The proposed 2026 Federal Budget tax reforms have already generated significant discussion amongst our clients this morning. Headlines surrounding changes to capital gains tax, discretionary trusts and negative gearing have understandably caused concern for many investors and business owners.
However, despite the media attention, it is important not to make rushed decisions based on proposals that have not yet become law.
What Changes Have Been Proposed?
The Government has flagged several major tax reform measures, including:
- Replacing the 50% capital gains tax discount with an inflation indexation method and a potential minimum effective tax rate of 30%;
- Restricting negative gearing benefits on established residential properties;
- Changes to discretionary trust taxation and bucket company arrangements; and
- Potential increases to minimum tax rates on certain trust distributions.
If implemented in their current form, these changes could significantly impact property investors, family groups and small-to-medium business structures across Australia.
Why You Should Not Panic
At this stage, these are proposed reforms only. Major tax changes typically go through:
- Treasury consultation;
- Exposure draft legislation;
- Industry submissions; and
- Senate negotiations.
Historically, many tax measures are substantially amended before becoming law, while some do not proceed at all.
This is particularly relevant given the widespread use of discretionary trusts and bucket company structures within Australian private business groups. Any broad changes to these arrangements are likely to attract strong feedback from accountants (including Nobel Thomas), lawyers, business associations and industry bodies.
Property Investors Could See Structural Changes
One of the more significant proposed reforms relates to negative gearing and capital gains tax treatment for residential property.
If tax concessions become limited to newly built properties only, this could create a long-term divide between:
- new developments; and
- established residential property.
This may influence investor demand, future property values and development activity over time.
That said, whether a property is new or established, investment decisions should primarily be driven by projected capital growth, rental return and long-term fundamentals — with tax outcomes remaining a secondary consideration.
Importantly, however, no final legislation currently exists and the precise details remain unclear.
Transitional Relief May Be Critical
The Government has also discussed the possibility of providing transitional rollover relief periods to allow taxpayers time to restructure without triggering immediate capital gains tax consequences.
If introduced, this could provide business owners and investors with time to:
- review existing structures;
- assess exposure to proposed changes; and
- plan restructures strategically rather than reactively.
This is why acting too early may actually create unnecessary tax costs.
What Should You Do Now?
Rather than making immediate changes, the better approach is usually to:
- speak with Mert and the team at Nobel Thomas to understand how the proposals may affect you;
- review your current structure;
- identify potential risk areas; and
- prepare contingency plans while waiting for draft legislation.
For many clients, careful planning and scenario modelling will be far more valuable than rushed restructuring.
Final Thoughts
The proposed tax reforms are significant and should be taken seriously. However, uncertainty remains around both the final form of the legislation and whether all measures will ultimately proceed.
For now, the focus should be on staying informed through our newsletters and correspondence, reviewing your position and obtaining advice before making major financial or structural decisions.
If you would like assistance reviewing your current tax structure or investment strategy, please contact Mert or any member of the team at Nobel Thomas.
