22 May 2026

Negative gearing limited to new builds

BUDGET MEASURE: From 1 July 2027, losses on established residential property acquired after 7:30pm AEST 12 May 2026 can only be deducted against rental or residential property capital gains income. Properties held (or under contract) before that time are grandfathered.

Our analysis

This aligns the Australian tax system with other jurisdictions and, together with the CGT indexation changes, should have some impact on the demand side for residential housing. But importantly, note the “grandfathering” of negative gearing arrangements already in place. (How far it shifts the affordability dial for young people trying to get a foothold in the housing market remains to be seen – especially in the light of ongoing supply problems.)

30% minimum tax on discretionary trusts

BUDGET MEASURE: From 1 July 2028, a 30% minimum tax will be applied to the taxable income of discretionary trusts, payable by the trustee, with exemptions for unit and widely-held trusts, complying super funds, special disability trusts, deceased estates and charitable trusts. Primary production income, certain vulnerable minor income, and income from existing testamentary trust assets are also excluded. Three-year rollover relief from 1 July 2027 will be provided to assist restructuring.

What to watch

Presumably this new trustee tax only applies to income to which beneficiaries are made presently (or specifically) entitled to during the particular tax year and that the current 47% tax rate will continue to apply to income to which no beneficiary is presently entitled – otherwise trusts might still be a useful accumulation vehicle.

In other words, it is in effect a 30% minimum tax on trust distributions. Also note despite the carve out for deceased estate trusts etc, this does not include testamentary discretionary trusts (as opposed to testamentary fixed trusts) – which will be subject to the 30% minimum tax rate.

But, again, the devil will be in the legislative detail – and after a year of consultations and submissions.