Current as at 30 June 2026
If you run a construction or trade business, you have probably been told the Federal Budget tax changes could force you to restructure. Some of the reforms have now passed into legislation, but several significant changes are still only announcements, particularly the proposed changes to the family trust framework. Acting too early on the parts that are not yet settled could cost you real money to fix a problem that does not yet exist.
This guide covers the three changes that matter most: capital gains tax, negative gearing, and the proposed changes to discretionary trusts. Each carries a status flag so you can see at a glance whether it is law or still only proposed, followed by what it means and a worked example or two.
How your business is structured changes how these reforms hit you, and that depends on where you operate and how you’re set up.
In Queensland, QBCC licensing and its minimum financial requirements mean the licensed building entity is rarely a trust. So, for many Queensland builders, the trust sits in the income-splitting or asset-holding part of the group, not the trading business itself. In states where licensing works differently, trading through a trust is more common.
The same federal change will therefore affect businesses differently depending on where they operate and how they are set up. That is worth keeping in mind, though the changes themselves are the starting point.
STATUS: PASSED. Became law 25 June 2026. Applies from 1 July 2027.
From 1 July 2027 the 50% capital gains discount is being replaced with indexation. Instead of halving your taxable gain, the law lifts your original purchase price in line with inflation, so you are taxed only on the real increase in value, not the part that simply kept pace with rising prices. A 30% minimum tax then applies to gains made from that date.
Gains you have already built up are protected. Any asset you hold on 30 June 2027 is treated as if you sold it and bought it back at its market value that day. Growth up to that point keeps the current treatment, and only the growth afterwards falls under the new rules. The trade off is that you may need a proper valuation of business assets at that date.
This is the most common situation: you already own a property on 1 July 2027 and sell it later. The gain is split in two. The part that built up before that date keeps the old 50% discount. The part that builds up after is worked out under the new indexation rules. The figures below mirror Treasury’s own published example.
A builder bought an investment property on 1 July 2022 for $800,000. They sell it on 1 July 2032 for $1,600,000, a return of about 7.2% a year. Using the ATO tools, the property is valued at $1,131,371 on 1 July 2027, the day the new rules start. That date splits the gain into a part that built up before and a part that built up after.
The gain up to 1 July 2027 is $331,371 ($1,131,371 less the $800,000 cost). This part keeps the old treatment, so the 50% discount halves it to a taxable gain of $165,685.
The gain after 1 July 2027 is $468,629 ($1,600,000 less the $1,131,371 value at the start date). This part is worked out under indexation, which lifts the $1,131,371 base by inflation so only the real gain is taxed. After indexation the taxable gain for this period is $319,958.
The new system also applies a 30% minimum tax on the real gain, but only where the gain would otherwise be taxed below 30%, which mainly affects a sale made in a low income year. For example, a $10,000 real gain taxed at about $1,400 (14%) in a low income year is topped up by a further $1,600, so the gain ends up taxed at 30%. A seller already on a 47% rate, like this one, is well above 30%, so the minimum tax changes nothing for them.
STATUS: PASSED. Became law 25 June 2026. Applies from 1 July 2027. One detail is still being finalised: the rules that define a “new residential dwelling”.
From 1 July 2027, negative gearing, the ability to offset a loss on an investment property against your other income, is restricted to new builds. Anything you already hold is grandfathered, meaning it stays under the current rules, as long as you owned it at 7:30pm on 12 May 2026. If you already have a geared investment property, nothing changes for it.
For builders there is a second angle worth watching. Pushing investor demand toward new homes should, in principle, support demand for the very thing the sector builds. The catch is how a new dwelling will be defined, which is being set in separate rules that are not yet finalised. Early signs suggest that knocking down one house and replacing it with one house may not count, while replacing it with two separately titled homes may.
Take two builders looking at an investment property. The first already owns a geared established house bought before 12 May 2026, so it is grandfathered and negative gearing will continue exactly as it does today. The second is considering an established house to negatively gear after 1 July 2027. From that date the deduction will no longer be available on an established home, so the loss could not be offset against their other income. If they were to buy a qualifying new dwelling instead, the benefit may still be available, once the definition of a new build is settled.
STATUS: NOT PASSED. Announced only. Proposed to start 1 July 2028. No draft legislation released.
This is the change generating the most attention, so it is worth setting out clearly how it is meant to work and what is still unknown. Discretionary trusts are long established and entirely legitimate structures. Many business owners in construction use them to protect assets, plan for succession, and manage how their income is distributed. The proposal does not remove trusts as an option or take away the other benefits they provide. What it changes is the tax outcome when income is distributed through the trust.
From 1 July 2028, as announced, the trustee of a discretionary trust would pay a minimum of 30% tax on the trust’s income, and family members who receive distributions would get a credit for that tax. Two details do the damage.
The first is that the credit is non-refundable. If you distribute to a family member on a low tax rate, the trust has already paid 30%, and that family member cannot claim back the difference between the 30% and the smaller amount they would normally have paid. The income splitting that many construction business owners rely on loses much of its value.
The second is that a bucket company, a private company used to hold profits at the company tax rate, gets no credit at all for the tax the trustee paid. The same income is then taxed again in the company, which pushes the effective rate well above the company rate. Early commentary puts it at around 51%, and some analysis higher, depending on the final design.
Some features soften the picture, but only in very narrow circumstances. Several trust types and kinds of income are excluded, including fixed trusts, widely held trusts, primary production income, and deceased estates. Paying a genuine wage to a family member who actually works in the business sits outside the measure entirely. And a three year window from 1 July 2027 to 30 June 2030 is proposed to let businesses restructure out of a discretionary trust without an immediate income tax or capital gains bill.
Picture a builder whose family trust distributes $50,000 to a spouse with no other income. Today the spouse pays around $5,788 in tax on that amount, an average rate of about 12%. Under the proposal the trustee pays 30% first, which is $15,000. The spouse receives a $15,000 credit but only owes $5,788, so roughly $9,200 of that credit is simply lost, and the tax on the same $50,000 rises from about $5,788 to $15,000. If that spouse genuinely works in the business, paying them a wage rather than a distribution avoids the problem.
Now take a construction group that sends $100,000 of trust income to its bucket company to hold profit at the company rate. Today the company pays tax at the company rate, and because of franking credits the rest is only taxed at the owner’s personal rate when it is finally drawn out, so the real benefit is timing: you choose when to pay the top up personal tax. Under the proposal the trustee pays 30% first, the company gets no credit for it, and the same income is taxed again inside the company. That timing benefit disappears. The profits and franking credits already sitting in the company are untouched, so this is about future earnings, not the balance you have already built up.
Here is the one we are asked about most, and the one where rushing does the most harm. A trade contractor has signed a contract to buy a commercial shed through their structure, and settlement has not happened yet. They have heard about the trust tax and wonder whether to change the ownership before settlement to get ahead of it.
The reason to slow down is simple. The measure is not law and is not due to start until 1 July 2028, and the rollover that helps you restructure only covers income tax and capital gains tax. It does not cover stamp duty, because duty is a state tax that a federal rule cannot switch off. On a commercial property, duty is worked out on the value and can be a large, immediate cost you never get back, often more than the tax the move was meant to save.
There is also a more basic point. If the shed is held in a company and used in the business, it may not be caught by the trust measure at all, since that measure taxes income distributed through a trust, not assets held in a company. Changing the ownership of something that was never at risk would mean paying duty for nothing.
Moving out of a trust is rarely just a tax exercise in any case. It can pull in lenders, licensing and registration, contracts and leases that need someone else’s consent, and insurance, all on top of the duty. None of that means you should never restructure. It means you should not rush it.
The measure was announced in the Budget on 12 May 2026. It was left out of the Bill that passed Parliament on 25 June 2026, and the ATO confirms it is not yet law. There is no draft legislation. The Government has said a consultation paper on how the tax will work is coming, and on 18 June 2026 it already adjusted the design by exempting income from testamentary trusts, subject to conditions. Big questions remain open, including how corporate beneficiaries will be treated, how the tax will be collected, what happens to surplus franking credits, and exactly how the rollover will work. More legislation is expected over the coming months. Until that detail lands, no one can make sound restructuring decisions with confidence.
For most construction operators, the job right now is to understand where you stand, not to restructure. The capital gains and negative gearing changes are law, but they do not start until 1 July 2027, so there is time to plan any sale or property decision properly.
On the trust measure, a few sensible steps stand out. Know which entities in your group distribute income, and to whom. Work out how much of your current benefit comes from distributions to low income family members or to a bucket company. Keep the wage option in mind for family members who genuinely work in the business. Beyond that, wait for the draft legislation and the rollover detail before changing anything structural, because with a three year window proposed from 1 July 2027, there is nothing to gain by moving early.
Above all, do not shift ownership of property or business assets to get ahead of the trust tax without first getting state specific duty advice. The federal rollover does not cover stamp duty, and that is where most of the avoidable cost sits.
We are working through these changes with construction clients now, separating what is settled from what is still being designed, and modelling what each part means for individual structures. The worst outcomes we are seeing do not come from the changes themselves. They come from owners acting too early on incomplete information.
If you want to know how this affects your particular structure, talk to us before you change anything. We will tell you plainly what applies to you, what does not, and what is worth waiting for.
