of the “tax-free ride” for high-end electric vehicles. Currently, eligible EVs under the luxury car threshold enjoy a full FBT exemption. From April 2027, if the car is worth more than $75,000, the 100% exemption drops to a 25% discount. By April 2029, the full exemption is gone for all EVs, and the 25% discount becomes the new standard. If a lease is already running, it usually keeps the rate it had when it started.
$1,000 Standard Deduction
This is a “no-receipts” win for employees. From July 2026, if an individual has work expenses under $1,000, they can claim the flat grand without itemising or keeping a shoebox of paperwork. It’s designed to make tax time faster. However, it doesn’t apply to the self-employed, and if you think you’ll spend more than $1,000, it’s still worth keeping the receipts so you can claim the actual amount instead.
There is a sting to the $1000 no receipts handout. Though this might seem like a generous concession to taxpayers, it is being funded by the removal of salary packaging benefits under the FBT regime, the removal of the otherwise deductible rule and employee contribution rules that realign the FBT 47% tax rate to match the taxpayers’ marginal tax rates where they are lower than the top tax bracket. It means benefits provided in the past at a tax cost of around 25% are going to move to the FBT penalty rate of 47%. This will more than fully fund the $1000 tax deduction gift, which is valued at around $300 to a taxpayer. Added to this will be the cost and burden of lodging FBT returns for benefits that were previously calculated as being of Nil value.
The WA Context
The State Budget also dropped recently, and there are some local perks to grab. Every driver’s license holder in Perth gets a $100 Fuel Support Payment via ServiceWA, and the third round of Student Assistance Payments ($150–$250 per kid) is coming back. It won’t fix your tax bill, but it is money on the table.
What should you do?
Traditional accounting looks at what you did last year. Our transition to a proactive advisory model means we are looking at where you’ll be in 2027 and 2028 when these tax floors kick in.
We aren’t interested in reinventing the wheel if your structure still works, but for many of our clients, the 30% trust tax and CGT changes mean we need to move.
If your current setup relies on established property gearing or income splitting through a trust, let’s touch base.
The Abbotts Advisory Team