The 2026 Federal Budget included several proposed tax changes that could affect small businesses, property investors, and family groups. While many of the announcements still need to pass legislation, there are a few key areas worth understanding now, particularly for business owners with investment properties, discretionary trusts, or future business expansion plans.

Permanent $20,000 Instant Asset Write-Off

One of the more positive announcements for small businesses is the proposal to permanently extend the $20,000 instant asset write-off for eligible businesses with turnover under $10 million.

If passed, businesses may continue to immediately claim deductions on eligible assets costing less than $20,000, instead of depreciating them over several years.

This may continue to assist with purchases such as:

• computers and office equipment
• tools and machinery
• business technology upgrades
• certain work vehicles

The proposed change would also provide greater certainty for businesses planning future equipment purchases, rather than waiting each year to see if the threshold will be extended again.

You can read more in the Australian Government’s Federal Budget papers:
Federal Budget 2026–27 Tax Reform Measures

Proposed Negative Gearing Changes

The Budget also announced proposed changes to negative gearing rules for residential investment properties.

Under the proposal, investors purchasing established residential properties after Budget night on 12 May 2026 may no longer be able to offset rental property losses against salary and wage income.

Negative gearing concessions are expected to remain available for newly built residential properties, with the Government aiming to encourage additional housing supply.

Existing investment properties purchased before the announcement are generally expected to remain under the current rules.

For property investors, this could influence future purchasing decisions and long-term investment strategies.

Proposed Capital Gains Tax (CGT) Changes

The Government also announced proposed changes to the current CGT discount system from 1 July 2027.

At present, individuals and trusts generally receive a 50% CGT discount on eligible assets held for more than 12 months.

Under the proposal, the current discount system may be replaced with an inflation-indexation model for future asset purchases.

While full details are still limited, the changes could affect:

• investment property decisions
• succession planning
• long-term investment strategies
• timing of future asset sales

Further detail is expected once draft legislation is released.

Further details are available through the Tax Explainers Negative Gearing Capital Gains Tax Fact Sheet.

Proposed Discretionary Trust Changes

Another significant proposal is the introduction of a 30% minimum tax rate on certain discretionary trust distributions from 1 July 2028.

If implemented, this could reduce some of the tax flexibility currently available through family trust income distribution strategies.

This proposal may particularly affect:

• family businesses
• investment structures
• professional practices
• property holding entities

The Government has indicated that some exclusions and restructuring relief measures may apply, however further clarification is still expected.

You can read the Treasury explainer here:  Minimum Tax on Discretionary Trusts Fact Sheet.

What Should Business Owners Do Now?

The 2026 Federal Budget signals a significant shift in tax policy, particularly around property investment, CGT, and discretionary trusts. While some measures may provide greater certainty for small businesses, others could reshape long-term investment and tax planning strategies for many Australians. As more detail becomes available, business owners and investors should review their position carefully before making major decisions.