Australia’s property investment landscape has undergone one of its most significant tax overhauls in decades following the passage of the Federal Government’s 2026 Budget legislation.

After extensive negotiations in Parliament and several last-minute amendments, major reforms affecting property investors, self-managed super funds (SMSFs), discretionary trusts, and capital gains tax have now become law.

While much of the public discussion has centred on housing affordability, these reforms extend well beyond residential property.

For small business owners, investors, company directors, SMSF trustees, and families using trust structures, the new rules may influence long-term tax planning, investment strategies, business structures, and wealth creation.

Understanding what has changed—and how those changes may affect your circumstances—is now more important than ever.

What Happened?

Following negotiations in the Senate, the Federal Government’s 2026 property and taxation package has passed into law.

The reforms introduce several significant changes aimed at reducing tax incentives associated with residential property investment while encouraging housing supply.

The key reforms include:

• Negative gearing is now restricted to newly built residential properties, removing eligibility for most existing residential investments.
• The traditional 50 per cent Capital Gains Tax (CGT) discount has been replaced with an inflation indexation model for future gains.
• Discretionary trusts will become subject to a minimum 30 per cent tax rate on distributions from 1 July 2028.
• New Limited Recourse Borrowing Arrangements (LRBAs) can no longer be used by SMSFs to purchase residential property.
• Commercial business real property remains exempt from the SMSF borrowing restriction.

During parliamentary negotiations, several important amendments were also introduced:

• Existing small business CGT concessions were retained.
• The turnover threshold for the active asset reduction concession increased from $2 million to $10 million.
• Testamentary trusts were excluded from the minimum trust tax rules.
• Transitional protections were introduced for certain inherited assets and family law property transfers.

Why Does This Matter?

These reforms represent one of the most significant changes to Australia’s property taxation system in many years.

For decades, residential property has been a key wealth-building strategy for many Australians. The reduction or removal of several long-standing tax incentives fundamentally changes the financial outcomes associated with purchasing, holding, and selling investment property.

As Latitude Accountants CEO John Saade explains in his analysis of the reforms:

“The facts are that this budget is a trade-off budget. Trade-offs have been made in order to appease one group at the cost of another. Who is winning in this budget? Anyone who wants to see house prices go down. And who is that? First home buyers.”

The reforms also extend beyond property investors.

Many small business owners hold assets through:

• Discretionary trusts
• Companies
• Self-managed super funds
• Family investment structures
• Commercial property entities

As a result, these changes may influence business planning, investment decisions, succession strategies, retirement planning, and future tax outcomes.

Why Small Business Owners Should Pay Attention

Much of the public discussion has focused on residential property investors.

However, small business owners may have considerably more at stake.

Many business owners build wealth through a combination of business ownership, trusts, commercial property, SMSFs, and long-term investment strategies.

As John Saade notes:

“As an accountant and small business owner myself, we are negatively impacted. Our clients are negatively impacted. But this is a tradeoff we need as a country.”

Understanding how these reforms affect business structures today can help reduce uncertainty and support better long-term planning.

Who Should Pay Attention?

Several groups should carefully review their current structures following these reforms.

Small Business Owners

Businesses operating through discretionary trusts should assess how the upcoming minimum trust tax rules may affect future distribution strategies.

Property Investors

Owners of residential investment properties should understand how the revised negative gearing and CGT rules may affect long-term investment returns.

SMSF Trustees

SMSFs intending to acquire residential property using borrowing arrangements will need to reconsider future investment strategies, while commercial property borrowing remains available.

Company Directors

Business owners should review ownership structures, succession planning, and long-term investment strategies.

Individuals Planning Retirement

Australians relying on business sales or investment assets to fund retirement should understand how the new rules may affect future wealth planning.

What Are the Tax and Business Implications?

Capital Gains Tax

Future capital gains will generally be calculated using inflation indexation rather than the traditional 50 per cent CGT discount.

This changes how taxable gains are calculated and may influence long-term investment decisions.

Residential Property Investment

Restricting negative gearing to newly constructed homes creates different tax outcomes between new and existing residential properties, potentially changing investment strategies.

SMSF Investment Planning

While new borrowing arrangements for residential property are no longer available, SMSFs can continue borrowing to acquire eligible commercial business real property.

Trust Structures

Businesses operating through discretionary trusts should begin reviewing future distribution strategies before the new minimum tax rules commence in 2028.

Small Business CGT Concessions

Importantly, small business CGT concessions remain available, with expanded eligibility following the increase in the turnover threshold.

As John Saade summarised:

“Negative gearing is gone on existing houses. Trusts are being taxed at 30%. 50% CGT discount is gone and it’s replaced by indexation. And there’s no more borrowing for residential properties in SMSF. Every single advantage that comes from investing in residential property has been limited.”

What Should Business Owners Do Now?

Rather than reacting to headlines, business owners should focus on preparation.

Review Your Business Structure

Assess whether your trust, company, or investment structure remains suitable under the new legislation.

Review Property Strategies

Consider how residential, commercial, and SMSF property investments align with your long-term objectives.

Maintain Accurate Records

With indexation becoming increasingly important, detailed records of acquisition costs, improvements, and ownership history will help support future CGT calculations.

Stay Informed

Although the major reforms have passed, additional regulations and ATO guidance may continue to develop.

Seek Professional Advice

Every business structure is different.

Professional advice can help ensure your tax planning and investment decisions remain aligned with your financial goals.

Common Mistakes to Avoid

Assuming Every Property Rule Has Changed

Several important concessions—including the Principal Place of Residence exemption and the six-year rule—remain available.

Waiting Until 2028 to Review Trust Structures

Early planning provides greater flexibility before the new trust tax rules commence.

Assuming SMSFs Can No Longer Invest in Property

SMSFs can still acquire commercial property using eligible borrowing arrangements.

Poor Record Keeping

Inflation indexation relies heavily on accurate cost base records and supporting documentation.

Making Decisions Based on Headlines

Major taxation reforms often contain transitional provisions and detailed legislative rules that may not be reflected in media coverage.

Frequently Asked Questions

1. Has negative gearing been abolished?

Negative gearing is now generally restricted to newly built residential properties rather than existing residential investments.

2. What replaces the 50 per cent CGT discount?

Future capital gains will generally be calculated using an inflation indexation model.

3. Can my SMSF still buy residential property?

Yes. SMSFs may still purchase residential property using available cash, but new LRBAs for residential property are no longer permitted.

4. Can SMSFs still borrow to purchase commercial property?

Yes. Eligible business real property remains exempt from the residential borrowing restrictions.

5. What happens to discretionary trusts?

A minimum 30 per cent tax rate on distributions is scheduled to commence from 1 July 2028, subject to legislative provisions and exclusions.

6. Have small business CGT concessions been removed?

No. Existing small business CGT concessions remain available, with expanded eligibility for qualifying businesses.

7. Has a new tax been introduced for collectibles?

No. Existing CGT rules continue to apply to collectibles and personal-use assets under current legislation.

8. Does the six-year main residence rule still apply?

Yes. The reforms do not remove the existing six-year absence rule for eligible principal residences.

9. Do these reforms apply across Australia?

Yes. Income tax, CGT, and superannuation legislation are federal laws that apply nationwide.

10. What should business owners do now?

Review your business structure, investment strategy, trust arrangements, and long-term tax planning with an experienced accountant.

Final Thoughts

The 2026 property reforms represent one of Australia’s most significant changes to property taxation, SMSF investment rules, and trust structures in many years.

While several longstanding tax concessions associated with residential property have been reduced, opportunities remain for businesses and investors who proactively review their structures and adapt their long-term strategies.

As John Saade observed, these reforms involve significant trade-offs that will reshape how Australians approach property investment for years to come.

Rather than reacting to headlines, business owners should focus on understanding how the new legislation applies to their individual circumstances and ensuring they remain well-positioned for the future.

Need Help Understanding the 2026 Property Tax Changes?

If you are unsure how these reforms affect your business, investments, SMSF, trust structures, or future tax planning, speak with Latitude Accountants.

Our team can help you understand your options, remain compliant, and make informed financial decisions with confidence.

📍 Sydney Olympic Park | Marrickville | Melbourne | Loxton
📞 1300 706 597
📧 info@latitudeaccountants.com.au

Disclaimer

This article is general information only and does not constitute tax, legal, financial, or investment advice. Information is based on current legislation and publicly available government announcements available at the time of writing. Individual circumstances vary, and professional advice should always be obtained before making financial or taxation decisions.