The 2026–27 Federal Budget announced the biggest changes to how Australia taxes capital gains and family trusts in a generation. For families who hold Melbourne, Sydney or Brisbane property through a family trust, or who run a business through one, the changes affect decisions being made today. The proposals are not yet law, but legislation was introduced into Parliament in October 2026.
The 50% CGT discount is being replaced
From 1 July 2027, the proposal is to replace the familiar 50% capital gains tax discount with indexation of the cost base for inflation, together with a 30% minimum tax on real capital gains. The change applies to assets held by individuals, trusts and partnerships for more than 12 months.
Gains that build up before 1 July 2027 keep the 50% discount, even if the asset is sold later. Only the gain that accrues after that date is taxed under the new rules. Investors in newly built residential property will be able to choose between the old discount and the new method.
Assets bought before 20 September 1985 lose their exemption
Assets acquired before 20 September 1985 have always been outside the CGT system. Under the proposals, gains on those assets that accrue from 1 July 2027 will become taxable. Gains up to that date remain exempt.
Many established families hold a home, shop or block of land bought by the first generation decades ago. A reliable market valuation as at 1 July 2027 is likely to become very important, because it may fix the starting point for future tax.
A 30% minimum tax on discretionary trusts
From 1 July 2028, trustees of discretionary (family) trusts are proposed to pay a minimum 30% tax on the trust’s taxable income. Until now, trust income has mainly been taxed in the hands of the beneficiaries who receive it, which allowed income to be spread across family members on lower tax rates.
Several types of trust are excluded, including fixed trusts, charitable trusts, special disability trusts, superannuation funds, deceased estates and testamentary trusts set up for genuine estate purposes. Primary production income is also excluded. The legislation also offers relief for families who decide to restructure, and an election for trusts that agree to distribute only to beneficiaries nominated in advance.
What families should do now
- Do not rush to sell or restructure. The details may still change in Parliament, and restructuring has its own stamp duty and tax costs.
- Find out what each trust actually holds, who the trustee is and who the beneficiaries are. Many family trust deeds have not been read since they were signed.
- Identify pre-1985 assets and plan to obtain valuations close to 1 July 2027.
- Check where family members live. Beneficiaries who live in Hong Kong, mainland China, Malaysia or Singapore raise their own tax questions in both countries.
- Review your Will at the same time. Testamentary trusts are treated differently from family trusts, so the way your Will is drafted now matters more.
- Work with your accountant and lawyer together. The tax figures and the legal structure need to be decided as one plan.
Chua Tan Associates advises families and family businesses across Australia on trusts, succession and estate planning, working alongside their accountants in Australia and overseas. To arrange a confidential consultation, please contact our Melbourne office on +61 3 9602 3988 or submit an enquiry. Advice is available in English, Mandarin and Cantonese.
Justin Chua (蔡智勋), lawyer and mediator, Chua Tan Associates, Melbourne. General information only, not legal or tax advice. The measures described are proposals and may change before they become law.
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