H&R Block’s Mark Chapman welcomes Federal Budget as one of the most substantive tax reform packages in a generation, delivering meaningful relief for workers whilst making long-overdue structural changes.
H&R Block Australia welcomes the Federal Budget as one of the most substantive tax reform packages in a generation, delivering meaningful relief for working Australians whilst making long-overdue structural changes to the way investment income and trust distributions are taxed.
Treasurer Chalmers has correctly identified that the current system, built around the 50 per cent CGT discount, uncapped negative gearing on established property, and flexible trust distributions, has over time tilted the playing field toward those already holding wealth. These measures begin to rebalance that equation.
Good news for workers and everyday taxpayers
For the millions of Australians who lodge their tax return, the budget delivers real, tangible benefits. The continuation of legislated income tax rate cuts, with the rate on income between $18,201 and $45,000 dropping to 15 per cent from 1 July 2026 and to 14 per cent from 1 July 2027, combined with the new $250 Working Australians Tax Offset from 2027 to 2028, means workers on average earnings will be up to $2,816 a year better off compared to 2023 to 2024 settings.
Investors face significant change, but a fair transition
The reform of the CGT discount is a landmark shift. Replacing the blanket 50 per cent discount with CPI-based indexation and a 30 per cent minimum tax rate from 1 July 2027 is a more intellectually coherent approach, taxing only real gains, not inflationary ones. The government has been careful to grandfather existing holdings and preserve the 50 per cent discount for gains arising before 1 July 2027, which limits the retrospective impact on investors who made decisions under existing settings.
Similarly, restricting negative gearing to new builds from 1 July 2027 is a structural change that will require careful planning from property investors. Those holding established properties as of Budget night retain full existing entitlements, but anyone looking to purchase in future will need professional advice to understand their options. The ability to carry forward losses, even if they can no longer be offset against wages, preserves some flexibility.
Any investor with property holdings, shares, or other CGT assets should seek advice before 30 June 2027 to understand how the transition rules apply to their specific situation.
Trusts: a long-telegraphed reform that demands action
The introduction of a 30 per cent minimum tax on discretionary trust income from 1 July 2028, with three years of rollover relief for those wishing to restructure, is a significant change for the approximately one million Australians who use these structures. Many small business owners and families hold assets through discretionary trusts, and this reform will require careful reconsideration of existing structures.
The generous transition period and the CGT rollover relief for those restructuring reflects a pragmatic recognition that trusts cannot be unwound overnight. However, trust beneficiaries and small business operators should not delay in seeking advice. With the relief window opening from 1 July 2027, the time to plan is now.
Small businesses gain real cash flow support
The permanent extension of the $20,000 instant asset write-off for businesses with turnover under $10 million is excellent news and long-called for by the small business community. Certainty matters for investment decisions, and making this measure permanent removes the annual uncertainty that has plagued small business planning.
The reintroduction of loss carry-back provisions, allowing companies to offset current-year losses against tax paid in the prior two years, is equally welcome. For small businesses navigating today’s difficult trading environment, the ability to recover previously paid tax provides genuine breathing room.
A note of caution
With reform of this breadth, complexity follows. The interaction between the new CGT regime, negative gearing rules, trust provisions, and existing structures will not always be straightforward. All Australians, whether investors, small business owners, or trust beneficiaries, should seek qualified tax advice before making any restructuring decisions or investment choices in light of the budget announcements.
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