PROPOSED CHANGES TO THE FEDERAL BUDGET
The 2026-27 Australian Federal Budget introduces some of the most substantial proposed tax and investment reforms Australia has seen in decades. While much of the public discussion has focused on property and personal tax changes, the broader direction of the Budget is clear: the Government is attempting to reshape how Australians invest, structure businesses, and build wealth over the long term.
For business owners, sole traders, investors, and family groups, these proposals are about more than tax rates. They may influence cash flow, business structuring decisions, investment strategies, and succession planning over the coming years.
Below, we break down the key announcements, what they may mean in practice, and where we expect the biggest impacts to emerge if the reforms proceed as proposed.
INDIVIDUALS & EMPLOYEES
What Has Been Announced
The Government has proposed modest personal income tax cuts for low and middle income earners, with the tax rate for income between $18,201 and $45,000 reducing from 16% to 15% in 2026–27, and then to 14% from 2027–28 onward.
Alongside these tax cuts, the Budget also includes broader reforms targeting housing affordability, including proposed changes to negative gearing and capital gains tax concessions.
What This Means
For most employees, the immediate impact will likely be relatively modest increases to take-home pay. While the tax reductions provide some cost-of-living relief, the larger impact may come indirectly through changes to the housing market and broader economic conditions.
The proposed restrictions on investor tax concessions are designed to reduce speculative demand for residential property, particularly existing dwellings. Over time, this may slightly improve accessibility for first-home buyers and younger Australians attempting to enter the property market.
However, these reforms are unlikely to dramatically reduce housing prices on their own. Australia’s ongoing housing supply constraints remain a major factor affecting affordability.
What We Expect
If implemented as proposed, we expect:
- slower property price growth rather than significant price declines;
- reduced investor activity in established residential property;
- continued demand pressure on newly built housing;
- and increasing importance placed on long-term financial planning and superannuation strategies.
Higher-income earners who have traditionally relied heavily on property investment for wealth accumulation may begin reassessing whether other investment structures provide better long-term outcomes.
SOLE TRADERS
What Has Been Announced
The Budget proposes making the $20,000 instant asset write-off permanent for eligible small businesses. The Government is also continuing reforms around Payday Super, which will require superannuation to be paid at the same time as employee wages.
What This Means
For sole traders and small operators, the instant asset write-off provides ongoing opportunities to invest in equipment, vehicles, technology, and productivity improvements while managing taxable income and cash flow more effectively.
At the same time, Payday Super reforms may create additional administrative obligations and place greater pressure on cash flow management for businesses with employees.
Many sole traders also use property investment as part of their personal wealth strategy. Proposed changes to negative gearing and capital gains tax concessions may reduce the attractiveness of heavily leveraged investment property strategies moving forward.
What We Expect
We expect many sole traders to increasingly focus on:
- business reinvestment rather than passive investment;
- improving cash flow forecasting;
- reviewing entity structures as businesses grow;
- and using superannuation more strategically for long-term wealth creation.
Businesses with strong financial systems and proactive planning processes will likely adapt more effectively to the changing environment.
PROPERT INVESTORS
What Has Been Announced
The Budget proposes major reforms to property investment taxation, including:
- replacing the 50% capital gains tax discount with an inflation-indexed model from July 2027;
- restricting negative gearing concessions for newly purchased established properties;
- while retaining concessions for newly built housing.
What This Means
These reforms are designed to reduce speculative investment demand in the housing market while encouraging investment into new housing supply.
For investors, this may materially reduce after-tax returns from leveraged property strategies, particularly where long-term capital growth has historically been the primary driver of investment performance.
The distinction between established properties and new developments may also become increasingly important moving forward.
What We Expect
If implemented as proposed, we expect:
- investor demand to shift more heavily toward new developments;
- slower growth in established property values;
- increased focus on cash flow-positive investments;
- and greater diversification into superannuation, business investment, and alternative asset classes.
We also expect many investors to seek earlier strategic advice regarding unrealised capital gains, ownership structures, and long-term investment planning.
TRUST & FAMILY GROUPS
What Has Been Announced
The Government has proposed a 30% minimum tax on discretionary trust distributions from 2028. While details are still emerging, the proposal is designed to reduce income-splitting opportunities through family trust structures.
What This Means
For many family groups, discretionary trusts have historically provided flexibility in distributing income to beneficiaries on lower marginal tax rates. These proposed reforms may significantly reduce that flexibility.
The impact will vary depending on:
- the size and complexity of the trust structure;
- the beneficiaries involved;
- the type of income generated;
- and how the overall group is currently structured.
Importantly, many trust arrangements may still remain commercially appropriate for asset protection and succession planning purposes, even if tax outcomes become less favourable.
What We Expect
We expect trust owners to increasingly review:
- bucket company arrangements;
- succession planning strategies;
- intergenerational wealth transfers;
- and whether current structures remain appropriate under the proposed rules.
Over the next several years, we anticipate significant restructuring activity across family groups and privately owned businesses as legislation becomes clearer.
COMPANIES & SME OWNERS
What Has Been Announced
The Budget continues to support business investment through the permanent instant asset write-off and ongoing productivity-focused initiatives. At the same time, the Government has proposed broader trust and tax integrity reforms aimed at reducing income-splitting opportunities and increasing tax neutrality.
What This Means
For many SME owners, the reforms represent a shift away from passive tax minimisation strategies and toward productive business investment.
While there are still opportunities available through business structures, the Government appears increasingly focused on ensuring business income is taxed more consistently across different entity types.
This means business owners may need to place greater emphasis on:
- long-term structuring decisions;
- succession planning;
- retained earnings strategies;
- and balancing tax efficiency with commercial flexibility.
The proposed trust reforms are likely to be particularly significant for family-run businesses and investment groups.
What We Expect
If these measures proceed, we expect:
- increased review and restructuring of business entities;
- greater use of company structures over discretionary trusts in some situations;
- increased focus on business advisory and strategic tax planning;
- and stronger demand for proactive cash flow and forecasting support.
Many business owners may also begin reassessing whether residential property remains the most effective long-term investment vehicle compared to reinvesting within operating businesses or other growth assets.