You’ve probably spent the past few days fielding calls about negative gearing and capital gains tax (CGT). Fair enough – those changes affect your clients. But there’s a second set of reforms in the 2026-27 budget aimed at how you run your business, not how your clients invest.
Here’s what’s in the package – and what it means depending on where you sit.
The $20,000 Instant Asset Write-Off (IAWO) is now permanent
This has been extended year to year since 2023. Every budget, you waited to see if it would be renewed. That uncertainty is over.
From 1 July 2026, the $20,000 instant asset write-off is permanent for businesses with turnover up to $10 million. Buy an asset under $20,000 – laptops, signage, office furniture, a CRM server, camera equipment for listings – and write it off immediately in the year you use it.
In 2023-24, around 300,000 businesses claimed it, writing off an average of $14,200 each. Treasury estimates making it permanent will save small businesses $32 million per year in compliance costs alone, because you’re no longer tracking depreciation schedules on every $800 chair.
The practical change isn’t the threshold – it’s the certainty. You can plan purchases knowing the write-off isn’t going anywhere.
Loss carry back is back – and it’s permanent
Think of this like a refund on a bad year. If your agency is incorporated and has a loss after 1 July 2026, you can carry that loss back against tax you already paid in the previous two profitable years – and get actual money back from the ATO.
It existed briefly in 2012-13 and was reintroduced during the pandemic from 2020-21 to 2022-23. Both times, temporary. This time it’s permanent, and it applies to all companies with up to $1 billion in aggregated turnover.
Treasury expects this to benefit up to 85,000 companies per year. The measure is costed at $2.3 billion over five years.
For an agency that invested heavily in growth – hired staff, opened an office, spent on marketing – and then hit a flat patch, this means real money coming back rather than carrying the loss forward indefinitely.
Your PAYG instalments are about to get smarter
PAYG stands for Pay As You Go – it’s the system where the Australian Taxation Office (ATO) collects tax from you in instalments throughout the year, rather than one lump sum at tax time.
Real estate income is lumpy. A big quarter followed by a quiet one. The current PAYG instalment system bases your quarterly tax prepayment on last year’s return – not what’s actually happening in the business right now. Most small businesses end up either overpaying (locking up cash the business needs) or underpaying (and getting hit with a large tax bill at lodgement).
From 1 July 2027, businesses will be able to opt into dynamic PAYG instalments – monthly, linked to their accounting software, with an ATO-approved calculation embedded in the platform. There’s a safe harbour provision, meaning if you use the ATO-approved calculation you won’t face interest charges even if your instalments turn out to be lower than your actual liability.
For a principal-run agency with variable income, it means your tax payments will actually reflect your cash flow rather than last year’s best quarter.
The $1,000 instant deduction for your team
From the 2026-27 income year, individual taxpayers can claim a flat $1,000 instant deduction for work-related expenses instead of itemising receipts. If your agents are employees, this simplifies their tax return. No more shoebox of receipts for phone bills, car expenses under the threshold, and client coffees.
Anyone who spends more than $1,000 on work-related expenses can still claim the full amount the traditional way. But for the majority of your team, this saves time and an average of $205 each.
The $250 Working Australians Tax Offset (WATO)
WATO is a flat $250 reduction in your tax bill, applied automatically when you lodge your return. Every working Australian – including sole traders – gets it from 1 July 2027.
An Australian worker on average earnings ($81,245) will receive a combined tax cut of up to $2,816 from the 2027-28 income year compared to 2023-24 settings. Over the period from 2024-25 to 2036-37, a worker on average earnings is expected to pay up to $38,977 less tax.
The WATO increases the effective tax-free threshold by nearly $1,800, lifting it to $19,985 for workers (or $24,985 for those also receiving the Low Income Tax Offset) – the largest permanent increase since 2012-13.
Discretionary trusts: the 30 per cent floor
Here’s where it gets complicated, so let’s use a simple analogy.
Think of a discretionary trust like a pie. The trustee decides how to slice it – who gets a piece, and how big. Until now, each person who received a slice paid tax at their own rate. So a slice given to a family member earning very little was taxed at a very low rate. That’s been one of the main reasons businesses use trusts.
To explain, from 1 July 2028, the government is putting a floor under the tax rate on every slice. No matter who gets the pie, the minimum tax rate is 30 per cent. The trustee pays it, and the beneficiaries receive a credit for the tax already paid.
To put numbers on it: if you’ve been distributing $50,000 to an adult child with no other income, they currently pay around $6,717 in tax (plus Medicare). Under the new rules, the minimum tax on that distribution is $15,000 – paid by the trustee.
The measure is expected to raise $4.5 billion over the forward estimates. Australia now has over one million trusts, more than double the number in 2001-02, and discretionary trusts distributed $142.4 billion in income in 2022-23.
“The golden age of the family trust in real estate is over,” according to Steven P. Rider, chartered accountant and founder of TenWealth Accountants.
“If someone is starting a new agency now, I would not be recommending a discretionary trust. Also, there’s no real grandfathering protection for the structure itself, so if you’re operating through a discretionary trust, you’re in the new system.”
Instead, he points to companies and alternative structures, like a dual structure tier, as the new baseline for planning.
A dual-tier structure, as Mr Rider describes it, separates the real estate business into two distinct operating layers rather than bundling everything into a single trust.
One entity typically holds the sales agency side of the business, while the other holds the property management (PM) business. The intention is to stop treating the entire agency as one blended income stream and instead recognise that sales and PM are fundamentally different value and cashflow engines.
In practice, this means one structure is responsible for sales activity, listings, commissions, and transactional revenue, while the other is built around recurring property management income and the long-term value of the rent roll.
Mr Rider’s point is that this separation is becoming more relevant because “we’re already looking at options like dual-tier structures: like a trading company for the real estate business and a holding company for the property management side, because the old trust model just doesn’t work in the same way anymore.”
In that context, structuring is no longer just about tax efficiency, it’s about isolating and protecting the different value streams inside the business as the rules around trusts tighten.
But he also warns that waiting until the changes formally take effect could be a costly mistake.
“The key dates matter. The restructure window opens from 2027, but by the time 2028 arrives, the trust rules are fully in force. You can’t afford to sit on your hands.”
For many principals, he says, the biggest risk isn’t choosing the wrong structure, it’s failing to act at all.
“Not doing anything is the biggest mistake. You have to start planning now, because this will trigger a wave of restructures across the entire sector.”
And as he puts it, the shift is already underway.
“It’s not a question of whether people will restructure. It’s when, and whether they do it in time.”
If you’re weighing up how to structure (or restructure) your business, Kristen Porter’s five critical questions when going into business with others is worth revisiting – particularly the section on entity structures, which now reads very differently in light of these changes.
The restructure window. The government is providing expanded rollover relief from 1 July 2027 – a three-year window to restructure from a discretionary trust into a company or fixed trust without triggering income tax or CGT consequences. The Australian Small Business and Family Enterprise Ombudsman will be available from 1 January 2027 to help businesses understand their options. The Australian Securities and Investments Commission (ASIC) will put specific arrangements in place to support small businesses that want to incorporate and access the 25 per cent small business tax rate.
Exemptions. Primary production income from farms, certain income relating to vulnerable minors, testamentary trusts existing at announcement, and other trust types (fixed trusts, widely held trusts, superannuation funds, deceased estates, charitable trusts) are all excluded.
Franking credits and bucket companies. If your trust receives franked dividends, the trustee will need to use those franking credits to pay the minimum tax first. Corporate beneficiaries – known as “bucket companies,” where a trust distributes income to a related company to access the lower company tax rate instead of higher individual rates – won’t receive non-refundable credits at all. Baker McKenzie has warned this could “spell the end of bucket companies.”
How many businesses are affected? Treasury says more than 90 per cent of all small businesses won’t be affected in any given year. Around 350,000 active small businesses operate through a discretionary trust, and of those, 40 per cent (roughly 140,000) aren’t expected to pay additional tax or need to restructure.
What this means if you’re planning to sell
For a lot of principals, the business is the retirement plan – the rent roll, the brand, the trail book. The value is in the asset, and the plan is to sell it one day.
Three changes in this budget work together to affect the after-tax proceeds of that sale.
The CGT calculation has changed. The 50 per cent discount – where you halved your capital gain and paid tax on the rest – is being replaced with cost-base indexation for gains accruing after 1 July 2027. Indexation adjusts your original purchase price (or cost base) upward each year for inflation, so you’re only taxed on the real growth above inflation. For most businesses that have grown well above the rate of inflation, the 50 per cent discount produced a lower tax bill than indexation will.
There’s also a new 30 per cent minimum tax on real capital gains – a floor that applies regardless of what your other income looks like in the year you sell.
The trust minimum tax applies to the gain. If the capital gain flows through a discretionary trust to beneficiaries, the 30 per cent floor applies to those distributions from 1 July 2028. Spreading a large capital gain across family members to access their lower marginal rates no longer works the way it used to.
The bucket company path is narrowing. Under the new rules, corporate beneficiaries won’t receive the non-refundable credits that other beneficiaries get. If you’re weighing up a share sale vs asset sale, the tax treatment of each structure has shifted.
Small business CGT concessions are preserved. The $500,000 lifetime exemption, the 15-year exemption, the retirement exemption, and the small business rollover all continue unchanged. These can still significantly reduce or eliminate the taxable gain on a qualifying sale. Whatever gain remains after those concessions is taxed under the new rules.
As the Council of Small Business Organisations put it: “For many Australians, their business is their retirement asset. Changes that reduce the value of business sale proceeds or associated property holdings could have major long-term consequences for owners who have spent decades building their businesses.”
One practical note on restructuring. The three-year rollover relief lets you move assets out of a discretionary trust into a company or fixed trust without triggering CGT – but that’s a federal tax concession only. BDO has flagged that no equivalent stamp duty relief has been announced at the state level. Transferring property out of a trust into a company can trigger stamp duty. If your trust holds commercial premises, that’s a real cost. Check the state position before you move.
Before any discussion about tax outcomes or deal structuring, there’s a more immediate issue emerging for principals planning an exit: valuation timing.
Mr Rider says the system shift is likely to trigger an unprecedented spike in formal valuation activity as owners rush to establish defensible asset values ahead of the transition point.
“There’s going to be a wave of valuations around 1 July 2027,” he explains. “Because there’s a big reset – a CGT reset – and effectively everything has to be revalued at that point.”
That reset point matters because it becomes the reference line for how future gains are measured, structured, and ultimately taxed.
For agency owners, particularly those holding rent rolls or long-established businesses, it introduces a practical constraint into exit planning: valuation capacity.
If valuations are delayed, contested, or inconsistent, transactions slow – and sellers risk negotiating in uncertainty rather than from a position of clarity.
For principals preparing an exit, that introduces a second-order planning issue. It is no longer just about structuring a sale or timing a market cycle, it is about securing a valuation within a tightening window where demand for professional services may exceed supply.
Mr Rider suggests this is one of the least understood pressure points in the reform package.
“People are focused on CGT and trust changes, but the valuation piece is the one that will catch people off guard,” he says. “Because you can’t sell what you haven’t properly valued — and everyone is going to need it at the same time.”
In his view, that compresses the real timeline for exit planning.
“If you’re thinking about selling in the next few years, you can’t just think about the sale date anymore,” he says. “You have to think about when you lock in value, because that becomes the foundation for everything that follows.”
Also, one area the government did not attack in this budget is superannuation, specifically, self-managed super funds.
For agency owners who are of the right age and have the right setup, rolling proceeds into an SMSF remains one of the few remaining strategies to access significantly reduced tax treatment on the sale of a business or asset.
“The one potential ray of light – it’s always been there, but the government hasn’t attacked it in this budget.”
Why the tech sector is so upset – and why it matters to you
You may have seen the headlines about tech founders threatening to leave the country over the CGT changes. It’s worth understanding why – because the same maths applies to anyone who built a business from scratch.
Here’s the core issue. When you build a business rather than buy one, your cost base – the amount the ATO considers you “paid” for it – is close to zero. Under the old rules, the 50 per cent CGT discount halved your taxable gain regardless. Under the new rules, the ATO adjusts your cost base upward for inflation each year (indexation). But if your cost base started near zero, adjusting zero for inflation still gives you roughly zero. The discount that mattered most – the flat 50 per cent – is the one that’s gone.
Jacques Greeff, who co-founded marketing technology company Realbase and sold it to Domain for $180 million in 2022, said on LinkedIn that he paid $6.2 million in CGT on that sale. Under the new rules, he estimates the same exit would have cost over $12 million.
Leigh Jasper, who sold construction software company Aconex to Oracle for $1.6 billion in 2018, told the Australian Financial Review the change would be “a disaster” for venture capital-backed companies. “If the proposed tax regime were in place, we would have ended up building Aconex outside of Australia,” he said.
The numbers are different, but the principle is the same for a principal who built an agency or a rent roll from nothing over 15 or 20 years. A business started from scratch with a near-zero cost base gets very little benefit from indexation. The 50 per cent discount was doing the heavy lifting.
There is one difference worth noting. Treasurer Jim Chalmers has committed to a consultation process with the tech and start-up sector.
The budget papers specifically reference “the unique features of the tech and start-up sector.” In question time on Wednesday, Chalmers said: “We think you are a really important part of the economy … and we will reflect and recognise that in our policy.”
Whether similar treatment is extended to other small business owners who built businesses from scratch – including in real estate – is not yet clear. The small business CGT concessions (the $500,000 lifetime exemption, the 15-year exemption, and the retirement exemption) remain available, and for qualifying sales these can still significantly reduce or eliminate the taxable gain. But they have caps, and for higher-value exits the new CGT settings will apply to whatever remains.
Three scenarios worth thinking about
If you’re growing a rent roll
The negative gearing changes restrict investor tax deductions on established properties – but new builds are fully exempt. That means the government is actively steering investor capital toward new housing stock. For property managers, that’s new rental properties looking for someone to manage them.
A rent roll built on new-build investor clients has a structural advantage: those investors have full negative gearing, which makes them more likely to hold long-term. That’s better retention and a more stable roll.
We’ve written extensively about rent roll valuation and growth strategies – the budget changes the tax settings underneath all of them.
The question is what structure to build it in. Before this budget, a discretionary trust was the standard starting point for a new property management business. With the 30 per cent minimum tax from 2028, a company structure – accessing the 25 per cent small business tax rate – may now produce a better outcome from day one. The distribution flexibility that made trusts attractive has a different price tag now.
If you’re going out on your own
An agent leaving a network to start their own agency is making a structural decision right now that will affect them for the next 10 to 20 years.
The old playbook – set up a family trust, distribute income to family members in lower tax brackets, build the asset, sell at retirement – has changed at every step. The distribution strategy hits the 30 per cent floor from 2028. The CGT discount on sale is replaced with indexation. The ability to spread the capital gain across family members is constrained.
The budget does include tailwinds for someone starting out. The $20,000 IAWO is permanent – fit-out and equipment can be written off immediately. Loss carry back means a tough first year in a company structure can generate a refund against tax paid in the final year of employment. The $1,000 instant deduction and WATO reduce the personal tax burden.
On structure: a company at the 25 per cent small business tax rate avoids the trust minimum tax entirely. It’s less flexible – you can’t slice the pie differently each year – but the slicing just got more expensive. If family members are genuinely working in the business, paying them a salary achieves a similar income-splitting outcome without triggering the minimum tax, because wages are a deductible expense for the trust or company.
If you’re an independent contractor
Thousands of agents operate as sole traders or through their own company or trust structure – technically running a small business, not employed by the agency they work from. (If you’re not sure whether your contractors are genuinely independent, that’s a separate conversation – but it determines which of these measures apply to them.)
For sole traders, several measures apply directly:
- The $250 WATO from 1 July 2027
- The $1,000 instant deduction from 2026-27 (no more shoebox of receipts)
- The $20,000 IAWO for any business assets
For contractors operating through a trust, the 30 per cent minimum tax changes the maths on distributing income to a spouse or family member. For contractors operating through a company, the 25 per cent small business rate is unaffected.
The dynamic PAYG instalment option from 1 July 2027 is particularly relevant for commission-based contractors, where income swings quarter to quarter. Tax payments that reflect actual earnings rather than last year’s best run is a practical improvement.
If you have equity in a rent roll or PM business
Equity and share arrangements in property management are common – and increasingly popular as a retention tool. A BDM (business development manager) who builds a rent roll and receives a share of it. A senior property manager who buys in over time. A succession arrangement where a departing principal sells down to the next generation. Some groups have built entire models around it. In each case, there’s a capital gain when that equity is eventually sold, bought out, or the business changes hands.
Under the old rules, the 50 per cent CGT discount applied to that gain. Under the new rules, from 1 July 2027, it’s cost-base indexation plus a 30 per cent minimum tax on the real gain.
The difference matters most when the cost base is low. A BDM who received equity as part of a remuneration package – or who bought in at a low valuation when the roll was small – has a cost base that may not have much room for indexation to help. The 50 per cent discount was doing the heavy lifting on the eventual tax bill.
This is the same issue the tech sector is raising about employee share schemes. In the tech world, early employees accept lower salaries in exchange for equity, then pay CGT when the company is sold or listed. In property management, the mechanism is different but the outcome is similar – people who helped build the asset over years face a higher tax bill when they realise the value.
The small business CGT concessions still apply to qualifying sales. But anyone with equity in a rent roll or PM business – whether as a shareholder, unit holder, or partner – should be modelling the new numbers with their accountant, particularly if a buyout or exit is on the horizon.
What this means for your EOFY planning
The budget changes that take effect soonest:
| Change | Start date |
| $20,000 IAWO permanent | 1 July 2026 |
| $1,000 instant tax deduction | 2026-27 income year |
| Loss carry back (permanent) | Income years after 1 July 2026 |
| $250 WATO | 1 July 2027 |
| Dynamic PAYG instalments | 1 July 2027 |
| Discretionary trust minimum tax | 1 July 2028 |
| Trust restructure rollover relief | Available from 1 July 2027 |
The IAWO and loss carry back are available from next financial year. The trust changes don’t take effect until 2028, but the restructure window opens in 2027 – meaning the planning conversation needs to happen well before that.
The bottom line
The negative gearing and CGT changes will dominate the industry headlines this week. For agency owners and principals, this second package of reforms covers how you structure your business, how you plan your exit, and how you manage your tax through the year.
The instant asset write-off gives certainty. The loss carry back provides a safety net. The PAYG changes improve cash flow. And the trust minimum tax introduces a deadline.
If you run your business through a discretionary trust, the three-year restructure window opens on 1 July 2027. That’s the date to work back from.
One thing that’s safe to predict: your accountant is about to get very busy. Let’s hope their fees remain tax deductible.
All figures sourced from Budget Paper No. 1, Statement 4: Tax reform for workers, businesses and future generations, 2026-27 Budget. Additional analysis from Baker McKenzie, BDO, and the Council of Small Business Organisations Australia (COSBOA). This article does not constitute financial or tax advice. Consult a qualified tax professional before making decisions about your business structure.