Newsletter – June 2026

The 2026–27 Federal Budget, released on 12 May 2026, has received more attention than most budgets in recent years. With proposed changes to negative gearing, the CGT discount and the taxation of trusts, this is a budget that has the potential to materially impact property investors, business owners and families using discretionary trusts.

It is important to remember that the proposed changes are not yet law. Even though legislation has been introduced into Parliament for some measures, there is no guarantee that Bills will pass in their current form.

Negative gearing – changes to apply from 1 July 2027

The Government is planning to tighten negative gearing on established residential properties. For properties purchased after Budget night:

• Rental losses can only be offset against rental income or capital gains from other residential properties.
• Any remaining losses must be carried forward and applied only against future residential rental income or residential property capital gains.

The new restrictions only apply to residential property, so losses relating to commercial property, shares and other asset classes should not be impacted. 'New builds' remain fully eligible for current negative-gearing rules, both before and after 1 July 2027, although final details of what qualifies as a 'new build' haven't been released yet.

If you are thinking about converting your private home into a rental property, please contact us — there is a technical issue that could potentially change your outcome and we would like to discuss this with you.

CGT discount – changes to apply from 1 July 2027

Individuals who hold an asset for more than 12 months currently qualify for a 50% discount on taxable capital gains. From 1 July 2027, this discount will be replaced for individuals and trusts with:

• Cost base indexation (inflation adjustment), and
• A 30% minimum tax on capital gains.

This change will apply across all CGT asset categories — including residential and commercial property, shares, business assets and pre-CGT assets. Gains that accrue up to 1 July 2027 will still receive the existing CGT discount. It will be necessary to determine the market value of assets at that date so CGT calculations can be performed. Companies won't have access to indexation, and complying super funds will continue to enjoy the existing one-third CGT discount.

Discretionary trusts – changes to apply from 1 July 2028

The introduction of a 30% minimum tax rate on the taxable income of discretionary trusts would represent a fundamental change to how the tax system currently operates. The Government is indicating that the tax would initially be paid by the trustee, with beneficiaries (other than companies) receiving a non-refundable tax credit for tax paid at the trust level.

This measure is aimed at curbing income splitting to lower-taxed family members and corporate beneficiaries. Some exemptions would apply, including for fixed and widely held trusts, superannuation funds, special disability trusts, deceased estates, charitable trusts, primary production income and certain other trust types.

While the start date isn't until 1 July 2028, now is the time to start modelling scenarios and comparing the pros and cons of other structures. Three years of roll-over relief will be available for restructures into companies or fixed trusts.

Other measures worth noting

• $250 Working Australians Tax Offset (from 2027–28) — increases the effective tax-free threshold for wage earners and sole traders.
• $1,000 standard deduction for work-related expenses (from 2026–27) — simplifies tax time for many employees.
• Small business measures — a permanent $20,000 instant asset write-off for plant and equipment.

The Reserve Bank of Australia (RBA) has confirmed that all surcharges on credit and debit card payments will be banned from 1 October 2026. This represents one of the most significant updates to Australia's payments landscape in years. Australians currently pay an estimated $1.6 billion in card surcharges every year. Under the new rules, total merchant payment costs are expected to fall by around $910 million per year, with small businesses likely to see the largest percentage savings.

What's changing?

The RBA's reform package has three key components:

1. Surcharges banned — From 1 October 2026, businesses cannot add any surcharge for payments made using eftpos, Mastercard, Visa or related networks. Customers must see and pay one final all-inclusive price.
2. Lower interchange fees — Interchange fees will be reduced, with new caps for foreign-issued cards, directly lowering the cost businesses need to pay to accept card payments.
3. Greater transparency — Banks, card schemes and payment providers must publish clearer information about fees and margins, and demonstrate how reductions in wholesale fees are passed through to retailers.

What your business should do now

1. Review your merchant fees — Look at recent statements and determine how much you currently pay in card-acceptance fees and whether surcharges have been used to offset those costs. You may need to adjust prices to maintain margins.
2. Speak to your payment provider — With lower interchange fees coming and more transparency required, it's a good time to negotiate better merchant service fees, updated pricing plans and POS or terminal upgrades.
3. Update your pricing and POS systems — Remove surcharge signage, online checkout surcharges and automatic percentage add-ons. All displayed prices must become all-inclusive.
4. Build changes into your cash flow — Lower merchant fees won't appear immediately, but most businesses should see reduced costs flow through during the 2026–27 financial year.
5. Watch customer behaviour — The removal of surcharges may encourage more customers to pay by card. Monitor total acceptance costs as patterns shift.

The Government has announced a staged wind-back of the current Fringe Benefits Tax (FBT) exemption for electric vehicles (EVs), following the Statutory Review of the Electric Car Discount released in May 2026. The changes are expected to save the Budget an estimated $1.7 billion over five years. Importantly, nothing changes immediately — the existing full FBT exemption for qualifying EVs continues until 31 March 2027.

Three-phase transition

Practical considerations

• Consider acting before 31 March 2027 — Anyone thinking about packaging an EV may benefit from entering arrangements while the full exemption still applies. Timing of orders and leases is particularly important.
• Review fleet and salary packaging models — From 2027 onwards, the value proposition shifts. EVs at or below $75,000 will remain highly attractive under the full exemption in Phase 2.
• Commercial fleets — Review total cost of ownership including FBT, running costs and charging infrastructure.
• Second-hand EVs — A growing used-EV market may provide cost-effective alternatives, particularly where new-vehicle thresholds become restrictive.

EV momentum remains strong — EV/PHEV sales reached 22.9% of new vehicles in March 2026, up from just 1.8% in May 2022, with an increasing number of models now available in the $30,000–$40,000 range.

The end of the financial year is fast approaching. For SMSF members and trustees, a few timely checks now can avoid headaches later and help preserve valuable tax and contribution opportunities.

Contributions — timing matters

• Get contributions into the fund by 30 June — Cash and electronic transfers must be received by the SMSF's bank account on or before 30 June. Allow extra days for inter-bank processing.
• Personal deductible contributions — You must notify the fund and receive acknowledgement by the required deadline (before lodging your tax return or 30 June of the following year, whichever is earlier).
• Starting a pension? — Your notice of intent to claim a deduction must be processed before the pension commences, or you may lose the deduction opportunity.

Contribution strategies to consider

• Carry-forward concessional contributions — Eligible members with total super balances below $500,000 at 30 June in the prior year may be able to use unused concessional caps from previous years. This may be useful if you have a larger capital gain in your personal name for 2025/26.
• Contribution reserving strategy — SMSFs can temporarily hold a June contribution in an unallocated reserve and allocate it to a member in July so it counts toward the following year's caps — but this must be done correctly, documented in minutes, and the fund's deed must allow it.
• Non-concessional contributions and bring-forward — Opportunities may be available for some members to make contributions this year, including bringing forward future year contribution amounts.
• Spouse contributions and government co-contribution — Contributions made for a spouse can attract a tax offset in some circumstances; low-income members may qualify for a government co-contribution if they make post-tax contributions and meet the income test.

Contribution caps — current and upcoming

Pensions and the transfer balance cap

• Minimum pension payments — If your fund is paying account-based pensions, make sure the minimum pension for each member has been paid by no later than 30 June 2026. Failure to meet the minimum can create administrative complications and loss of tax concessions.
• Transfer balance cap timing — The current 2025/26 general transfer balance cap is $2.0 million, increasing to $2.1 million from 1 July 2026. Members thinking of starting a pension around year-end should consider timing carefully — commencing before or after 1 July 2026 can affect how much can be moved into a tax-free retirement pension.

Records, valuations and audit readiness

• Market valuations — Ensure all assets are valued at market value on 30 June and that supporting evidence is retained, especially for property, related-party assets and unlisted holdings.
• Related-party arrangements — Confirm that leases, rents and services with related parties are documented and commercially reasonable.
• Pension paperwork and minutes — Check that pension commencements, commutations and lump sums are supported by correctly signed documents and trustee minutes.