While the Federal Budget announcements continue to drip feed into legislation, investors and business owners are keen to understand what these changes mean for them, and what action, if any, should be taken now. We’ve summarised where the key announcements currently stand and added practical steps you can consider, even if the best move is to pause.

Snapshot of announcements and status

Capital Gains Tax (CGT) changes

Negative gearing

Changes to the taxation of trusts

Other relevant announcements

Practical considerations

These changes are far-reaching. Here’s a breakdown of practical steps for investors and business owners.

Investors

Investment structures

  • The tax profile of existing structures is changing. Superannuation funds and testamentary trusts remain some of the most tax effective vehicles.
  • There are restrictions on entering these structures, for example, contribution limits into superannuation and testamentary trusts are established through a will as part of estate administration
  • Investment companies are likely to grow in popularity, and family trusts still have their place in the right circumstances.
  • Asset rollovers don’t always fully exempt you from tax implications when changing structure. State Governments haven’t offered any extra concession on transfer duties, and any historical 50% CGT discount will be lost if you roll an asset into a company.

Tax profile of assets

  • There is now a marked difference between the tax treatment of some assets over others.
  • Negative gearing rule changes are aimed at ‘existing’ residential properties – not commercial, primary production or other asset classes.
  • Residential ‘new build’ properties remain eligible for the 50% CGT discount and negative gearing.

30 June 2027 market valuation

  • As drafted, only real property and assets without a readily ascertainable market value can use the days apportion method.
  • Investors should seek a valuation of their assets, such as real property, as at 30 June 2027
  • Market performance on and around 30 June 2027 will be crucial for setting the value for pre-CGT and 50% CGT discount assets.
  • We’re seeing investors dispose of assets to ‘lock in’ the 50% CGT discount at current market values.

Business owners

Business structuring

  • Restructuring a business is not as simple as the budget announcements suggest. Moving a business involves substantial administration, which can be costly and take focus away from day-to-day operations. This includes registration changes, updating contracts and legal agreements, managing employee matters, asset transfer documentation and state tax considerations.
  • There are existing rollovers and concessions that may be preferrable to the newly announced options. It’s important to consider all available avenues at the appropriate time.

30 June 2027 market valuation

  • Both the days’ apportionment method and market value will be available for business owners to set the new cost base on 30 June 2027.
  • The choice between these methods can be made at a later date, but a valuation done around 30 June 2027 will provide valuable evidence when needed.
  • Business owners can take steps now to ensure a higher valuation by 30 June 2027.

Until legislation is passed, we are not recommending any large-scale restructuring purely in response to the budget changes. However, it’s essential to review your circumstances now to understand how these changes could affect you – both today and in the years ahead.

Unfortunately, there is no one-size-fits-all model. While tax efficiency is always important, your review should also consider asset protection, flexibility in distributions, lifestyle changes and succession planning. Each of these factors play a role in shaping the right strategy for your situation.