The recent Federal Budget has introduced several proposed tax changes that have generated immediate concern across small business and investor groups. Whilst there may be pressure to restructure, our view is it is too early to act at this stage.
What’s been announced?
The Government has proposed a shift in how capital and trust income is taxed. For most SME clients, the key items are:
Capital gains tax (CGT)
From 1 July 2027 (proposed):
• Replacement of the 50% CGT discount with indexation
• Introduction of a 30% minimum tax on capital gains
• Application to future gains only
Discretionary trusts
From 1 July 2028 (proposed):
• Introduction of a 30% minimum tax on trust income
• Reduced ability to distribute income across beneficiaries
• Direct impact on family groups and SME structures
There is also a limited 3 year rollover window expected for restructuring where appropriate.
What does this mean?
If implemented, these changes will:
• Reduce the effectiveness of traditional family trust income distributions
• Shift the balance between trust and company structures
• Require many business groups to review their existing structure
Importantly, these proposals are far from finalised.
Our view
As mentioned, we suggest delaying any immediate action for a number of reasons:
• Not yet law – No draft legislation, and key details remain unresolved
• Timing – Changes are not expected until 1 July 2027 and 1 July 2028
• Uncertainty – A lot of detail remains subject to consultation
• Cost risk – Early restructuring can trigger unnecessary CGT and duty
We are actively monitoring all developments and will advise further when action is required.