The 2026 Federal Budget tax updates have introduced changes to several key tax proposals announced by the Federal Government. The Budget was delivered on 12 May 2026 and included major changes to capital gains tax (CGT), discretionary trusts and self-managed superannuation funds (SMSFs).
Since then, the Government has reviewed feedback from businesses, tax professionals and industry groups. As a result, several key proposals have been amended. These Federal Budget 2026 tax updates provide important information for taxpayers, investors, business owners and trustees planning for future changes.
Federal Budget Tax Updates: Capital Gains
One of the biggest Budget announcements was a change to the current 50% CGT discount. Under the proposal, individuals and trusts would use an indexation system instead. A new 30% minimum tax rate would also apply to capital gains that accrue from 1 July 2027, with limited exceptions.
The Government has now announced a new Innovative Business CGT Concession. The concession aims to encourage more investment in Australian start-ups. Eligible investors, founders and employee share scheme participants could still receive the 50% CGT discount. The Government has released a consultation paper on how the concession will operate.
In addition, small businesses will also benefit from another proposed change. From 1 July 2027, the turnover limit for the 50% active asset reduction will increase. It will rise from $2 million to $10 million.
However, the other three small business CGT concessions will not change. These include the 15-year exemption, retirement exemption and small business rollover. The current $2 million turnover test will still apply. Businesses may still qualify. They need to meet the existing $6 million net asset value test.
Federal Budget Tax Updates: Trusts
The original Budget proposed a 30% minimum tax rate for discretionary trusts from 1 July 2028. Under that proposal, many testamentary trusts would have fallen within the new rules.
The Government has now changed its approach. It plans to exempt all testamentary trusts that exist for genuine testamentary purposes.
The exemption will only apply to income earned from assets that come from the deceased estate. For testamentary discretionary trusts created on or after 1 July 2028, only individuals and income tax-exempt entities can be beneficiaries if the trust is to qualify.
Federal Budget Tax Updates: SMSF’s
The Government has also announced changes for self-managed superannuation funds.
The Government also plans to change SMSF borrowing rules. Under the proposal, SMSFs could no longer use Limited Recourse Borrowing Arrangements (LRBAs) to buy residential property.
Existing borrowing arrangements are expected to remain in place under grandfathering provisions. However, new residential property borrowing through LRBAs would no longer be available once the changes begin.
What Should You Do Next?
These tax proposals could affect investment decisions, business structures, estate planning and superannuation strategies. Although the Government has already revised several measures, more changes may occur before Parliament passes the legislation.
If you own a business, invest through a trust or manage an SMSF, now is a good time to review your position. Understanding the proposed rules now can help you plan ahead.
We will continue to monitor the legislation and provide updates as more information becomes available. If you would like to discuss how these proposed reforms could affect you, please contact our team.
Need Help?
By working with us as your professional tax accountant and mortgage broker, you can be confident that your loans are structured to protect your tax position, maximise deductions, and avoid costly mistakes, giving you greater peace of mind and more control over your financial future.
Pitt Martin Group is a firm of Chartered Accountants, providing services including taxation, accounting, business consulting, self-managed superannuation funds, auditing and mortgage & finance. We spend hundreds of hours each year on training and researching new tax laws to ensure our clients can maximize legitimate tax benefit. Our contact information are phone +61292213345 or email info@pittmartingroup.com.au. Pitt Martin Group is located in the convenient transportation hub of Sydney’s central business district. Our honours include the 2018 CPA NSW President’s Award for Excellence, the 2020 Australian Small Business Champion Award Finalist, the 2021 Australia’s well-known media ‘Accountants Daily’ the Accounting Firm of the Year Award Finalist and the 2022 Start-up Firm of the Year Award Finalist, and the 2023 Hong Kong-Australia Business Association Business Award Finalist.
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This content is for reference only and does not constitute advice on any individual or group’s specific situation. Any individual or group should take action only after consulting with professionals. Due to the timeliness of tax laws, we have endeavoured to provide timely and accurate information at the time of publication, but cannot guarantee that the content stated will remain applicable in the future. Please indicate the source when forwarding this content.
By Alex Cramery @ Pitt Martin Tax
