Find out how the 2026 Budget affects your investments

The Major Changes

• You probably do not need to restructure anything yet.

• For many people, trusts still remain useful, but companies may become more attractive for yield only investments.

• Jul 2028 — All family trust distributions will be taxed at least 30% non-refundable (bucket companies are now useless).

• Jul 2027 — Capital gains will move from 50% discount for individuals and trusts to indexation with inflation for individuals, trusts and will be taxed at least 30% non-refundable (no change to companies).
• May 2026 — Negative gearing for non-new builds is not possible; instead, the losses are carried forward to later years.
• Jul 2026 — Company loss carry-back for small businesses to offset gains in the previous two years.

Although it seemed like bad news for trusts and investors, the reality is it's not a massive change at all. When the right structure is put in place the outcomes are overall the same; however they are a little more complicated to implement.

What do you need to do?

Nothing yet. The rules could change again, and you have until 2028 before the 30% floor is expected to take effect (subject to legislation and commencement dates).

If these rules go ahead substantially as announced, a plausible sequence would be:

1. Before the new rules apply, sell the yield only assets in the trust (private credit and bonds).
2. Distribute capital gains to family members as appropriate, and stream income to the bucket company where that still fits your plan.
3. Re-purpose the bucket company as your yeild only investment company, carrying forward its existing franking credits.
4. If you do not want to rely on wages and have no other income-producing assets, lend money to the investment company personally.
5. Contribute any excess capital you want protected back into the trust for asset protection.
6. Have the trust lend to the investment company so the company has enough to cover wages and yield only investments.
7. Re-acquire the same or replacement investments in the investment company’s name.
8. Continue to use your trust for growth investments

Every step above depends on final law, timing, your deed, Division 7A, GST, stamp duty, and commercial pricing. Treat this as a planning checklist to discuss with a professional, not a DIY recipe.

What the minimum 30% tax floor means

This will likely be classed as a non-refundable, non-carry-forward tax offset.

This is the same as how the foreign income tax credit is classified, but different to franking credits, which are a refundable tax credit.

If you are already over the 30% marginal tax bracket, this change has no impact on you.

So all you need to do is have your own income (from working, investments, and so on) that gets you and each of your family members over the $45k bracket.

• If you have a job, you are likely already there.
• If you do not mind working, you could work for your investment company a few hours a week and pay yourself a modest wage of $50k.
• If you do not have a job and do not want to work, your family trust members could loan your investment company $500k and charge 10% interest.

Snapshot: before and after

Metric	Before	After	Outcome
Ability to distribute funds to family members on lower tax rates	Trust distributions to family members	Company wages to anyone, or interest from loans	Neutral
Ability to distribute funds to the 30%+ bracket individuals	Trust distributions	Trust distributions	No change
Tax payable on 0-3% p.a. capital gains	0-1.5% * marginal rate	0%	Positive
Tax payable on 3-6% p.a. capital gains	1.5-3%	0-3%	Positive
Tax payable on 6-10% p.a. capital gains	3-5%	3-7%	Negative

* Assumes 3% inflation.

How it changes investment choice

The same headline return feels different depending on whether gains are taxed as you go (reinvested income), at the end with the CGT discount, or at the end on an indexed cost base with a 30% floor on the rate applied to the gain.

In many Australian states, trusts were historically limited to a maximum duration (commonly cited as 80 years). That can force a wind-up and effectively push asset sales and capital gains into a timetable tied to the trust’s life. Companies are separate legal entities and do not share that same statutory sunset in the same way, so there is no hard-coded trust-law expiry forcing you to realise capital gains on the same clock—planning can focus on economics and tax law, not only vesting dates.

Gross return (7% p.a.)

0%15%

Investment P (100)

1001,000

Income tax TR (40%)

0%15%30%40%47%

CPI c (3.0% p.a.)

0%4%

Years n (20)

530

Capital-gains paths Match reinvested profit

Metric	Yield Only	Capital gains discount	Capital gains index

Investment path comparison

Comparing the benefit of capital gains versus yield under the new system shows very little difference between the discount and index methods for moderate (about 5%) growth returns. Growth still comes with roughly a 1–2% benefit over yield-only investments.

When a trust usually wins, and when a company usually wins

The charts below are illustrative: horizontal axis is growth % p.a., vertical axis is income % p.a. Shading shows which side delivers higher after-tax cash in a simple model (47% individual rate when investing through a trust, 30% company rate on income when investing through a company, 3% inflation on cost base between events, $100 start). Teal favours a trust; orange favours an investment company—read the three bullets first, then use the charts for shape, not precision.

• Income-heavy portfolios often tilt toward an investment company, because company tax on income is lower than personal tax on trust distributions in this comparison.
• More selling or turnover (for example realising gains every two years instead of once at the end) tends to favour an investment company, because repeated personal-level CGT when investing through a trust reduces the advantage of the current CGT-discount setting faster than repeated company-level tax.
• A typical “balanced” blend in the rough ballpark of about 5% growth and 3% income still tends to favour a trust in these grids—so trusts remain the default for many ordinary growth-and-yield mixes unless your facts push you toward income or trading.

Separate view: % p.a. uplift of the better of (investing through a company vs indexed-trust-style path) over a stylised current-law baseline in the same model family (bucket-company yield, 50% CGT discount, no CPI uplift on trust cost base in that baseline). Same growth and income axes as above—illustrative only.

• First, put enough capital into the investment company so that its income can cover required wages (and related running costs) without starving the portfolio.
• Income-heavy investments tend to look better inside an investment company, because company tax on income is lower than personal tax on trust distributions in this comparison.
• The higher the growth rate, the less income you need before investing through a company can pull ahead—more of the return is deferred as capital growth, so more cash stays available for reinvestment at the lower company rate.
• The more often gains are realised (more trading, turnover, or periodic sales), the more investing through a company benefits relative to investing through a trust, because repeated personal-level CGT when investing through a trust reduces the advantage of the CGT discount setting faster than repeated company-level tax.
• For a typical balanced holding in the rough ballpark of about 5% growth and 3% income, a trust still tends to come out ahead in these grids—so trusts remain the default preference for many “average” growth-and-yield blends unless your facts push you toward income or turnover.

Current state and future state compared

Current state (before)

Future state (after)

You gift or loan money to your family trust. The trust invests that cash. Income is distributed to individuals up to 30%. All discounted capital gains are distributed to individuals. Excess income is distributed to a bucket company to hold franking credits for later use. The bucket company loans spare cash to the trust for investment (as a company cannot get the capital gains discount). In later years the bucket company can recall the loan and distribute profits with franking credits attached to the trust as a dividend. The trust passes on that income with franking credits to you. You can withdraw trust capital at any time with no tax implication. Trust income must be assigned before end of financial year.

You gift money to the trust, or lend money directly to the investment company (previously your bucket company). The trust lends the company enough extra (for example interest free) so wage bills can be met from company income when returns allow. The trust and investment company each hold suitable assets for their role. The investment company pays wages to you and anyone else who works for it, up to or above the 30% tax bracket, plus investment-related expenses. The investment company can retain excess profit, pay dividends to the trust, or repay the trust loan. The trust distributes the trust income including the company dividends to family members who are already above the 30% bracket. You can withdraw trust capital at any time with no tax implication. Trust income must be assigned before end of financial year.

Negative gearing (property)

The inability to negative gear (where that applies under the announced settings) will affect some investors. In practice, most investment properties are only meaningfully negatively geared for the first few years (often roughly the first five), and for many holdings the gearing effect on annual taxable income is small relative to rent and other drivers.

New builds with large depreciation schedules are more likely to be negatively geared on paper. As commonly reported for the budget package, that kind of stock is often carved out or exempt from the same restriction on established property—subject to final legislation.

Losses carry forward where the rules allow. Over a long hold, the “lost” benefit from missing early-year refunds can be much smaller than it feels in year one: instead of tax refunds in years 1–5 then tax on profits from year 6, you might see no refunds and no tax in years 1–10, because losses from years 1–5 absorb income in years 6–10. The tax timing shifts; the cumulative position can be similar.

If you are impacted, a common structural response is debt recycling on the investment-property loan so the property is no longer negatively geared: the loan purpose is traced to new use (for example capital contributed or lent onward to your investment company to fund other investments), so interest is no longer framed as a deduction against that rental property in the same way. The details are fiddly and must match ATO tracing and your bank’s requirements—get advice before moving money.

Self Managed is built to support that kind of purpose split and tracing cleanly in your records (so the story in your data matches the story you intend to tell at EOFY).

How will this impact your existing structure and fees?

Item	Before	After
Typical stack	Family trust, corporate trustee, bucket company	Family trust, corporate trustee, investment company
Self Managed fees (illustrative)	$1,000	$1,000
ASIC fees (illustrative)	$660	$660

So on a like-for-like structure (same number of companies and the same reporting load), your Self Managed and ASIC fee lines can stay in the same ballpark—the change is what each entity does with cash and investments, not necessarily how many shells you pay to register and maintain.

What this means in practice

The opportunity is still strong, but the flow of money and control points matter more than before.
If the structure is right, outcomes for family members on lower tax rates can still be strong while preserving flexibility for higher-bracket family members.
Moving portfolio growth into a company can also sit more comfortably alongside long-dated wealth plans than a fixed-term trust horizon in some states.

This article is general information only and should be tailored to your circumstances.