Holiday Homes Under Scrutiny: What the ATO’s New Guidance Means for Property Owners

Capital Gains Tax (CGT) – What You Need to Know (and What’s Changing) If you own investments like property, shares, or a business, understanding Capital Gains Tax (CGT) is critical—especially with major changes on the horizon. What is Capital Gains Tax? Capital Gains Tax (CGT) is the tax you pay on profits when you sell an asset. It applies to assets acquired after 19 September 1985 Your capital gain is simply: Sale price (what you sell it for) minus Cost base (what you paid + associated costs) If the result is positive → you have a taxable capital gain If negative → you have a capital loss Do you always pay tax on the full gain? Not always. There have historically been concessions to reduce your tax bill, depending on when you bought the asset and how long you held it. The Two Main CGT Methods (Historically) 1. Indexation (Pre-1999 assets) This older method adjusted your cost base for inflation so you were only taxed on the real gain. Only applies to assets acquired on or before 21 September 1999 Adjusts the purchase cost using CPI This method is no longer available for newer assets. 2. The CGT Discount (Current system) This is the most common method used today. If you: hold an asset for more than 12 months, and are an eligible taxpayer (individual, trust, or super fund) You may reduce your capital gain: 50% discount for individuals and trusts 33.33% discount for super funds Example: If you make a $100,000 gain, you may only pay tax on $50,000 How CGT is Taxed Your net capital gain is added to your income It’s taxed at your marginal tax rate Capital losses can’t reduce other income—but can be carried forward Major CGT Changes Coming (From 1 July 2027) The government has proposed significant reforms that will change how CGT works. 1. The 50% Discount is Being Replaced From 1 July 2027: The current 50% CGT discount will be removed Instead, we return to a form of indexation Meaning: You’ll only be taxed on gains above inflation This is designed to tax the “real” gain only 2. A New Minimum 30% Tax Rate A key change: A minimum tax rate of 30% will apply to capital gains What this means: If your tax rate is below 30% → you still pay 30% If your rate is above 30% → you pay your normal rate The 30% is a floor, not a cap 3. Existing Assets – How Will They Be Treated? If you already own assets, the rules will split your gain into two periods: Before 1 July 2027 Existing rules apply (including the 50% discount) After 1 July 2027 New rules apply (indexation + 30% minimum tax) In practice: You may need a valuation at 1 July 2027 to determine the split 4. What About Pre-1985 Assets? Historically: Assets bought before 20 September 1985 were completely CGT-free From 1 July 2027: Any future growth in those assets will become taxable Past gains remain tax-free 5. Special Rule for New Housing To support housing supply: Investors in new residential property may choose between: The old 50% discount, or The new indexation method + minimum tax What This Means for You These changes could significantly impact: Investment property owners Share investors Business owners Family groups and trusts Key implications: The timing of asset sales will become more important Valuations at 1 July 2027 may be critical Tax outcomes could increase for lower-income taxpayers Long-term investment strategies may need review Final Thoughts Capital Gains Tax has always been complex—but the upcoming changes make planning even more important. If you own, or are thinking about selling: Property Shares A business Or any investment asset it’s worth reviewing your position well before 1 July 2027.

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.