The 2026–27 Federal Budget:
What every small business owner needs to know

By Lily Hii · Tax By Lily · May 2026 · 5 min read

Treasurer Jim Chalmers handed down his fifth Federal Budget on 12 May 2026 - and it's the most significant tax shake-up in over 25 years. If you run your business through a discretionary trust, this one's for you.

The good news first

Wins for small business

$20K instant asset write-off = permanent

From 1 July 2026. Businesses with turnover under $10M can immediately deduct eligible assets. No more annual budget lobbying.

Loss carry-back reinstated

From 2026–27, companies can apply current-year losses against tax paid in the prior 2 years. Great for cash flow.

$1,000 instant work deduction

For individuals, no receipts needed. Saves time and reduces compliance costs from 2026–27.

$250 Working Australians Tax Offset

For wage and salary earners, including sole traders. From 2027–28.

The big one

30% minimum tax on discretionary trusts

This is the change everyone's talking about - and for good reason. Around 350,000 small businesses currently operate through discretionary trusts. That's about to get more expensive.

Effective 1 July 2028 - here's what changes

• Trustees will pay a minimum 30% tax on all discretionary trust income at the trust level

• The current system - where income flows to beneficiaries at their (often lower) marginal tax rate - is gone

• Income-splitting to low-income family members will no longer deliver a tax advantage

• Beneficiaries receive a non-refundable credit for tax already paid by the trustee

The government frames this as levelling the playing field with wage earners. Small business groups aren't so sure - and with rollover relief on offer, you have a window to act before the rules kick in.

Also changing

CGT and negative gearing

Capital gains tax - from 1 July 2027

• 50% CGT discount abolished - replaced with cost base indexation

• 30% minimum CGT rate applies to gains in trusts and partnerships

• Assets held before 7:30pm AEST 12 May 2026 are grandfathered until sold

Negative gearing - from 1 July 2027

• Limited to new residential builds only

• Existing investment properties (pre-budget) are exempt until sold

• Shares and commercial property are unaffected

What to do now

NOTHING!!

I would advise to not jump into re-structuring as legislation still needs to pass Parliament. Follow us to receive updated news on the budget!

Key dates

1 July 2026

$20K instant asset write-off permanent. Loss carry-back applies.

1 July 2027

Rollover relief window opens. CGT and negative gearing changes take effect.

1 July 2028

30% minimum trust tax takes effect. Act before this date.

30 June 2030

Rollover relief window closes. Last chance for tax-free restructure.

These changes affect most clients operating through a discretionary trust. Let's review your structure and find the best pathway before the window closes.

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This post is general in nature and does not constitute personal tax advice. Please reach out to discuss your specific circumstances.