Australian Federal Budget & Tax Reform Update

The major development last week was that Labor and the Greens have reached agreement on key tax reforms, making passage through Parliament highly likely. The measures most relevant to you are CGT reform, small business CGT concessions, superannuation contribution opportunities on business sale, and trust structures.

✅ Measures now effectively locked in

These measures have passed or now have sufficient parliamentary support that they are expected to proceed in substantially their current form.

1. Personal income tax cuts (now legislated)

Personal income tax cuts have now been legislated and will be phased in over the coming years.

What this means:

• Modest tax relief for lower- and middle-income earners. The 16% tax rate (for low-to-middle income earners) is being reduced:
• to 15% (first stage)
• then 14% (second stage in later years)
• Roughly $18,200 to $45,000 income band
• Gradual implementation rather than immediate change
• Designed as part of broader cost-of-living relief measures

What matters for you:

• Limited direct impact for most long-term investors and retirees
• May improve household cashflow for working family members or dependants
• Slight uplift in disposable income over time, but not a major driver of investment strategy

2. Capital Gains Tax reform (direction now set)

A major change to the way capital gains are taxed has now effectively been agreed in principle, with bipartisan support forming through Parliament.

What is changing:

• The current CGT discount model is being materially adjusted for future gains
• Transitional arrangements are expected for existing investments

Why this matters now:

This is not just a tax change — it is a timing change.

It affects:

• When gains are realised
• Whether assets are held or sold
• How investment portfolios are structured over time

What we are likely to see:

• More people deferring sales in some cases
• Others bringing forward planned disposals to lock in current settings

3. Negative gearing changes (new investments only)

Changes are being implemented that reduce negative gearing benefits on new investment properties, while largely protecting existing arrangements.

What this means:

• Existing property investors are generally unaffected in the short term
• Future property investments will be less tax-advantaged

Why it matters now:

This is likely to shift investor behaviour over time:

• Less leverage-driven property investment
• More focus on cashflow and diversification

4. Small business CGT concessions (expanded access)

The Government has agreed to broaden access to small business CGT concessions following negotiations.

What this means:

• More business owners may now qualify for meaningful tax relief on sale
• Retirement-related concessions may be more widely available

Why this matters now:

For business owners, this directly affects:

• Exit timing
• Sale structure
• After-tax retirement outcomes

Even small differences in eligibility can materially change outcomes.

???? Measures still being finalised (but direction is clear)

These are not yet fully legislated, but the direction of travel is well established.

5. Trust taxation changes

Reforms are still being refined around trust distributions and taxation.

What this means:

• Trusts are unlikely to disappear as a structure
• But flexibility and tax efficiency may reduce over time

What to consider:

• Whether your current trust setup still aligns with your long-term strategy
• Whether changes should be made proactively rather than reactively

6. SMSF borrowing restrictions (property inside super)

Changes are proposed that will limit borrowing within SMSFs for residential property.

What this means:

• Existing structures are expected to remain
• Future SMSF property strategies may be more restricted

Why this matters now:

This may reduce future flexibility for:

• Property acquisition inside super
• Gearing strategies in retirement planning

???? What this means in practice

Across most clients, we are seeing three clear shifts emerging:

1. Timing matters more than before

Decisions about selling, buying, or restructuring investments may now have materially different outcomes depending on when they occur.

2. Structure matters more than before

Trusts, SMSFs, and ownership structures are becoming more important in determining tax outcomes.

3. Planning is becoming more valuable, not less

Periods of policy change tend to increase the value of proactive financial advice rather than reduce it.

???? What you should be thinking about now

You do not need to make immediate changes, but this is a good time to review:

• Any planned sale of investments over the next 1–3 years
• Property investment decisions that are currently on hold or being considered
• Business succession or exit planning
• SMSF investment strategy (particularly property exposure)
• Whether your current structure still supports your long-term goals

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