This update follows our Budget analysis below, in light of recent developments, including the introduction into Parliament last week of the CGT and negative gearing legislation.
1. CGT and negative gearing legislation
The legislation has now been introduced in terms very close to what was announced in the Budget, which naturally raises the question of where was the consultation? The Bill will now face the Senate Committee where one can hope it will be scrutinised and refined. The Explanatory Memorandum notes areas that require consultation, but in our view, consultation should have occurred before and after parliamentary introduction. It seems to us that the Bill was rushed into Parliament in response to the political backlash.
The Government has flagged possible expansion of the small business CGT concessions. An increase in the turnover threshold from $2 million to $10 million would be welcomed (and consistent with other applications of small business concessions). However, we have seen enough to not hold our breath for favourable reform…
2. Further concerns regarding trusts: do we have a death tax?
Draft legislation on the proposed minimum tax on trusts is expected later this year. However, one aspect already attracting significant concern is the treatment of testamentary trusts.
The Budget materials specifically exclude income from testamentary trusts in existence at the time of announcement. However, trusts arising from deaths occurring after 12 May 2026 do not appear to attract the same exclusion. There is a lot to play out and we expect this to be subject to significant consultation, however, as noted above, our confidence for reasonable consultation is waning.
Clients who rely on testamentary trust structures for succession planning, asset protection and intergenerational wealth management should consider revisiting their estate planning.
3. Leaving Australia
Since the Budget, we have been fielding many enquiries about the tax implications of leaving Australia. These are real conversations: the attack on aspiration is genuinely causing talented people to consider leaving Australia for more favourable tax jurisdictions. Residency considerations can be complicated, including:
- Leaving Australia does not automatically confer non-resident status. Economic and social ties (including the maintenance of a home, family connections and the nature and frequency of return visits) all remain relevant. We often ask clients: if you had a dog, where would the dog live? It is a surprisingly effective way of getting to the heart of the question.
- The main residence exemption may no longer be available once a person becomes a non-resident.
- CGT events I1 and I2 may be triggered on departure, crystallising a deemed disposal on unrealised gains of capital assets. Individuals may elect to defer the taxing point for non-taxable Australian property assets, but entities do not have that flexibility.
- Any applicable double tax agreement with the new country of residence should be considered carefully.
- Superannuation implications should also form part of any departure planning conversation, particularly given the relative advantage superannuation structures appear to retain under the current proposals.
4. Additional implications emerging from the Budget
A number of issues continue to arise which have not been addressed by the Government and are already becoming a key focus for some of our clients.
Examples include:
- Property developers using discretionary trusts may be particularly exposed. Trusts can play a critical role in managing land tax aggregation exposure, so restructuring away from them is not straightforward. Land rich entities also face the added complication of requiring stamp duty relief in conjunction with the proposed income tax rollover relief to restructure effectively.
- Look-through earnout arrangements are likely to become significantly more complex under the new CGT settings.
- The combined effective tax outcome where family trust distribution tax and the proposed corporate beneficiary treatment interact could become extraordinary. FTDT at 47% on a distribution to an out-of-group bucket company, followed by corporate-level assessment without a credit, produces a highly punitive result (potentially over 100% tax) which the Government has not yet addressed.
- The proposed extension of the ATO's garnishee powers to jointly held assets is another significant measure that should not be overlooked.
Heading into tax planning season, we have become increasingly involved in partnering with our accounting firm clients to support their clients with tax opportunities and exposures. This has become a particularly popular service this year, given the significant implications presented by the Budget.
