Federal Budget 2026 - Webinar Recording

Question: Could you restructure a trust shareholder in trading company to a the so called bucket company directly as part of the rollover?

There is limited information as to the nature of the rollover and we will need to await exposure draft legislation / industry consultation. The budget papers simply state "Rollover relief will be available to assist small businesses and others that wish to restructure out of discretionary trusts into another entity type, for example a company or fixed trust. This will provide relief from income tax consequences of restructuring, including tax on capital gains, and will be available for three years from 1 July 2027. The Government will consult with stakeholders on key details of this policy including the mechanism for collecting the minimum tax on trusts, how trustees use excess franking credits and details of rollover relief for restructuring."

Question: What are the thoughts on using bucket companies for trust distributions going forward. Commentary appears that the trust will be taxed at 30% then the bucket company won't be able to claim a credit on that tax paid which is afforded to individuals?

Based upon the proposed announcement, distributions to 'bucket companies' will seemingly attract double taxation due to the taxation paid by the trustee not being a non-refundable credit, meaning that both the 30% trustee tax and then subsequent tax to the company applying. If implemented in this way, it is likely that corporate beneficiaries will be subject to a higher overall tax burden than individuals on the top marginal rate. There may however be other commercial considerations in using corporate beneficiaries.

Question: Do we know what is included in the restructure of Discretionary Trusts being offered?

There is limited information as to the nature of the rollover and we will need to await exposure draft legislation / industry consultation. The budget papers simply state "Rollover relief will be available to assist small businesses and others that wish to restructure out of discretionary trusts into another entity type, for example a company or fixed trust. This will provide relief from income tax consequences of restructuring, including tax on capital gains, and will be available for three years from 1 July 2027. The Government will consult with stakeholders on key details of this policy including the mechanism for collecting the minimum tax on trusts, how trustees use excess franking credits and details of rollover relief for restructuring."

Question: My ETFs are held inside a family trust (added post tax personally). Should I consider moving ETF investments outside the trust structure and into my own name or my wife's name before 1 July 2027 to preserve any grandfathered treatment?

This will depend upon your personal circumstances and you may need to seek financial advice. Potentially moving the investments out of a trust will crystallise a capital gain which may bring forward tax, although it may depend whether the proposed roll-over relief is available broadly to all trusts. If distributions to the individual beneficiary will be subject to more than 30% tax, there may be no substantive benefit. It may be appropriate to wait until the  legislation is released to determine what options are available to you.

Question: In relation to Trusts, is a corporate Trustee effectively the same as a corporate beneficiary?

A corporate trustee is responsible for the trust funds, that is they control the funds. A corporate beneficiary is an object of the Trust and may be considered to receive benefits from the Trust, but otherwise has no entitlement to the assets of the trust.

Question: Will the trust be entitled to a franking credit on a dividend to offset the 30% tax?

As we understand it, the trustee will be entitled to apply franking credits against the 30% trustee tax payable, however the franking credits will not flow-through to beneficiaries as they currently do.

Question: Are Unit Trusts impacted the same way?

Unit trusts that are 'fixed trusts' are exempted from the 30% taxation proposed under the Budget. Whether your unit trust is a 'fixed trust' may depend upon the structure of the trust.

Question: What will happen to accumulated imputations held within established corporate beneficiaries?

There is no direct change to the imputation system. Franking credits will remain in companies and dividends will be frankable. The change is at the shareholder level and particularly acute where the shareholder is a Trust that may otherwise seek to distribute those dividends to a corporate beneficiary.

Question: Noting that the negative gearing changes won't commence until 1 July 2027 and existing established properties will be grandfathered; do you know if any established properties purchased between now and June 30 2027 will also be able to be negative geared?

Existing properties, including those under contract prior to 7:30PM AEST on 12 May 2026 (Budget Night) will be grandfathered and eligible under the current negative gearing provisions. Established properties acquired after Budget Night will qualify for negative gearing until 30 June 2027, and then will no longer be eligible for negative gearing following introduction of the proposed rules

Question: Noting that the negative gearing changes won't commence until 1 July 2027 and existing established properties will be grandfathered; do you know if any established properties purchased between now and June 30 2027 will also be able to be negative geared?

Existing properties, including those under contract prior to 7:30PM AEST on 12 May 2026 (Budget Night) will be grandfathered and eligible under the current negative gearing provisions. Established properties acquired after Budget Night will qualify for negative gearing until 30 June 2027, and then will no longer be eligible for negative gearing following introduction of the proposed rules

New dwellings that are eligible for negative gearing post 1 July 2027 will be eligible to offset their rental losses against other income. They will not be limited to rental profits.

Question: Noting that the negative gearing changes won't commence until 1 July 2027 and existing established properties will be grandfathered; do you know if any established properties purchased between now and June 30 2027 will also be able to be negative geared?

Existing properties, including those under contract prior to 7:30PM AEST on 12 May 2026 (Budget Night) will be grandfathered and eligible under the current negative gearing provisions. Established properties acquired after Budget Night will qualify for negative gearing until 30 June 2027, and then will no longer be eligible for negative gearing following introduction of the proposed rules

New dwellings that are eligible for negative gearing post 1 July 2027 will be eligible to offset their rental losses against other income. They will not be limited to rental profits.

There was no mention in the budget papers of a cap on the number of new builds that would qualify for negative gearing. There is however a limit in the sense that you must have sufficient other income with which to apply the rental losses against.

The budget papers do not address this, although state "Properties held at 7:30pm (AEST) 12 May 2026 will be exempt". It is therefore expected that they would still remain eligible to be negatively geared where their use changes from main residence to income producing.

We expect that the grandfathering applies until you sell the asset. 

If the PPR was acquired before budget night, we anticipate negative gearing will continue to be available.

The budget papers do not address negative gearing in the context of investment structures. Whilst negative gearing is generally most effective to the individual, we will need to see the legislation to see if it only applies to individuals or to other entities. 

The budget papers only address limiting negative gearing on residential property. As such it is expected that commercial property will be eligible for negative gearing.

Question: If the scheme begins from 1 July 2026, then income tax losses in 2026_27 can be offset against tax paid in the 2024_25 and 2025_26 FYs? 
 

The budget papers do not explicitly state this, however the forward estimates show an impact on collections and it is therefore expected that losses in FY 2025 and FY 2026 will be eligible for loss carry back. It will depend upon how the transitional rules are stated.

Question: Any mention of the medicare levy (2%) between $45k-135k? e.g. if a beneficiary earns $100k and you pass through $30k to this beneficiary, does that individual pay 2% top up for ML?

There are proposed changes to the Medicare Levy low-income thresholds, but no other changes. Currently the Medicare Levy is calculated as 2% of your taxable income, and this appears to be unchanged.

Question: Regarding instant asses write-off - when determining if the company is above or below the $10m threshold - does turnover need to be aggregated with foreign parent companies, or is it assessed on Australian turnover only?

Aggregated turnover includes global turnover of all connected entities and is not limited to Australian turnover.

Question: What effect will the changes to the Medicare Private Insurance rebate being removed for over 65’s have on their health care costs?

The reduction of the private health insurance rebate for older Australians will increase the cost of private health insurance policy premiums of older Australians. It will not affect current Medicare rebates or the cost of medical services.

The budget papers state "the Government will limit negative gearing for residential properties to new builds that genuinely add to housing supply." We expect that negative gearing on other asset classes, (e.g. commercial property and shares) will remain, however it will ultimately depend upon the wording of the legislation. 

There was no announcements that impact the small business CGT concessions. As such it is expected that these will continue in their current form.

It is likely that all CGT assets held at 30 June 2027 (noting that the proposed changes are not limited to residential property) will need to be valued to set a value for the unrealised gain that is eligible for the 50% CGT Discount. Whilst we do not have the details of the legislation, this would be consistent with the rules that applied when the CGT Discount was removed for non-residents on 8 May 2012. 

The budget papers confirm that the CGT changes will not impact the main residence CGT exemption.

This will depend upon your personal circumstances and you may need to seek financial advice. It may be appropriate to wait until the legislation is released to determine what options are available to you.

The Government's intention behind retaining the current negative gearing and 50% CGT discount for new builds is to influence investment decisions towards the establishment of new housing as part of its earlier commitment to building 1.2 million homes between 1 July 2024 and 30 June 2029

It is expected that the 50% discount will apply for the unrealised gain to 30 June 2027, with indexation applying thereafter. We do not have the legislative detail, however the CGT provisions that applied when the 50% CGT discount was removed for non-residents required a valuation of the property at the date to determine the extent of the gain that would qualify for the 50% Discount and it is likely to be the same with the proposed changes.

The four small business concessions are the 15-year exemption, 50% Active Asset Reduction, Retirement Exemption and small business roll-over. There are a number of conditions that need to be satisfied in order to access these concessions and we would encourage you to obtain specific taxation advice to determine eligibility based upon your circumstances.

The proposed changes to the 50% CGT discount will apply to all CGT assets and are not limited to residential property. 

It is expected that if you obtain a valuation at 30 June 2027, that the unrealised gain will be eligible for the 50% CGT discount. Consequently, if there is a loss that accrues post 30 June 2027, the full gain would be eligible for the 50% CGT discount.
 

When applying indexation currently (albeit frozen in 1999), the indexed cost base would not give rise to a capital loss. If the current indexation and cost base rules are retained, it is likely that the capital loss could only be made with reference to the reduced cost base, however it will depend how the legislation is written. 

Companies are eligible to use the frozen indexation method that currently exists and consistent with that legislation we would anticipate that companies would also be eligible to apply indexation in calculating their future capital gains. However, the budget papers do not specifically address it as the focus is on removing the 50% CGT discount which does not apply to companies.

Superannuation funds are eligible for a 1/3 discount on their eligible capital gains. The budget papers specifically state that the changes will not impact superannuation tax arrangements.

We expect that the purchase of house and a construction of residential property by the owner will have the same treatment as the purchase of a new dwelling from a developer. We anticipate a definition of a new build to be included in the legislation which will may be linked to the property having not otherwise been used for any purpose, which then may stop negative gearing benefits arising where a purchaser lives in a property acquired after 12 May 2026 and subsequently rents it out, even if the property was newly built by the owner.

Contracts entered into prior to 7.30pm (AEST) on 12 May 2026 will be grandfathered and eligible to be negatively geared. 

Changes to CGT take effect for capital gains on or after 1 July 2027. There are no grandfathering provisions, although noting the 50% CGT discount is expected to be available on any unrealised gain made up to 30 June 2027. Note, assets acquired before 20 September 1985 which were previously exempt from CGT will now be subject to CGT if sold on or after 1 July 2027. 

It is likely that you will need to engage an expert in valuations to provide you with a market value of the shares in a private company as at 30 June 2027, unless the ATO provide some safe harbour relief as part of the roll-out of the proposed CGT changes.