A budget that taxes the engine room and dodges the reform we need

This article was first published by Village Voice Brisbane on 14 August 2026. [Read the original article.]

 RSM Brisbane Managing Partner Steve Healey examines the tax measures announced in the 2026–27 Federal Budget and argues that Australia needs broader, whole-of-system tax reform. 

After a decade of budgets that tinkered at the edges of tax reform, the 2026-27 Federal Budget finally delivered structural tax change — but the wrong kind.  

It increases the burden on the very businesses and families who drive our economy and employment, while sidestepping the comprehensive tax reform Australia genuinely needs.

Two measures stand out. From 1 July 2027, the 50 per cent CGT discount will be scrapped and replaced with cost base indexation plus a new minimum 30 per cent tax on capital gains. From 1 July 2028, a minimum 30 per cent tax will apply to discretionary trusts. These are not narrow property measures: the CGT changes reach across virtually every asset class — shares, units and business assets alike — while the trust changes strike at structures Australian families and SMEs have used lawfully for generations.

And the trust reform is far more than the “30 per cent” headline suggests. As a trust must distribute its income to its beneficiaries, the proposed measures mean that further tax will be imposed down the line and in the case of a corporate beneficiary, the effective tax rate will likely be close to 70 per cent.

This is my central concern. Discretionary trusts are not exotic avoidance vehicles; they are the ordinary plumbing of family business, succession planning and intergenerational wealth transfer. The SME sector and family groups are rightly called the engine room of the economy — yet this budget asks them to carry a disproportionate share of the load, with no attempt to spread the pain across the wider system. The near certain result is greater complexity, higher effective tax, and a raft of unintended consequences that will take years, and considerable cost, to untangle.

Reform of this magnitude should never be done piecemeal — pull one lever in isolation and you distort behaviour, adding complexity and unintended consequences. Real reform means putting every tax on the table at once, including the one nobody in Canberra wants to touch: the GST.

Here the international perspective is instructive. Earlier this year, the OECD twice urged Australia to rebalance its tax mix, noting our GST rate of 10 per cent is barely half the OECD average of around 19 per cent, on a base riddled with exemptions. Its recommendation: broaden the base and consider lifting the rate, shifting weight from labour taxes toward consumption. The OECD has argued that shifting the tax mix toward consumption taxes could improve efficiency and support economic growth.

The usual objection to a GST change is its regressive impact. That is legitimate — but it overlooks half the equation. Australia does not have a tax system; we have a tax and transfer system, and the two are designed to work together. If we broaden the base and lift the rate, the transfer system is the mechanism that should shield pensioners, low-income earners and welfare recipients — through targeted compensation and adjustments to payments and thresholds, as we did in 2000. That much forgotten transfer side of the ledger is what makes an efficient consumption tax fair.

That is the honest, whole of system conversation we should be having. 

Instead, we have a budget that reaches for the politically convenient targets and calls it reform. Australia desperately needs to modernise its tax system — but through genuine, holistic reform, not a selective raid on the businesses and families least able to absorb it.

Steve Healey is Managing Partner of RSM in Brisbane and a former National President of The Tax Institute (2015).