The Federal Budget is always a landmark event for the Australian economy, but the 2026 Labor Budget has sparked particularly intense debate among taxpayers, investors, and business owners. At Latitude Accountants, we’ve been monitoring these updates closely to ensure our clients aren’t just keeping up, but staying ahead.

In a recent roundtable discussion, our directors and senior team—including Tufic Haddad, Pat El-Bitar, and Mick Saade—dove deep into the implications of Treasurer Jim Chalmers’ latest announcement. The consensus? While the government is aiming for a “fairer” system, the path to getting there involves significant “hits” for wealth creators, business owners, and those using traditional investment structures.

What Happened? An Overview of the 2026 Budget

The 2026 Budget is being framed by the government as a win for “workers”. It introduces several sweeping changes designed to close perceived loopholes and redistribute wealth toward lower-income earners. However, for the “heroes of our community”—the risk-takers and builders—the news is a mixed bag of increased tax burdens and a few strategic silver linings.

The Major Shifts

• Trust and Capital Gains Overhaul: A new 30% minimum tax has been proposed for discretionary trusts and capital gains.
• The Return of Indexation: The 50% Capital Gains Tax (CGT) discount is being scrapped in favour of a return to the pre-1999 indexation method.
• Business Relief: The “loss carry back” scheme has been reintroduced, allowing companies to claim tax credits from previous years.
• Individual “Wins”: A modest $250 payment for workers and an increase in the general expense deduction to $1,000.

Why This Matters for Small Business Owners and Investors

If you own a business or hold assets in a trust, the 2026 Budget fundamentally changes your financial foundation. Labor has targeted structures that have long been the bedrock of Australian wealth creation: negative gearing, capital gains, and discretionary trusts.

1. The 30% Minimum Tax on Trusts

One of the biggest surprises was the announcement of a 30% minimum tax for discretionary trusts. Historically, trusts have been used to distribute income to beneficiaries in lower tax brackets. This change effectively sets a “floor,” meaning that even if you distribute to someone with a lower marginal rate, the trust income may still be hit with a 30% tax.

2. Scrapping the 50% CGT Discount

For decades, investors who held an asset for more than 12 months enjoyed a 50% discount on their capital gains. The 2026 Budget replaces this with indexation.

What does this mean? Instead of a flat discount, you will only pay tax on the “real” gain—your profit minus the cost of inflation. While this sounds fair in theory, our team notes that it adds complexity and may result in higher tax bills for those whose assets outperform inflation significantly.

3. Business Loss Carry Back

For businesses that have struggled recently but were profitable in the past, the loss carry back is a lifeline. It allows you to “look back” up to two years and use current losses to get a refund on tax already paid. This provides an immediate cash flow injection that can be vital for survival or reinvestment.

Who Should Pay Attention?

• Family Business Owners: If you operate through a trust, your year-end distribution strategy needs a total overhaul.
• Property Investors: Changes to negative gearing and CGT indexation mean your “exit strategy” for properties may no longer be tax-effective.
• Individual Workers: While you get a $250 boost and a higher $1,000 expense deduction, our team questions if this is enough to offset the broader economic pressures.
• Companies: High-turnover businesses should look at the loss carry back provisions to see if they can claw back tax paid during the previous two years.

The Accounting Angle: Tax and Cash Flow Implications

The 2026 Budget isn’t just about how much tax you pay; it’s about when and how you pay it.

Treasury vs. RBA: The Modeling Gap

There is a notable discrepancy between the Treasury’s positive outlook on wage growth and inflation compared to the Reserve Bank of Australia’s (RBA) more cautious predictions. If the Treasury’s modelling is overly optimistic, business owners who hire staff based on these projections might find themselves overextended if the economy cools faster than expected.

GST Thresholds: The Missed Opportunity

One point of frustration discussed by Mick Saade was the stagnant GST threshold, which has remained at $75,000 since 2007. With inflation rising, more small “hobby” businesses are being forced into the GST net, increasing their compliance burden. The 2026 Budget failed to address this, leaving many micro-businesses feeling the squeeze.

What Should Business Owners Do Now?

Don’t wait until June 30 to react to these changes. Here are the practical steps you should consider immediately:

1. Review Trust Deeds: With the 30% minimum tax looming, talk to your accountant about whether your current trust structure is still the most efficient way to hold assets.
2. Audit Your Asset Register: Under the new indexation rules, keeping meticulous records of your “cost base” (including every cent spent on improvements and holding costs) is more critical than ever.
3. Assess Cash Flow via Loss Carry Back: If your business has recorded a loss this year, calculate potential refunds from tax paid in 2024 or 2025 to boost your working capital.
4. Evaluate Payroll: With conflicting data on wage growth, review your staffing levels and ensure your PAYG and Superannuation obligations are fully funded for the coming quarters.

Important Note: Tax laws such as Land Tax, Payroll Tax, and Stamp Duty vary significantly between Australian states (NSW, VIC, SA). Always ensure your strategy accounts for the specific state in which your business or assets are located.

Common Mistakes to Avoid

• Assuming the 50% CGT Discount Still Applies: Many investors will get caught out by the switch to indexation. Ensure you calculate your projected tax liability using the new method before selling assets.
• Ignoring Interstate Differences: If you have offices in multiple states, remember that state-based taxes are not covered by the Federal Budget and may have changed independently.
• Treating Proposed Changes as Law: Some of these measures are proposed and must pass through Parliament. Do not make irreversible financial decisions until these changes are officially legislated.

Frequently Asked Questions

What is the new minimum tax for trusts?

The 2026 Budget proposes a 30% minimum tax rate for discretionary trusts. This is designed to prevent wealth from being distributed to individuals in lower tax brackets to avoid higher tax rates.

How does CGT indexation work compared to the old discount?

Previously, you received a 50% discount on capital gains. Under indexation, you adjust the original purchase price of the asset for inflation. You only pay tax on the profit that exceeds the inflation rate.

What is the “Loss Carry Back” scheme?

It is a provision that allows companies to use current tax losses to offset tax paid in the previous two years. This can result in a cash refund from the ATO.

How much is the new individual tax deduction for expenses?

The general expense deduction has been increased to $1,000. This allows workers to claim a higher flat amount for work-related expenses without needing as much detailed documentation as higher claims.

When do these budget changes take effect?

Most measures are slated for the 2026-2027 financial year, but many require legislation to pass the Senate. Business owners should stay in close contact with their accountants to track the official “start dates.”

Is negative gearing being scrapped?

The budget indicates a “smashing” of negative gearing benefits as part of a move toward a fairer system, though specific legislative wording is still being finalised.

Is the $250 payment available to everyone?

The payment is targeted toward workers and individuals as a cost-of-living relief measure, though eligibility criteria regarding income thresholds are expected to apply.

Does this budget affect my Superannuation?

While the transcript focuses on trusts and CGT, any changes to tax structures often have flow-on effects for Self-Managed Super Funds (SMSFs). Professional advice is recommended for SMSF holders.

Why is there a dispute over Treasury modeling?

The Treasury is predicting higher wage growth and lower inflation than the RBA. If the Treasury is wrong, businesses may face higher costs than they are prepared for.

Should I sell my investment property now?

Deciding to sell depends on your specific financial goals and the state-based taxes involved. Given the shift to CGT indexation, a professional tax projection is essential.

Final Thoughts

The 2026 Budget represents a significant pivot in Australian fiscal policy. While it offers minor relief for individuals, it places a heavier burden on the structures that many business owners use to grow their wealth. At Latitude Accountants, we believe that “outcomes are everything.” Navigating these changes requires more than just compliance—it requires a proactive strategy.

Need Help Taking Control of Your Financial Future?

If you are unsure how this update may impact your business, tax position, or cash flow, speak with Latitude Accountants.

Our team helps Australian individuals and business owners understand their financial position, stay compliant with ATO requirements, and make smarter decisions with confidence. We deliver accounting “The Latitude Way”—practical, proactive, and focused on real-world outcomes that help you move forward with clarity.

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

Disclaimer:

The information provided in this blog is general in nature and does not constitute personal financial or tax advice. Laws and policies are subject to change and may vary between Australian states and territories. Readers should seek professional advice regarding their specific circumstances before making any financial decisions.