Capital Gains Tax (CGT) – What You Need to Know (and What’s Changing)

While most of the media focus around the 2026 Federal Budget has been on things like negative gearing and housing, one of the biggest changes has barely been mentioned at all — the taxation of discretionary trusts. And if you’re a small business owner or part of a family that uses a trust, this change could materially affect how your income is taxed in the future. Introduction One of the most significant outcomes of the 2026 Federal Budget isn’t aimed at the so‑called ‘top end of town’. It is aimed squarely at structures that everyday mum‑and‑dad businesses rely on. From 1 July 2028, discretionary trusts will be subject to a minimum 30% tax on taxable income, fundamentally changing how trust distributions are taxed. What Was Announced Under the measures announced in the 2026 Federal Budget:  • Discretionary trusts will pay a minimum of 30% tax on their taxable income • That tax will be withheld by the trustee • Beneficiaries will receive a non‑refundable tax credit for the tax already paid by the trust Why This Is a Big Deal for Individual Beneficiaries Under the current system, a trust distribution to an individual is taxed at the individual’s marginal tax rates, allowing access to the $18,200 tax‑free threshold and currently a 16% tax rate on income up to $45,000. Under the proposed rules, this benefit effectively disappears. Even beneficiaries with total taxable income below $45,000 will still bear an effective 30% tax on trust distributions. Why Small Businesses Are Most Affected Discretionary trusts are widely used by small businesses including trades, farming operations, professional practices, and family‑run enterprises. While paying wages instead of trust distributions may address the tax outcome, if your business does not already have employees it introduces real additional costs such as payroll software, payday superannuation compliance, Single Touch Payroll obligations, and WorkCover premiums. The Investment Company Issue A major concern with the proposed measures is how they apply where a company is a beneficiary of a trust, commonly referred to as ‘Bucket’ companies. Based on information released to date, companies do not appear to receive access to the non‑refundable tax credit. This creates the risk of double taxation and significantly undermines bucket company strategies commonly used to smooth income over multiple years and manage long‑term family tax outcomes. Another Common Structure Being Impacted Many small businesses operate through a company, but where all shares are owned by a discretionary trust. This has historically been prudent tax and succession planning, allowing flexibility, family involvement, and long‑term planning. While companies may continue to declare franked dividends to the trust, distributions from the trust to family members appear to be subject to the same minimum 30% tax outcome — even where that income represents the operating profit of the business. Practical Example Consider a modest family business earning $120,000 through a Trust. Under current rules, the Trust could be distributed across family members on low marginal tax rates, or at the least between Mum and Dad, therefore they would each have taxable incomes of $60,000. Currently Tax on that before Medicare and other offsets would be $17,576 combined. Under the new measure that same profit would result in tax of $36,000, an increase of $18,424 in tax paid! For a business operation we would strongly suggest wages be paid of at least $45,000 to each of Mum and Dad. If the same profit is from Trust where all income is from investments there may not be the justification of wages. Final Thoughts Although these measures are not scheduled to commence until 1 July 2028 and further legislative details are still to be released, the implications for small business owners and families using trusts are significant. This article is general information only and does not constitute tax advice.

We’re seeing an increase in company clients receiving correspondence that closely resemble ASIC annual company renewal notices . While these notices can look official, they’re often sent by private businesses that are not associated with ASIC. They typically offer optional services at a cost well above the actual ASIC renewal fee. Before paying anything, we recommend taking a moment to check the following:  Who it’s from – Genuine ASIC renewal notices come directly from ASIC, or from our office if we act as your registered agent. The details – Official ASIC correspondence will include your Corporate Key and clear ASIC branding. The tone – These notices often use urgent or threatening language to encourage quick payment. If you receive an invoice or notice and aren’t sure whether it’s legitimate, please contact our office before making payment. We’re happy to review it with you and help ensure you don’t pay for unnecessary services.

It’s common to inherit land, shares or other investments and assume there won’t be any tax to think about. While inheriting an asset usually doesn’t trigger capital gains tax (CGT) straight away, CGT can become an issue later—particularly when you decide to sell. What affects the CGT outcome? · When the deceased originally acquired the asset (especially whether it was before or after 20 September 1985 ). · What the asset is (a home, an investment property, farmland, shares, a business asset, etc.). · Whether it was ever used to produce income (for example, rented out) or used in a business. · Who owned it and how (for example, owned jointly, or inherited through multiple generations). Questions we commonly ask (because the answers can change the result): · When did the deceased buy the asset? (And was it inherited from an earlier estate?) · Was the asset originally purchased with someone else (for example, a spouse or sibling)? · Was the asset used in a business (and could any small business CGT concessions apply)? As a general rule, there’s usually no CGT event when you inherit an asset . However, if you sell the inherited asset later, CGT may apply—and the calculation often depends on when the deceased acquired the asset and how it was used . If the inherited asset is a home: the main residence exemption may still apply after the owner’s death, but it can depend on things like when the deceased moved out, whether the property was rented, and who lived in the property after death. Cost base (the starting point for CGT): for many inherited assets, your cost base will depend on whether the deceased acquired the asset before or after 20 September 1985 . In broad terms, if the asset was owned by the deceased before that date, the cost base is often the market value at the date of death . If it was acquired after that date, the cost base is generally carried over based on the deceased’s position (with adjustments in some cases). Where the asset is connected to a business, small business CGT concessions may be relevant. If you’re thinking about selling something you inherited, it’s worth getting advice early—before contracts are signed—so we can confirm what records you’ll need and what the CGT position is likely to be.

It is Federal Budget night on May 12 and even though you may not be an excited accountant or tax agent counting down the days, if you are an investor, it is likely there will be changes announced which will impact you. The change which is likely to be unveiled will be the Albanese Government’s approach to capital gains tax, targeting mainly share and property investors, but will also impact business owners who sell business assets. It is likely the Albanese Government will re-introduce an inflation indexation model for calculating capital gains tax. This proposed change has gained more traction in the media over the last few weeks. Currently, individual taxpayers and trust beneficiaries are able to reduce their capital gains tax on the sale of any capital investment by 50 per cent, providing this investment has been owned for at least 12 months. Please note – superannuation funds receive only a one-third discount. For an individual, this means half the gain is tax free, the remaining half of the gain is taxed at the taxpayer’s marginal tax rate. This discount system on capital gains has been in place since 1999. Capital gains tax (CGT) was introduced in 1985 and is applied to realised gains and losses on assets acquired after 19 September 1985. If an asset was purchased prior to the introduction of CGT, then it is exempt from CGT when sold. From 1985 to 1989 an indexation system was used where inflation factors were applied to the original cost, so only the “real/after inflation” gain was taxed. At this stage there has been no indication whether the changes, if introduced, would be grandfathered, to spare existing investors from any initial pain.