May 2026 Newsletter

Suttie Financial Group

INTRODUCTION

We are now only 6 weeks from the start of the new financial year and May has been one of the busiest months of the year. We are trying to understand all the proposed changes in the budget which was issued on 12 May and also have businesses ready for Pay Day Super which commences on 1 July 2026. This newsletter discusses some of the changes which will arise from the budget and also sets out details of how Pay Day Super will work and what employers are required to do to ensure they comply with the new regulations. We have already had numerous questions from clients in relation to the budget. If you hold investment properties, shares or other investments, or if you have a Discretionary Family Trust, you will be impacted by the budget. Please contact our office if you need to know how the Budget may impact you and your investments.

THE BUDGET

This year’s budget included the most significant tax changes since 2000, when GST was introduced. The most significant changes are to negative gearing on residential rental properties and the imposition of a 30% tax rate on profits derived by discretionary trusts. We have summarised some of these changes:

Key Business Measures
Individual Tax Measures
Capital Gains
Property and Investment Changes
Trust Tax Changes
What this means for you

1. Key Business Measures

Permanent $20,000 Instant Asset Write Off

The Government has announced that the $20,000 instant asset write off will become permanent for eligible small businesses with aggregated turnover under $10 million. This allows businesses to immediately deduct eligible assets costing less than $20,000 rather than depreciating them over several years.

This may assist with:

• Cash flow management
• Business investment planning
• Equipment and vehicle purchases

Company Loss Carry-Back Rules

From 1 July 2026, eligible companies with turnover under $1 billion may be able to carry back tax losses for up to two prior income years to obtain refunds of previously paid tax. This measure is designed to support business cash flow during periods of reduced profitability.

PAYG Instalment Flexibility

Small and medium businesses may soon have the option to calculate PAYG instalments using ATO-approved software with more flexible monthly adjustments. This could help businesses better match tax payments with actual trading conditions.

Start-Up Loss Refundability

From 2028-29, eligible start-up businesses may be able to receive refundable tax offsets for losses incurred during their first two years of operation.

2. Individual Tax Measures

Working Australians Tax Offset

A new annual tax offset of $250 has been announced for Australian workers and sole traders, expected to commence from the 2027-28 financial year.

Instant Work Expense Deduction

The Budget also announced a proposed $1,000 instant deduction for work-related expenses for eligible taxpayers from 2026-2027 Further details and eligibility criteria are still to be confirmed.

Medicare Levy Threshold Changes

The Government has proposed increasing the Medicare levy low-income thresholds to provide relief for low-income earners.

3. Capital Gains

From 1 July 2027 the 50% Capital Gains tax discount will be replaced by cost base indexation for assets held for more than 12 months. There will be a minimum tax rate of 30% applied to all such gains.

These changes will apply to all assets including pre-CGT assets.

Calculation Example:

*Note: $1,400,000 – ($1,300,000 *1.03) = $61,000

4. Property And Investment Changes

Negative Gearing

The budget will limit negative gearing for purchases of residential property from 7.30 p.m. on 12 May 2026. The tax treatment of negatively geared properties acquired prior to this date will not change.

The changes will impact properties acquired post 12 May 2026 however newly built properties will not be affected.

From 1 July 2027, property losses on properties acquired post 12 May 2026 (other than new builds) will only be deductible against other income from residential properties. Net rental losses will be carried forward or offset against capital gains – not against other taxable income.

Losses from newly built properties acquired after 12 May 2026 will not be affected.

5. Taxation of Discretionary Trusts

As of 1 July 2028, Trustees will pay a minimum tax rate of 30% on the taxable income of discretionary trusts.

Beneficiaries other than corporate beneficiaries will receive non-refundable franking credits from the tax payable by the trustee.

Exempt Trust Types:

• Fixed and widely held trusts (including unit trusts)
• Complying super funds
• Special disability trusts
• Deceased estates
• Charitable trusts

Excluded Income Types:

• Primary production income
• Amounts relating to non-resident withholding tax
• Income for assets of discretionary testamentary trusts existing at 12 May 2026

There will be rollover relief available from 1 July 2027 to assist small businesses and others wishing to restructure into another type of entity.

The changes to trusts have raised numerous questions as to how they will be applied. Until the changes are legislated it will be difficult to advise as to your specific circumstances.

6. What This Means For You

Many of the announced measures are still proposals and will require legislation before becoming law.

We recommend reviewing your current business, investment and tax structures to determine whether any future planning opportunities or changes may be required.

If you would like to discuss how these Budget announcements may impact your situation, please contact our office.

We are happy to assist with:

• Tax planning
• Business structure
• Investment considerations
• Cash flow planning

Thank you for your continued support!

P: (03) 9417 3511 
E: enquiries@respl.com.au