If you look past the headlines, this is one of the more meaningful Budgets we’ve seen in quite some time for clients who have accumulated wealth, particularly those using a combination of super, property and family structures.
On the surface, there’s the usual mix of tax cuts and cost-of-living measures. In reality, the bigger story is a deliberate shift in how the Government intends to tax investment income and private wealth over time.
For most of my clients, the question isn’t whether this Budget matters – it does. The more relevant question is how and when it matters.
The starting point is that not much changes immediately. A number of the major measures don’t begin until 1 July 2027 or later, and several still require legislation. At this stage, the Federal Budget announcements are proposed changes only and must still go through the legislative process before they become law. That creates a window, but it also creates uncertainty.
We’re seeing three key areas where this Budget starts to reshape things.
The first is capital gains tax. The move away from the 50 per cent discount towards an inflation-based calculation, combined with a minimum 30 per cent tax on gains, represents a meaningful change in how after-tax returns are assessed. For clients holding investment properties or significant equity portfolios outside super, this shifts the conversation. It becomes less about simply holding assets for more than 12 months and more about how real returns are generated and measured.
The second is negative gearing. Limiting this to new residential builds is clearly a policy decision aimed at redirecting capital into housing supply. Existing investments are largely protected, which is important, but for anyone thinking about future acquisitions, the landscape changes. Borrowing capacity, after-tax cashflow and long-term returns all need to be reconsidered in that context.
The third, and in many cases the most significant, is the change to discretionary trusts. The proposed minimum 30 per cent tax on trust income from 2028 has the potential to materially reduce the flexibility that many families have relied on for income distribution. For clients with family groups, private businesses or intergenerational planning strategies, this is likely to be one of the more important developments to watch over the next couple of years.
When you step back, there is a consistent theme running through all of these changes. The Government is shifting the system towards taxing income from capital in a way that is more closely aligned with income from work. That doesn’t mean structures like trusts or investment portfolios stop working, but it does mean the advantages are narrowing.
From an SMSF perspective, the position is a little more nuanced. Superannuation itself has largely been left unchanged in this Budget, and importantly, remains one of the more tax-efficient environments for long-term investment. The existing CGT concessions inside super remain intact, which continues to support the case for holding growth assets within that structure.
However, that doesn’t mean SMSF clients are unaffected. Many clients operate across multiple entities – personal names, trusts, companies and super funds. When the tax treatment outside super changes, it inevitably influences how assets are allocated across those structures. For some, this may reinforce the role of super as a long-term accumulation vehicle. For others, it may prompt a broader review of where investment income is best generated and retained.
It’s also worth acknowledging the environment this Budget has been delivered into. Inflation remains elevated and the economic outlook is uncertain, influenced by global energy markets and geopolitical factors. At the same time, there is pressure on the Government to maintain fiscal discipline and address longer-term sustainability.
That context helps explain why we’re seeing reform that is structural rather than short-term. It’s not designed to create immediate impact; it’s designed to change behaviour over time.
For clients, that creates a few very real pressure points.
The first is uncertainty. Many of these measures are proposals and will evolve as legislation is drafted. Acting too early can be just as problematic as reacting too late.
The second is complexity. The move towards indexation and minimum tax thresholds introduces a level of calculation and modelling that didn’t previously exist. What looks simple at a headline level is often far more nuanced in practice.
The third is timing. With implementation dates pushed out, there is an opportunity to plan, but that window won’t stay open indefinitely.
This is where good advice becomes more valuable, not less. In my experience, the best outcomes rarely come from reacting to Budget announcements. They come from understanding how those announcements interact with your broader strategy and making considered decisions over time.
For some clients, the right course of action will simply be to stay the course. For others, it may involve reviewing structures, reassessing asset allocation or planning for future transactions differently. There is no single answer, and that’s exactly the point.
What I would strongly caution against is making decisions based purely on headlines. These changes are significant, but they are also staged, subject to detail, and in many cases, designed with transitional rules.
The clients who tend to navigate these periods best are the ones who take the time to understand where they sit, what actually applies to them, and what needs to change, if anything.
This Budget doesn’t require immediate, wholesale change. It does, however, require attention.
If you haven’t looked at how these measures may interact with your existing structures, your superannuation strategy or your longer-term plans, it’s worth doing so. Even if the outcome is simply confirming that you’re in a strong position, that clarity is valuable in itself.
If you’re unsure how these changes apply to you, please get in touch.
Jahanne is a Senior Investment Adviser who specialises in providing a holistic approach to wealth advice. Contact Jahanne today to discuss your investment strategy via [email protected] or 03 9947 4156.
