Federal Budget Update

Overall Theme

The budget signals a broader shift toward increased taxation of wealth and a narrowing of some long-standing tax planning strategies.

Key Proposed Changes Discussed

1. Negative Gearing

• Proposed changes would limit negative gearing benefits on residential property investments to newly constructed properties for future purchases.
• Other investments (e.g. shares) and non-residential property investments remain outside the scope of the proposed changes.
• Investors are encouraged not to make rushed decisions while legislation remains unfinalised.

2. Capital Gains Tax (CGT)

• The government proposes replacing the current 50% CGT discount with an inflation-indexation style approach for future gains. The proposal would commence from 1 July 2027, with gains accrued prior to that date expected to retain access to the current discount methodology.
• Existing exemptions for the family home and small business concessions remain unchanged under the proposal.
• Superannuation funds are largely unaffected by the proposed CGT changes.

3. Discretionary Trusts

• Proposed changes to the taxation of discretionary trusts were outlined.
• Asset protection benefits of trusts remain valuable.
• Potential tax advantages from income distribution strategies may be reduced in future.
• Final legislation and implementation details may still change before commencement.

Other Measures Mentioned

• Targeted tax offsets and deductions for working Australians.
• Potential changes to private health insurance rebates.
• Division 296 superannuation tax measures for balances above $3 million remain separate from the budget process.

Key Takeaways

• Most proposed tax measures are not yet law.
• Significant changes are unlikely to require immediate action.
• Investment and tax strategies may need adjustment over time as legislation becomes clearer.
• Superannuation remains one of the most tax-effective investment structures available for many Australians.
• Well-advised investors typically adapt successfully to changing economic and tax environments.



General Advice Summary Documents

These summaries are based on the webinar discussion and are intended as general information only. They do not constitute personal financial, taxation, or legal advice. Readers should seek advice from their financial adviser and tax professional before acting on any information.