By Ahmad El Masri
Principal Accountant & Registered Tax Agent
Published: 19 June 2026
Last Updated: 19 June 2026
Over the past few weeks, I have received countless phone calls, emails and questions from clients regarding the Federal Government’s proposed tax reforms.
Many people have heard terms such as:
- Negative gearing changes
- Capital Gains Tax reforms
- A proposed 30% minimum tax on discretionary trusts
- Payday Super
- The proposed $1,000 standard deduction
- Changes to superannuation contribution limits
Unfortunately, there has also been a lot of misinformation circulating online, particularly on social media.
Before discussing these changes, it is important to understand one key point:
Most of the measures discussed in this article are currently proposals and have not yet become law.
While the Government has announced these reforms and introduced legislation relating to a number of them, the proposals must still pass through Parliament and may be amended before becoming law.
This means there is no reason to panic, restructure your affairs immediately or make significant investment decisions based solely on newspaper headlines.
However, there is every reason to understand what is being proposed and how it may affect you if these reforms ultimately become law.
In my opinion, these proposals represent some of the most significant tax reforms Australia has seen in more than two decades.
The proposals attracting the most attention are:
- Limiting negative gearing to new residential properties
- Replacing the current 50% Capital Gains Tax discount
- Introducing a minimum 30% tax rate on capital gains
- Introducing a minimum 30% tax rate on discretionary trust income
- Payday Super
- Personal income tax reductions
Whether you agree with the reforms or not, there is no doubt that they could have a substantial impact on future investment decisions and business structures.
The purpose of this article is to explain the proposals in plain English and discuss what they may mean for ordinary Australians if they are ultimately passed into law.
Personal Income Tax Cuts
The Government has announced further personal income tax cuts for lower and middle-income earners.
Under the proposal, the tax rate applying to income between $18,201 and $45,000 would reduce from 16% to 15% from 1 July 2026, with a further reduction to 14% proposed from 1 July 2027.
For most employees, this will result in slightly less tax being withheld from their wages and a modest increase in take-home pay.
While every dollar helps, most taxpayers should understand that these changes are relatively small. They are unlikely to dramatically change anyone’s financial position but will provide some assistance with increasing living costs.
The Proposed $1,000 Standard Deduction
The Government has also proposed introducing a $1,000 standard tax deduction for work-related expenses.
The objective is to simplify tax returns and reduce record-keeping requirements for employees with straightforward affairs.
One misconception I have already encountered is people believing they will receive a $1,000 tax refund.
That is not correct.
A tax deduction reduces your taxable income. It does not provide a dollar-for-dollar refund.
For taxpayers with significant work-related expenses, motor vehicle claims, home office expenses, self-education costs or professional memberships, claiming actual expenses may still produce a better result.
Before relying on any standard deduction, taxpayers should seek advice and compare both options.
Payday Super – A Major Change for Employers
One of the most significant practical changes for business owners is the introduction of Payday Super.
The Government has proposed that from 1 July 2026, employers will generally be required to pay superannuation at the same time wages are paid rather than quarterly.
For employees, this is largely positive. Their superannuation will be invested earlier and there will be less risk of unpaid super accumulating over time.
For business owners, however, this will significantly impact cash flow management.
Many businesses currently retain superannuation amounts until the quarterly due date. Under the proposed system, that flexibility would effectively disappear.
Businesses should begin preparing now by reviewing payroll systems, budgeting processes and cash flow forecasts to ensure they can meet the new requirements if implemented.
Higher Superannuation Contribution Caps
The Government has also announced increases to superannuation contribution caps.
For many Australians, this may create additional opportunities to build wealth within the concessionally taxed superannuation environment.
Individuals approaching retirement may benefit from additional flexibility when implementing contribution and retirement planning strategies.
As always, care should be taken to ensure contribution limits are not exceeded.
Negative Gearing Changes
Perhaps the most controversial proposal relates to negative gearing.
For decades, Australian investors have generally been able to offset rental property losses against other income such as wages, business income and investment income.
The Government has proposed restricting negative gearing concessions for newly acquired established residential properties from 1 July 2027.
Under the proposal, losses from these properties may no longer be deductible against salary and wages or other unrelated income.
Instead, those losses may be quarantined and carried forward to offset future rental income or future capital gains.
New residential developments are expected to continue receiving favourable treatment in an effort to encourage additional housing supply.
Existing property owners are expected to be grandfathered under the current rules.
From a practical perspective, this means future investors may need to rely more heavily on the property’s underlying investment performance rather than annual tax benefits.
Many investors have traditionally relied on annual tax refunds generated from negatively geared properties to assist with holding costs. That strategy may become significantly less attractive under the proposed changes.
For property investors considering purchasing an investment property over the next few years, it will become increasingly important to focus on rental yields, long-term capital growth and overall cash flow rather than relying solely on taxation benefits.
Capital Gains Tax Changes
Another major proposal relates to Capital Gains Tax.
Currently, individuals and trusts generally receive a 50% CGT discount where an asset has been held for more than 12 months.
This concession has formed part of Australia’s taxation system since 1999 and has significantly influenced investment decisions throughout the country.
The Government has proposed replacing the current 50% discount system with an inflation-adjusted model.
In addition, the Government has proposed introducing a minimum effective tax rate of 30% on capital gains.
Supporters argue this approach is fairer because taxpayers would only receive concessions relating to genuine inflationary gains.
Critics argue the proposals effectively increase taxes on long-term investment and may discourage investment in property, shares and businesses.
The impact will vary depending on:
- The type of asset
- The length of ownership
- Inflation rates
- The taxpayer’s marginal tax rate
- The structure used to hold the asset
One thing is certain: investors should expect greater complexity if these proposals proceed.
Many Australians have accumulated wealth over decades under the existing CGT rules. Any significant change to the current concession could influence future investment decisions and retirement planning strategies.
The Proposed 30% Minimum Tax on Discretionary Trusts
Of all the proposed reforms, this is the one generating the most concern amongst accountants, business owners and investors.
Discretionary trusts have long been used for:
- Asset protection
- Estate planning
- Business ownership
- Investment structures
- Income distribution amongst family members
The Government has proposed introducing a minimum 30% tax rate on discretionary trust income from 1 July 2028.
Under the proposal, trust income may effectively be taxed at a minimum rate of 30%, regardless of whether beneficiaries are on lower marginal tax rates.
For many family groups, this could significantly reduce one of the primary taxation advantages of discretionary trusts.
While trusts may continue to offer important asset protection and succession planning benefits, the tax outcomes could be substantially different from those available today.
This proposal has created uncertainty for thousands of family trusts across Australia.
Many of my clients operate through discretionary trusts. At present, there is simply not enough information available to determine the full impact of these proposals. The final legislation, if passed, will ultimately determine how significant these changes become.
Should You Get Rid of Your Trust?
At the moment, my answer is simple:
No.
There is no reason to panic.
There is no reason to rush out and wind up a trust.
There is no reason to restructure solely because of media reports.
The proposed trust measures are not expected to commence until 1 July 2028 and there is still considerable legislative work to be completed.
There may also be transitional relief provisions and restructuring concessions available.
For now, investors and business owners should monitor developments closely and seek professional advice before making any major structural changes.
History has shown that tax legislation often changes significantly during the parliamentary process. Making major decisions before the final legislation is known can often create more problems than it solves.
What Does This Mean for Business Owners?
Business owners should view these proposals as a reminder that tax planning is becoming increasingly important.
Many strategies that have worked effectively for years may need to be reviewed.
Business structures, succession planning, trust arrangements, investment strategies and superannuation planning should all be assessed in light of the proposed reforms.
The days of simply lodging tax returns and hoping for the best are rapidly disappearing.
Strategic tax planning is becoming more important than ever.
Business owners who review their structures regularly and seek advice before legislative changes take effect will generally be in a much stronger position than those who wait until the last minute.
My Thoughts
I understand the Government’s objectives of improving housing affordability, increasing revenue and simplifying parts of the taxation system.
However, many Australians have spent years making financial decisions based on long-standing tax rules.
Changes to negative gearing, capital gains tax and discretionary trusts have the potential to significantly alter investment behaviour and business structuring decisions throughout Australia.
Whether these proposals ultimately achieve their intended objectives remains to be seen.
What I do know is this:
The people who benefit most from tax changes are usually the people who understand them early and plan accordingly.
My advice is not to react emotionally, not to rely on social media, and not to make major financial decisions based on newspaper headlines.
Instead, take the time to understand how the proposed changes may affect your specific circumstances.
Every investor, every business owner and every family group is different.
If you would like to discuss how these proposed reforms may affect your investment properties, family trust, business structure, capital gains position or future tax planning opportunities, please contact our office.
At El Masri Accounting Services, we will continue to monitor these developments closely and keep our clients informed as further information becomes available.
Disclaimer
The information contained in this article is general in nature and is provided for informational purposes only. It does not constitute taxation, financial, legal or professional advice and should not be relied upon as such.
The tax reforms discussed in this article are proposed measures only and, unless otherwise stated, have not yet become law at the time of publication. Proposed legislation may be amended, delayed or not enacted at all. The final legislation may differ significantly from the proposals currently announced by the Government.
Every taxpayer’s circumstances are different. Before making any decisions regarding your investments, business structure, family trust, superannuation, taxation affairs or financial arrangements, you should obtain professional advice tailored to your individual circumstances.
While every effort has been made to ensure the accuracy of the information contained in this article as at the date of publication, El Masri Accounting Services Pty Ltd, its directors, employees and representatives accept no responsibility for any loss or damage arising from reliance on the information contained herein.
If you would like advice specific to your circumstances, please contact El Masri Accounting Services to arrange a consultation.
Important: The reforms discussed in this article are proposed measures only and have not yet become law. The final legislation may differ from the proposals currently announced by the Government. Readers should seek professional advice before acting on any information contained in this article.
