Federal Budget 2026 – What M GROUP Clients Need to Know

The 2026 Federal Budget introduces some of the most significant proposed tax changes in a generation. The Government’s direction is to shift tax concessions away from investment structures and toward work, wages and productivity, while addressing housing affordability and long‑term sustainability.

Many measures will require legislation and are not immediate, but the policy direction is now clear. Below is a summary of the key changes most relevant to M Group clients.

Individuals

The Budget provides modest but broad‑based relief to wage earners, along with some simplification of personal tax compliance.

Key changes:

·      Personal income tax rate reduced from 16% to 15% from 1 July 2026, and to 14% from 1 July 2027 (
       for the taxable income bracket of $18,200 - $45,000)

·      Working Australians Tax Offset of up to $250 per year from the 2027–28 income year

·      $1,000 instant work‑related deduction from 2026–27
       (no receipts required up to this amount and charitable donations and professional memberships still claimable on top)

·      Medicare levy thresholds increased for low‑income earners

What this means:

·      Most working clients will benefit, although the impact is modest and phased in

·      Clients with lower work‑related expenses will benefit from simplified record‑keeping

Business (SMEs and Corporates)

Business measures focus on cash flow, investment and innovation rather than headline tax rate reductions.

Key changes:

·      $20,000 instant asset write‑off made permanent from 1 July 2026 (for businesses under $10m turnover)

·      Company loss carry‑back reinstated, allowing the offset of current losses against prior year profits

·      Start‑up loss refundability expected for early‑stage companies

·      R&D Tax Incentive expanded, particularly for smaller and innovation‑focused businesses

What this means:

·      Review timing of capital expenditure

·      Consider loss utilisation strategies

·      Assess eligibility for R&D concessions

·      Measures favour active trading businesses over passive structures

Investors (Property and Other Assets)

This is the area of most significant structural reform, particularly for property investors.

Key changes:

·      Negative gearing in its previous rules limited to only new residential builds from 1 July 2027

·      Existing properties held or contracted to purchase at Budget night are grandfathered to the old rules

·      Existing properties purchased after budget night can only claim rental expenses against rental income and not any other income

·      If a rental loss is made this can still be carried forward to utilise in a future tax year against rental income or rental capital gains income

·      Capital gains tax reform from 1 July 2027:

o  50% CGT discount removed and replaced with cost‑base indexation

o  Minimum 30% tax rate on net capital gains introduced, excluding individuals on income support payments, including Age Pension

o  Pre‑1 July 2027 gains remain under existing rules, including 50% discount and pre-CGT, however these assets gains after the 1st July 2027 will move to indexation onwards

What this means:

·      Investment strategies likely to shift toward new developments

·      Greater emphasis on longer holding periods

·      The period before 1 July 2027 is important for reviewing:

o  Asset sales

o  Acquisitions

o  Existing structures

Trusts (Family, Business and Investment Trusts)

Proposed changes to discretionary trusts are one of the most consequential elements of the Budget.

Key changes:

·      Minimum 30% tax on discretionary trusts from 1 July 2028

·      Applies regardless of the beneficiary’s personal marginal income tax rate

·      Individual beneficiaries may receive credits, but company beneficiaries will not

·      This significantly impacts bucket company arrangements

·      Exclusions proposed for primary producers, fixed trusts, superannuation funds, deceased estates and certain other categories

·      Restructuring relief expected from 1 July 2027

What this means:

·      Many existing trust structures will become less tax‑effective over time

·      Clients should begin planning for potential restructuring

·      The lead‑in period provides an opportunity for measured transition

What Happens Next

·      Most measures require legislation and further consultation

·      Key reforms are staged between 2026 and 2028

·      The Budget signals a shift toward simpler taxation of investment income and greater reliance on company and superannuation structures

Our Advice

You should consider reviewing your position if you:

·      invest in property or growth assets

·      operate through trusts or bucket companies

·      are considering selling assets in the medium term

·      want to ensure your business structure remains efficient

M Group is working with clients to model the potential impact of these changes and identify practical transition strategies.

Please contact your usual M Group adviser if you would like to discuss how these proposed reforms may affect you.

This publication contains general information only and is based on proposed measures that are subject to legislative change. It does not constitute legal or financial advice. You should obtain tailored advice before taking action.