The 2026–27 Federal Budget: three measures to watch

The 2026–27 Federal Budget contained what is arguably the most significant personal tax reform package in over 25 years. Three measures in particular warrant close attention for high-net-worth individuals, family offices, and anyone with a significant residential property or trust structure.

1. CGT: the end of the 50% discount, and a new 30% floor

The Government proposes to:

• replace the 50% CGT discount with inflation-adjusted indexation prospectively, with new builds retaining the option of the 50% discount; and

• introduce a minimum 30% tax rate on capital gains from July 2027.

Why it matters: For clients holding appreciated investments (e.g. listed portfolios, investment properties, business assets sitting outside the small business CGT concessions) the 50% discount has been one of the most valuable features of the personal tax system since 1999.

Indexation is, in many cases less generous (shorter holds, higher-inflation periods) but in some cases, more generous than the discount (long holds in low-inflation periods). The 30% floor compresses the benefit at the top end either way.

The change is prospective, which makes the timing of disposals between now and July 2027 a live planning question. So is the choice between disposing into the current regime versus holding under the new one; it is a calculation turning on holding period, inflation expectations, and the seller’s marginal rate.

2. Negative gearing: limited to new builds from July 2027

From July 2027, negative gearing on residential property will be limited to new builds.

Why it matters: Clients with portfolios built around the current settings should expect a re-think of their acquisition strategies.

3. Minimum 30% tax rate on discretionary trust distributions from July 2028

The Treasurer framed this as aligning the tax on income from trust-held assets with the tax on wages. From July 2028, distributions from discretionary trusts would be subject to a minimum 30% rate.

Why it matters: This is the measure most likely to reshape day-to-day family office planning. Distributions to lower-marginal-rate beneficiaries (e.g. adult children studying, a non-working spouse, or a retired parent) have been a cornerstone of family trust strategies. A 30% floor narrows that gap considerably, and in some cases eliminates it.

A few practical points

• Model the timing question: For clients contemplating disposals or acquisitions in the next 12 months, the question of which side of commencement to be on is worth working through now.

• Review the architecture, not just the tax. Asset protection, succession, and control rights are reasons people use trusts, and tax is one input. The 30% floor changes the tax calculus but doesn’t necessarily change the structural case.

If you’re advising clients in this space, or you’re a client wondering how exposed your structure is, now is the time to be running the numbers.

This post is general information only. It reflects measures announced in the 2026–27 Federal Budget on 12 May 2026, which are subject to the passage of legislation and may change. It is not legal, tax, or financial advice and should not be relied on for any specific transaction or position. For advice on your circumstances, please get in touch.

Authored by Connor Pangallo, Lawyer at Bird Law.