The Australian economic landscape is on the cusp of a significant transformation. With the latest Federal Budget announcements, the government has flagged some of the most substantial structural and tax design overhauls seen in recent decades. From proposed adjustments to property incentives and capital gains treatments to tightening measures on trust tax rules, these announcements are set to redefine how wealth is generated, protected, and managed across the nation.

This article is based directly on the latest episode of the CEO Breakdown, where Latitude Accountants CEO John Saade takes a detailed look at the Federal Budget workpapers. In his breakdown, John explains what these proposed tax reforms could mean for small business owners, property investors, family trusts, bucket companies, and modern holding company structures. His analysis focuses on how these changes may affect real-world business decisions rather than just policy theory.

For small business owners, family enterprises, and property investors, these updates mean that the “standard” ways of structuring operations and investments are changing. At Latitude Accountants, we believe in acting proactively rather than reactively. While these budget papers represent proposed legislation rather than immediate law, understanding the direction of these reforms is essential for making smart, long-term commercial decisions.

What Happened?

The Treasury has handed down a suite of budget workpapers aimed at balancing cost-of-living relief for everyday working Australians with deep structural adjustments to property investment incentives and business entity tax treatments.

The announcement outlines major proposed shifts across several core areas of Australian taxation:

• The Working Australians Tax Offset: A planned tax offset aimed directly at wage earners and sole traders.
• Immediate Deduction Simplification: An increase in the threshold for receipt-free work deductions.
• Business Tax Relief Extensions: Making temporary relief measures like loss carry-back and the instant asset write-off permanent policies.
• Property Tax and CGT Reform: Replacing the 50% Capital Gains Tax (CGT) discount with indexation and a minimum tax, alongside limiting negative gearing to new residential builds.
• Trust and Corporate Structure Restrictions: Introducing a minimum 30% tax threshold for discretionary trusts and phasing out traditional “bucket company” advantages.

Why Does This Matter?

These budget proposals matter because they directly alter the financial mechanics of risk-taking, property ownership, and business succession in Australia.

For years, family trusts and corporate beneficiaries (“bucket companies”) have formed the bedrock of asset protection and legitimate tax planning for family-run companies. By altering how these entities interact, the government is shifting the goalposts. Furthermore, treating residential real estate differently based on whether it is an existing dwelling or a new build will fundamentally change real estate investment strategies and borrowing capacities across the country.

Who Should Pay Attention?

• Small to Medium Business Owners: Anyone operating via a discretionary family trust or utilizing corporate beneficiaries needs to review their structural strategy.
• Property Investors: Current and aspiring landlords looking at residential property portfolios will face a brand-new tax environment for capital growth and ongoing expenses.
• Individual Taxpayers and Sole Traders: Everyday working Australians looking for relief from sticky cost-of-living pressures.
• Founders Planning an Exit: Business owners aiming to sell their equity or company assets down the track must keep a very close eye on the shifting capital gains landscape.

What Are the Tax, Business, or Accounting Implications?

1. Individual Relief: The Working Australians Tax Offset & Simplified Deductions

The budget proposes a new $250 Working Australians Tax Offset scheduled to launch for the 2027–2028 financial year. It is vital to note that this is an offset applied directly to your tax payable, rather than a structural change to the marginal tax brackets themselves. This will target employment wages, salaries, and net sole trader business income. While helpful, our view is that $250 falls short of moving the needle against intense cost-of-living pressures.

John’s Voice from the Video:

“Does this help working Australians pay less tax? Yes. Do I agree that working Australians should pay less tax? Absolutely. So, I think it’s a good policy. Do I have any negatives on this? Yes, it’s not enough. Clearly, not enough. $250 is just really not enough of a tax offset to help move the needle on what working Australians are facing in terms of cost of living pressure.”

John’s view:

John believes the proposed tax offset is a positive step, but it does not go far enough to meaningfully help working Australians with cost of living pressure.

The offset plans to increase the effective tax-free threshold for workers to $19,985 (or up to $24,985 when combined with the low-income tax offset). Historically, our tax-free threshold has sat stagnant between $15,000 and $20,000. Had it been properly indexed with inflation, it would sit closer to $30,000 or $40,000 today—which is closer to what an individual actually needs for basic subsistence. Taxing individuals earning below basic subsistence levels is a structural flaw, and while this offset is a step forward, raising the baseline threshold entirely would be a more robust solution.

Additionally, the government plans to introduce an instant tax deduction of up to $1,000 for work-related expenses starting in the 2026–2027 financial year. This means you will be able to claim up to $1,000 in employment expenses without needing to track and maintain physical receipts. Crucially, items like charitable donations, union fees, and professional association memberships can still be itemized and claimed on top of this $1,000 allowance, preserving extra deductions for diligent taxpayers.

2. Making Business Relief Permanent

On a positive note for commercial cash flow, the government plans to solidify two popular temporary measures into permanent fixtures of the tax system:

• Loss Carry-Back Extension: From 1 July 2026, eligible companies (with turnovers under $1 billion) can carry back a tax loss to offset tax paid up to two years prior, unlocking rapid cash refunds.

John’s Voice from the Video:

“What they’re doing is expanding the time horizon on which you’re looking at the profitability of your business… This year, last year, the year before, and they’re saying, ‘Okay, over 3 years was this business profitable?’… A one-year financial year period for determining how businesses are taxed is very arbitrary in and of itself… factor in the economy or projects you’re working on don’t always fit smoothly into that calendar.”

John’s view:

John strongly favors evaluating business profitability over a wider three-year window rather than an arbitrary 12-month calendar. He notes that this permanent change will give small business owners a vital cash flow buffer during temporary economic shocks. Rather than forcing a business to trap losses and carry them forward into uncertain future years, this expansion evaluates profitability over a fairer three-year window. This recognises that business cycles don’t always cleanly align with an arbitrary 12-month calendar. Note that you must have a sufficient franking account balance (meaning you actually paid tax in those prior years) to claim the refund.

• Permanent $20,000 Instant Asset Write-Off: Small businesses with an aggregate turnover of up to $10 million will permanently be able to immediately deduct the full cost of eligible capital equipment valued under $20,000. This avoids the cash flow drag of depreciating small assets over multiple years. While making this permanent removes year-to-year guesswork, John notes in the video that it is disappointing that the threshold hasn’t been indexed higher, as $20,000 has remained stagnant for years.

3. The Property and Capital Gains Tax Shake-Up

Perhaps the most dramatic proposal is the scheduled abolishment of the traditional 50% CGT discount on 1 July 2027. Instead, the system will revert to a cost-based indexation model for assets held longer than 12 months, paired with a strict 30% minimum tax on net capital gains.

John’s Voice from the Video:

“Guys, this is actually unprecedented. We’ve never had a fixed tax on capital gains in Australia. 30% minimum tax on net capital gains is a new thing… In the past, a capital gain was calculated by taking the gain you made and using your marginal income tax rates… Now, the government’s saying at the very least they’re going to take a 30% clip.”

John’s view:

John highlights that a flat minimum tax on capital gains fundamentally changes traditional Australian tax principles, meaning that even if your marginal rate is zero, the government takes a minimum 30% clip.

Australia has historically never had a fixed flat tax rate on capital gains; gains were simply added to your ordinary income and taxed at your marginal rate. Under the new rules, if your marginal rate is lower than 30% (or even if you have no other income), the government will still take a minimum 30% clip. Conversely, if your marginal rate exceeds 30%, you will pay that higher rate.

The introduction of cost-based indexation means your property’s cost base scales up with inflation. If inflation is 5% and your property grows by 10%, you only pay tax on the 5% real gain, mimicking the old 50% discount. However, if property growth stagnates and only matches inflation over a 10-year period, your taxable capital gain falls to zero.

Where this hurts most is the sale of small business shares. If you build an accounting firm or a local trade from scratch ($0 cost base) and sell it down the track for $10 million, you lose the 50% discount entirely. Without proper planning, you could look at a top marginal hit of 47% ($4.7 million in tax).

Furthermore, negative gearing will be restricted strictly to new builds. Investors buying existing housing stock will no longer be allowed to offset net rental losses against their personal wage income to get a tax refund.

John’s Voice from the Video:

“If you have negative gearing off the table, the banks in their servicing calcs will lend you less money as an investor. They used to look at that negative gearing cash flow benefit… as income and therefore increase your borrowing capacity… There’s been discussions that potentially borrowing capacity for investors could be down up to 20%… That puts downward pressure on houses.”

Major financial institutions like Westpac are already moving first, warning mortgage brokers that they will slash investor borrowing capacities by up to 20% because the cash flow benefits of negative gearing can no longer be used in bank servicing calculations. This drop in borrowing capacity will inevitably place downward structural pressure on the broader housing market.

4. Redesigning Business Structures: Phasing Out Bucket Companies

Historically, business owners operating through a family trust could distribute surplus trading profits to a corporate beneficiary—commonly known as a bucket company—to cap the immediate tax rate at 25% or 30% rather than paying individual marginal rates up to 47%.

The budget proposals intend to upend this dynamic by imposing a minimum 30% tax on trust structures directly at the trustee level.

John’s Voice from the Video:

“Now, the trustee of the trust is going to pay a 30% tax and then distribute those distributions with that tax credit… But if you’re a company, you’re not actually entitled to that credit. So what does that mean? It means that bucket companies… are going out the door. We’re not going to be advising clients anymore to set up bucket companies.”

John’s view:

John warns that because corporate beneficiaries will no longer be eligible to utilize the tax credits passed from trust distributions effectively, traditional bucket companies are completely obsolete for future tax planning.

When the trust distributes that money to a corporate beneficiary, the company will not be allowed to utilize the attached tax credit efficiently, rendering traditional bucket companies obsolete for future tax planning.

Because of this, our approach to advising clients on corporate setups is evolving. Instead of the classic Trading Company $\rightarrow$ Discretionary Trust $\rightarrow$ Bucket Company setup, modern plans are shifting toward a Holdings Company model.

Under this framework, the trading entity pays dividends up to a clean Holdings Company. To fund investments like property, the Holdings Company can provide a secured Division 7A loan to a family trust. By securing the loan against real property, the repayment terms can be extended across 25 years rather than the standard 7 years. This keeps interest deductible within the trust while maintaining indexation benefits upon a future property sale—benefits that companies cannot access, since indexation is strictly limited to individuals and trusts.

What Should Business Owners Do Now?

• Don’t Panic, but Plan: Remember, these are proposed budget measures. No immediate structural alterations should be executed without modeling your specific asset mix and revenue projections.
• Audit Existing Group Structures: Assess how heavily your current operations rely on trust-to-corporate distributions to see if your corporate setup needs to pivot to a Holdings Company model.
• Review Exit Strategies: If you are planning to sell your business or investment properties close to or after 2027, review how the elimination of the 50% CGT discount will impact your net proceeds.
• Shift Focus to Property Types: If you are planning property acquisitions, factor in the contrasting tax treatments between existing homes and new builds regarding negative gearing.

Common Mistakes to Avoid

• Treating Proposals as Enacted Law: Making permanent structural changes to a business today based on rules scheduled for 2026 or 2027 can backfire if the legislation is amended or rejected in Parliament.
• Neglecting Small Business CGT Concessions: Many commentators worry about a 47% tax rate on business sales, forgetting that the Small Business CGT Concessions remain an invaluable tool. If you have less than $6 million in assets outside the family home and meet active asset criteria, you can still access the 50% active asset reduction and superannuation roll-overs to drastically minimize or eliminate your tax liability upon sale.
• Throwing Away Receipts Prematurely: Even though a receipt-free $1,000 threshold is on the horizon, the ATO still requires robust documentation for any deductions claimed outside of or above that limit today.

Frequently Asked Questions

What is the proposed Working Australians Tax Offset?

It is a planned $250 tax offset designed for individuals earning income via wages, salaries, or sole trader operations, set to commence in the 2027–2028 financial year.

Will I still need to keep receipts for work deductions under the new budget proposals?

If your work-related claims total less than $1,000, the proposed rules mean you will not need to retain standard receipts starting from the 2026–2027 financial year.

Can I still claim donations separately from the $1,000 instant deduction?

Yes. Charitable donations, union fees, and professional association costs can be itemized and claimed entirely on top of the $1,000 work expense allowance.

How does the proposed loss carry-back reform work for small companies?

From 1 July 2026, if your company incurs a tax loss, you can apply it back against profits made up to two years prior to claim an immediate cash refund from the ATO, provided your franking account is in credit.

Is the $20,000 instant asset write-off changing?

The budget proposes making the $20,000 instant asset write-off permanent for small businesses with an annual turnover under $10 million, removing the year-to-year uncertainty.

What is replacing the 50% Capital Gains Tax discount?

Starting 1 July 2027, the 50% CGT discount is slated to be replaced by a cost-based indexation system (adjusting for inflation) along with a 30% minimum tax on net capital gains.

Can companies access the new inflation-adjusted indexation for capital gains?

No. The cost-based indexation method is proposed to be accessible only by individuals and trust structures; companies will remain locked out of indexation benefits.

Will negative gearing be abolished entirely for residential properties?

No, but it will be limited strictly to new builds. Existing properties purchased after the change takes effect will no longer enjoy ordinary negative gearing benefits against personal wage income.

What are the proposed changes to tax rates on discretionary family trusts?

The budget outlines a plan to introduce a minimum 30% tax rate directly at the trustee level for discretionary trusts, disrupting low-rate distributions to family members.

Why are bucket companies considered “out the door” under these updates?

Because corporate beneficiaries will no longer be eligible to utilize the tax credits passed from trust distributions effectively, eliminating the tax-cap benefit of traditional bucket company setups.

Final Thoughts

This Federal Budget signals a clear policy intent to steer investments toward new supply chains, simplify base-level compliance, and restrict complex trust filtering. However, a shifting regulatory landscape also brings fresh opportunities to build robust corporate structures—like the modern Holdings Company framework—that stand the test of time.

Rather than waiting for 2027 to arrive, proactive evaluation of your company’s blueprint ensures your assets remain fully protected and structurally optimized.

Need Help Understanding the Federal Budget Tax Reforms?

If you are unsure how these proposed Federal Budget changes—explained in John Saade’s breakdown—may affect your business structure, tax position, trust arrangements, or cash flow, speak with Latitude Accountants.

Our team can help you interpret what these reforms could mean for your current setup, identify risks and opportunities across your structure, and guide you toward smarter long-term tax and business decisions with confidence.

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Disclaimer:

This article is general information only and does not constitute financial, tax, legal, or accounting advice. It is based on publicly available reporting and commentary from John Saade’s Federal Budget breakdown video at the time of writing. These measures are not yet law and may change during the legislative process. Individual circumstances vary, and you should seek professional advice before making financial or structural decisions.