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9 Legal Tax Planning Moves from the 2026 Federal Budget Every Australian Should Know

The 2026 Federal Budget changed the tax landscape for nearly every Australian. With three major changeover dates ahead (1 July 2026, 1 July 2027, 1 July 2028), there is a clear window to make the most of both the existing rules and the new ones.

The 9 legitimate tax planning moves below come from public Treasury fact sheets and the published positions of major Australian accounting firms. None require aggressive interpretation. Each is the natural response to a specific change announced in the budget.

Important: most budget measures are proposed legislation, not law. The income tax cuts and Medicare levy threshold increase have been legislated. The CGT reform, negative gearing changes, $1,000 instant deduction, $250 WATO, and trust minimum tax are announced policy that still needs to pass Parliament. We have written this on the basis that the measures will be legislated as announced. Final form may change. Talk to a registered tax agent before acting on anything below.

TL;DR

• Crystallise large unrealised capital gains before 1 July 2027 to lock in the full 50% CGT discount, where it suits your overall plan.
• Time large purchases of work equipment to use the permanent $20,000 instant asset write-off from 1 July 2026 if you are a small business.
• Make sure your discretionary trust structure is reviewed before 1 July 2028. Rollover relief available from 1 July 2027.
• Compare the $1,000 instant deduction against your actual claim each year from 2026-27.
• Consider new builds over established properties if expanding your investment portfolio.
• Use small business CGT concessions where eligible. They were retained unchanged.
• Consider electric vehicle FBT timing for the transitional benefits to 1 April 2029.
• Use loss carry-back from 2026-27 if you run a profitable company that may have a future loss year.
• Increase Medicare levy threshold awareness in 2025-26 lodgement.

Move 1: Crystallise large unrealised gains before 1 July 2027

This is the most consequential single move available to Australian investors with high-growth assets. The 50% CGT discount that has applied since 1999 will be replaced by indexation plus a 30% minimum tax rate from 1 July 2027 for gains accruing after that date.

For most assets, the new indexation system is reasonable. For a high-growth asset like founder equity, appreciated shares with a low cost base, or business assets with significant capital growth, the 50% discount is materially more valuable than indexation will be on a fast-growing investment.

The window: 12 May 2026 to 30 June 2027.

The decision: Whether to sell assets before 30 June 2027 to lock in the full 50% discount on the entire accrued gain, or hold and accept the split treatment afterward.

Who this suits:

• Investors holding shares with significant capital gains they were planning to realise within the next few years anyway.
• Founders or early-stage employees with appreciated equity from a non-listed company they expect to sell.
• Investors who can realise the gain without disrupting an investment strategy that depends on holding.

Who this does not suit:

• Long-term holders who would otherwise keep the asset for decades. The split treatment after 1 July 2027 still preserves the 50% discount on accrued gains to that date.
• Investors with assets that have grown slowly. The new indexation system may produce similar or better outcomes for slow-growth assets.
• Anyone whose marginal rate is so low that the 50% discount is not driving the after-tax outcome.

Practical step: Get an accountant to model the difference for your specific situation. The variables are size of gain, cost base, expected future growth, marginal rate, and holding intentions.

Move 2: Use the permanent $20,000 instant asset write-off (sole traders and small business)

The $20,000 instant asset write-off has bounced between temporary and extended for years. The 2026 Budget makes it permanent from 1 July 2026 for small businesses with turnover under $10 million.

What changes:

• Eligible assets costing less than $20,000 can be immediately deducted in the year of purchase, rather than depreciated over multiple years.
• The threshold is per asset, not per business. You can buy multiple eligible assets in the same year.
• The permanence removes the annual uncertainty that has plagued small business equipment planning for years.

Practical step for 2026-27: If you have equipment purchases coming up (tools, computers, vehicles, furniture, fit-out, technology), plan the timing around the financial year. Buying in late June can bring forward the deduction. Buying in early July defers it by a year. Neither is automatically better; what matters is matching the deduction timing to your income year.

Move 3: Review your discretionary trust structure before 1 July 2028

From 1 July 2028, distributions from discretionary trusts will be subject to a 30% minimum tax rate at the trust level, with non-refundable credits for beneficiaries. The longstanding practice of distributing to lower-marginal-rate family members will be effectively neutralised.

Exclusions: Fixed and widely held trusts, charitable trusts, special disability trusts, complying superannuation funds, deceased estates, primary production income, certain income for vulnerable minors, and income from existing discretionary testamentary trusts.

The window: 12 May 2026 to 30 June 2028. Rollover relief is available from 1 July 2027 to 30 June 2030 for those who choose to restructure.

Practical step: If you operate a family business through a discretionary trust, talk to a qualified accountant about whether the structure still suits the new rules. Restructuring is complex and individual. The answers depend on your business, your beneficiaries, and the income types flowing through.

Move 4: Compare the $1,000 instant deduction against your actual claim each year

From 2026-27, eligible workers can claim a flat $1,000 deduction for work-related expenses without keeping receipts. The deduction is a flat amount; you can still itemise your actual expenses with full substantiation if they exceed $1,000.

The simple test: Add up your actual deductible work expenses for the year. If it is under $1,000, claim the instant deduction. If it is over $1,000, itemise.

Who benefits from the instant deduction:

• PAYG employees with modest work expenses, low phone use, no home office, no significant uniform or PPE costs.
• Workers who lose receipts and previously claimed under the $300 evidence threshold.

Who keeps itemising:

• Hybrid and home-based workers with significant WFH costs.
• Mobile professionals, trades, and field workers with car, equipment, and PPE costs.
• Sole traders with business expenses (these are separate from the work-related expense category that the $1,000 instant deduction covers).

The instant deduction does not change donations, union and professional association fees, or other deductions claimed separately. Those continue to be claimable on top of the $1,000.

Move 5: Choose new builds over established properties for new investment

The negative gearing rules diverge sharply between new builds and established homes from 1 July 2027. Properties acquired after 7:30pm AEST 12 May 2026 face different treatment depending on what was bought.

Established residential property bought after Budget night:

• Net rental losses deductible only against rental income or capital gains from residential property, not salary.
• Unused losses carry forward against future residential property income.
• CGT uses new indexation plus 30% minimum from 1 July 2027.

New residential build bought after Budget night:

• Full negative gearing against salary continues.
• On sale, choose between 50% CGT discount or new indexation.

For property investors weighing their next purchase, the new build option is now considerably more tax-efficient than the established alternative. This is an intentional policy outcome to channel investment toward new housing supply.

For more detail on grandfathering and what changes for existing owners, see our investment property grandfathered rules guide.

Move 6: Use small business CGT concessions where eligible

The 2026 Budget retained the existing small business CGT concessions unchanged. These remain among the most valuable tax planning tools available to Australian small business owners.

The concessions:

• 15-year exemption: Disregard the entire capital gain if you have continuously owned the asset for 15 years.
• 50% active asset reduction: Halve the gain after applying any other applicable discounts.
• Retirement exemption: Disregard up to $500,000 of capital gain over a lifetime, with contributions to super for those under 55.
• Rollover: Defer capital gain by acquiring a replacement asset.

Eligibility tests: Active asset test, basic conditions, maximum net asset value test (or small business entity test). The concessions are complex and stack in specific ways.

Practical step: If you are planning to exit a small business in the next decade, structure the eventual sale to qualify for the concessions wherever possible. This requires planning years in advance, not at sale time.

Move 7: Time electric vehicle purchases for FBT transitions

The FBT treatment of electric vehicles is changing in stages.

Until 31 March 2027: 100% FBT exemption for eligible electric cars valued up to $75,000 (and a higher fuel-efficient luxury car tax threshold).

1 April 2027 to 31 March 2029: Cars valued above $75,000 and up to the luxury threshold receive a 25% FBT discount (a 15% rate in the statutory formula).

1 April 2029 onward: Permanent 25% FBT discount for all eligible electric cars valued up to the luxury threshold, regardless of price.

Transitional protection: Cars provided before 1 April 2029 keep the FBT treatment that applied at the time they were provided. A car under $75,000 provided before 1 April 2029 keeps 100% exemption for as long as it is provided.

Practical step: If your employer offers a novated lease on an electric vehicle, the timing of when the car is first provided matters. Cars provided before 1 April 2029 keep richer benefits.

Move 8: Reintroduced loss carry-back from 2026-27 (companies)

From 2026-27, eligible companies that make a loss in the current income year can use that loss to claim a refund against tax paid in the previous two income years. Treasury estimates 85,000 mostly small companies will benefit, with cash refund opportunity rather than carrying losses forward.

Who benefits:

• Profitable companies that have a loss year due to investment, expansion, or downturn.
• Small businesses that have used the permanent $20,000 instant asset write-off to create a tax loss in 2026-27.

Worked example from Treasury: Dining Co reports a $50,000 profit but uses instant asset write-off deductions of $65,000, creating a $15,000 tax loss. It pays no tax in the current year and carries the loss back to claim a $3,750 refund ($15,000 × 25% company tax rate).

Practical step: If your small company is investing heavily in equipment, the combination of permanent IAWO plus loss carry-back is a powerful cash flow tool. Talk to your accountant about how to structure the timing.

Move 9: Check your Medicare levy position for 2025-26

The Medicare levy low-income thresholds were increased by 2.9% retrospectively for the 2025-26 income year. The thresholds are:

• Singles: $28,011 (up from $27,222)
• Families: $47,238 (up from $45,907)
• Single seniors and pensioners: $44,268 (up from $43,020)
• Senior and pensioner families: $61,623 (up from $59,886)
• Family threshold uplift per dependent child or student: $4,338 (up from $4,216)

Treasury estimates the change provides Medicare levy relief for more than one million Australians. The change applies when you lodge your 2025-26 return. There is nothing to do; the ATO will calculate the levy correctly based on the new thresholds.

Practical step: If you have taxable income near these thresholds, the levy treatment may have changed. Check your lodgement carefully. The ATO will work this out automatically when you lodge.

Bonus: Working Australians Tax Offset (from 2027-28)

This is not a planning move so much as a thing to be aware of. From 1 July 2027, the $250 Working Australians Tax Offset applies automatically to 13 million workers including 1.5 million sole traders. It is limited to income from work. Treasury says 97% of eligible workers will receive the full $250.

For workers, this effectively raises the tax-free threshold from $18,200 to $19,985 (or $24,985 for workers also eligible for the Low Income Tax Offset).

There is nothing to claim. The ATO applies it automatically. Just be aware it is coming.

What to avoid

Some of the budget framing has prompted speculative "tax minimisation" content elsewhere on the internet. To be clear about what we are not recommending:

Pre-12 May 2026 backdating. The grandfathering for negative gearing applies to contracts entered before 7:30pm AEST 12 May 2026. Creating or backdating documents to appear pre-Budget is fraud. Don't.

Aggressive trust splitting. The new 30% minimum tax on discretionary trust distributions is designed to neutralise the trust splitting strategy. Working around it with novel structures will likely attract ATO attention. Restructure with a qualified accountant or accept the new rules.

Property "switching" tricks. Selling and rebuying the same property to convert established to new build status is unlikely to work. The Treasury fact sheet specifies new builds as the criterion, not "new ownership of an existing build". Don't try to game this.

CGT timing without modelling. Selling before 1 July 2027 to lock in the 50% discount only works if the after-tax outcome is genuinely better. For long-term holders of slow-growth assets, the new indexation system may produce comparable or better results. Run the numbers first.

The 9 moves above are all public, well-documented, and within the clear spirit of the budget. Going beyond them puts you in ATO target territory.

How Finwell AI helps with budget-era tax planning

The 2026 Budget creates real planning opportunities, but the rules are now too complex for paper-based record-keeping or annual tax-time guesswork. Two parallel CGT systems will run side-by-side from 1 July 2027. Two parallel negative gearing rules will apply depending on when each property was acquired. The $1,000 instant deduction creates a year-round decision about whether to itemise.

Finwell AI is built for that complexity. The app tracks the acquisition date of every asset and applies the correct CGT method depending on whether the gain accrued before or after 1 July 2027. It separates negatively-geared properties by acquisition date and applies the right deduction rules to each. It tracks your actual work-related expenses in real time so you know at any moment whether the $1,000 instant deduction or the itemised claim gives you the better outcome.

For sole traders, the app models the timing of equipment purchases against the permanent $20,000 instant asset write-off and the new loss carry-back rules. For small business owners thinking about the small business CGT concessions, the app surfaces eligibility flags as you record disposals.

At tax time, Finwell AI prepares lodgement-ready forms covering all your income types, runs a peer desktop review, and surfaces suggestions on what you may want to amend. You press a button to lodge. Your accountant or bookkeeper can sign in to check before you do. Where you authorise it, Finwell AI can represent you to the ATO.

Finwell AI is a flat monthly subscription, not a percentage of your income. It works with whatever bank, card, invoicing tool, and POS you already use.

Take the 2-minute survey. Founding 500 members get 6 months Premium free.

Frequently asked questions

Q: Should I rush to sell investments before 1 July 2027 to lock in the 50% CGT discount?

Only if it suits your overall plan. The 50% discount applies to all gains accruing before 1 July 2027, including for assets you continue to hold past that date. For short-term sellers with high-growth assets, the window is meaningful. For long-term holders of slow-growth assets, the new indexation system may produce comparable results. Run the numbers with a registered tax agent before acting.

Q: Will the $1,000 instant deduction save me more than itemising?

Only if your actual work-related expenses are under $1,000 per year. Most workers with significant home office costs, mobile work, technical equipment, or professional development will continue to itemise because the real claim is bigger. The instant deduction is designed for workers with modest, hard-to-substantiate expenses.

Q: Is a family trust still worth using?

It depends on what the trust does. The 30% minimum tax on discretionary trust distributions starts on 1 July 2028 and targets the income-splitting strategy. If your trust serves other purposes (asset protection, estate planning, succession), it may still be worth keeping. If income splitting was the primary benefit, the structure may need rethinking. Talk to a qualified accountant.

Q: Are small business CGT concessions still available?

Yes. The existing concessions are retained unchanged in the 2026 Budget. Eligible small business owners can still halve or completely disregard CGT on the sale of qualifying business assets, subject to the active asset test, basic conditions, and maximum net asset value or small business entity tests.

Q: How do I know if my electric car keeps the 100% FBT exemption?

Cars provided before 1 April 2029 keep the FBT treatment that applied at the time they were provided. A car under $75,000 first provided before 1 April 2029 keeps 100% exemption for as long as it is provided. Cars provided from 1 April 2029 onward use the permanent 25% FBT discount.

This article is general information only and not personal tax advice. For your situation, consult a registered tax agent. The measures described above are based on the 2026-27 Federal Budget announced on 12 May 2026 and may change during parliamentary passage. We will update this article when legislation passes or material changes are announced.