The Latest Updates to Budget Measures:
What Business Owners and Property Investors Need to Know
The Federal Budget delivered some of the most significant changes to property investment and trust taxation in decades. If you own investment properties or hold assets through a discretionary trust, these changes are relevant to you, and with key dates approaching, now is the time to understand what they mean for your structure.
Here’s a comprehensive summary of where things stand, all now legislated as of 26 June 2026.
Negative gearing
From 1 July 2027, negative gearing on established residential properties is abolished for properties purchased after 7:30pm on 12 May 2026. Investors affected will no longer be able to offset rental losses against salary or other personal income. Instead, losses can only be offset against residential rental income or future capital gains from rental properties.
Existing property owners, including those already under contract before the announcement, are grandfathered and can continue to access negative gearing under the current rules
Changes to negative gearing will only apply to residential property. Commercial property and other asset classes, such as shares, keep the existing arrangements.
Eligible new builds will remain exempt, with investors still able to access both negative gearing and the 50% CGT discount.
Worth noting: knock-down-rebuild projects on existing sites will need careful consideration — the legislation contemplates that a single dwelling demolished and replaced with a single dwelling will not satisfy the “genuine addition to supply” test, but a single dwelling demolished and replaced with two separately titled duplexes will.
CGT Changes
On Budget night the Treasurer announced that the existing 50% CGT discount for individuals and trusts would be replaced with an indexation system and a 30% minimum tax rate on capital gains accruing from 1 July 2027 (with limited exceptions).
However, the Government has announced that it plans to introduce a new Innovative Business CGT Concession that would provide a 50% CGT discount to early-stage investors, including founders and employee share scheme participants in innovative start-up businesses. A consultation paper has been released on the design of this concession.
In addition, the Government is taking steps to increase the annual turnover threshold that applies in determining whether a small business or its owner can access the existing 50% “active asset reduction” under the small business CGT concessions, from $2m to $10m. This change would apply from 1 July 2027.
The existing $2m turnover threshold would remain in place for the other three small business CGT concessions, being the 15 year exemption, retirement exemption and small business rollover relief. Taxpayers who can’t pass the turnover test can still access the concessions if they can pass a $6m net asset value test.
SMSF Borrowing Arrangements
As a result of negotiations with the Greens in connection with the changes to the CGT discount and negative gearing, the Government has agreed to remove the ability for SMSFs to borrow to purchase residential property (SMSF borrowing is commonly known as a limited recourse borrowing arrangement).
It seems that existing arrangements will be grandfathered.
* We will keep you updated as more developments occur. However, please don’t hesitate to contact us on 1300 743 267 if you want to discuss how these changes impact on your position.