Following negotiations between the Government and the Greens, the major tax reform package has now passed Parliament. While some measures commence immediately, many of the significant tax changes apply from 1 July 2027, giving taxpayers time to review their structures and investment strategies.
- Replacement of the 50% CGT discount for individuals and trusts with an inflation-indexation model from 1 July 2027.
- Introduction of a 30% minimum tax on capital gains.
- Restriction of negative gearing on residential property to new builds from 1 July 2027.
- Increase in the Small Business CGT active asset turnover threshold from $2 million to $10 million.
- Significant changes affecting discretionary trusts and family groups.
- New borrowing restrictions for SMSFs acquiring residential property. Existing arrangements are grandfathered.
When the Federal Government first announced its tax reform agenda, the focus was clear: improve housing affordability and make the tax system fairer.
Since then, the proposals have evolved significantly.
Several measures have been refined, others expanded, and the political landscape has shifted following support from the Greens for key aspects of the package.
For business owners, investors and trustees, understanding what has changed is becoming just as important as understanding the original announcements.
Latest Update
Since the original announcements:
The Greens have indicated support for key CGT and trust reforms, increasing the likelihood that parts of the package will pass Parliament.
SMSFs will no longer be permitted to establish new Limited Recourse Borrowing Arrangements (LRBAs) to acquire residential property. Existing arrangements entered into before commencement are generally grandfathered, while borrowing for commercial property remains available.
The turnover threshold for Small Business CGT Concessions is proposed to increase from $2 million to $10 million.
Elements of the trust and testamentary trust reforms have been refined following significant industry feedback.
The reforms now extend well beyond housing and have implications for investors, trustees, business owners and succession planning.
SMSF Borrowing Restrictions Introduced
One of the most significant developments is the decision to prohibit SMSFs from borrowing to acquire residential property.
The Government argues that SMSFs have become another source of competition in the residential property market and that reducing investor demand will improve housing affordability.
Whether the measure materially impacts property prices remains to be seen.
What is clear is that SMSFs are now firmly part of the housing affordability debate.
For trustees considering property as part of their retirement strategy, the rules have changed significantly.
Small Business CGT Changes: Not Quite the Windfall Headlines Suggest
One of the most publicised announcements has been the increase in the turnover threshold for Small Business CGT Concessions from $2 million to $10 million.
This has been promoted as a major win for small business.
However, many genuinely small businesses were already eligible under the existing $2 million threshold.
The businesses that stand to benefit most are those with turnover between $2 million and $10 million that previously fell outside the concession rules.
That doesn’t mean the change is unwelcome.
Many advisers have argued for years that the $2 million threshold no longer reflected modern business realities.
However, the practical benefit is narrower than the headlines suggest.
Many businesses under $2 million turnover gain little or no additional benefit because they were already eligible.
Trusts Remain One of the Biggest Areas of Reform
Discretionary trusts are now at the centre of the Government’s tax reform agenda.
While consultation resulted in several important concessions – including changes for testamentary trusts and refinements to the original proposals – the reforms will significantly alter how many family groups use discretionary trusts.
For many Australians, trusts remain valuable for:
- asset protection
- succession planning
- business ownership
- intergenerational wealth transfer.
The challenge for advisers will now be helping clients understand how the new rules affect existing structures and whether restructuring should be considered before the commencement dates.
Trust structures remain firmly in the spotlight.
While aspects of the original trust proposals have been refined following consultation, the broader direction remains clear.
Governments continue to focus on how income is distributed through discretionary trusts and how trust structures are used by family groups.
For many business owners, trusts are not simply tax structures.
They are succession planning tools, asset protection mechanisms and long-term family wealth structures.
The challenge for policymakers is balancing integrity measures with the legitimate role trusts play in Australia’s business landscape.
What Should You Do Now?
Rather than reacting to headlines, now is the time to review whether your current structure remains appropriate.
Depending on your circumstances, this may include reviewing:
- Investment ownership structures
- Discretionary trusts
- Business succession plans
- Planned business sales
- Property acquisitions
- SMSF investment strategies
- Asset valuations before 1 July 2027
Every client’s circumstances are different, and the new rules may create opportunities for some taxpayers while increasing tax costs for others.
If you’re considering buying or selling assets, reviewing your business structure, or simply want to understand how these reforms may affect you, we encourage you to seek advice sooner rather than later.
Contact the team at Next Dimension Accounting to discuss your specific circumstances and develop a strategy tailored to your situation before the new rules take effect.
