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Federal Budget 2027 Highlights
1. Replacing the 50% CGT discount with indexation
From 1 July 2027, the 50% CGT discount will be replaced by cost base indexation for assets held for more than 12 months, with a 30% minimum tax on net capital gains.
These changes will apply to all assets, including pre-CGT assets, held by individuals, trusts and partnerships.
Transitional arrangements will limit the impact on existing investments by ensuring the changes only apply to gains accruing on or after 1 July 2027. The 50% CGT discount will continue to apply to gains that accrued before 1 July 2027.
Capital gains on pre-CGT assets that accrued before 1 July 2027 will remain exempt from CGT.
Furthermore, investors in new residential properties will be able to choose either:
• the 50% CGT discount; or
• cost base indexation and the 30% minimum tax
Income support payment recipients, including Age Pension recipients, will be exempt from the minimum tax.
Assets that are sold prior to 1 July 2027 will continue to be subject to the existing rules.
2. Changes to negative gearing for residential property investments
From 1 July 2027, losses from established residential properties will only be deductible against rental income or the capital gains from residential properties. Excess losses will be carried forward and are able to be offset against residential property income in future years.
These changes will apply to established residential properties acquired from 7:30 PM (AEST) on 12 May 2026. Properties acquired prior to this time (including contracts entered into but not yet settled) will be exempt from the changes until disposal.
Eligible new builds will be exempt from the changes.
Properties in superannuation funds and widely held trusts will be excluded, alongside targeted exemptions for build-to-rent developments and private investors supporting government housing programs.
3. Reforming the taxation of discretionary trusts
The Government will introduce a minimum 30% tax on discretionary trusts.
From 1 July 2028 (i.e., from the 2029 income year), trustees will pay a minimum tax of 30% on the taxable income of discretionary trusts. Beneficiaries, other than corporate beneficiaries, will receive non-refundable credits for the tax payable by the trustee.
Under the minimum tax, corporate beneficiaries will be assessed based on the trust income to which they are entitled, without being able to claim credits for tax payable by the trustee.
The minimum tax will not apply to other types of trusts such as fixed trusts, fixed testamentary trusts, complying superannuation funds, special disability trusts and deceased estates.
Some types of income such as primary production income, certain income relating to vulnerable minors, amounts to which non-resident withholding tax applies, and income from assets of discretionary testamentary trusts existing at announcement will also be excluded.
The Government will provide expanded rollover relief for three years from 1 July 2027 for small businesses and others that wish to restructure out of discretionary trusts into another type of entity, such as a company or fixed trust.
4. Permanent $20,000 instant asset write-off
From 1 July 2026, the Government will permanently extend the $20,000 instant asset write-off for small businesses with turnover of less than $10 million.
Assets valued at $20,000 or more can continue to be placed into the small business depreciation pool. The provisions that prevent small businesses from re-entering the simplified depreciation regime for five years after opting out will continue to be suspended until 30 June 2027.
5. Introducing a Working Australians Tax Offset
The Government will introduce a $250 Working Australians Tax Offset with effect from the 2028 income year. This new offset will provide a permanent annual tax offset for Australians for their income derived from work such as salary and wages and the business income of sole traders.
6. $1,000 Standard Deduction for Work-related Expenses
The Government will introduce a standard tax deduction of up to $1,000 for work-related expenses from the 2027 income year. Draft legislation and explanatory materials have been released for consultation regarding this measure: Treasury Laws Amendment Bill 2026: standard deduction for work-related expenses.
The Draft Bill proposes to amend the tax law to introduce a standard deduction of up to $1,000 for Australian tax residents who earn income from work, starting 1 July 2026. Such taxpayers will not need to itemise or substantiate work-related expenses if they are claiming no more than $1,000.
Individuals who incur work-related expenses greater than the $1,000 maximum standard deduction can continue to claim their deduction in the usual way.
Charitable donations, union and professional association membership fees and other non-work-related deductions can still be itemised separately and claimed on top of the standard deduction.
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