2026 Australian Tax, Super &
Trusts Reforms Radar

The 15% surtax applies to 'calculated earnings' on the portion of TSB exceeding $3M, including unrealized capital gains, so SMSFs with high-growth assets face tax without selling.

A further 30% surtax applies to TSBs exceeding $10M, and both $3M and $10M thresholds are indexed to CPI, so high-balance clients face escalating tax rates.

The tax is levied on the individual, not the fund, so SMSF trustees must ensure liquidity to pay the tax from personal assets or fund withdrawals, potentially triggering further tax.

Review all SMSFs with TSBs above $2.5M before 1 July 2026 to assess exposure and consider asset rebalancing, spousal equalization rollovers, or unwinding illiquid high-growth assets.

Consider alternative structures such as holding growth assets in a discretionary family trust instead of SMSF, but weigh the trade-offs of lower concessional tax rates vs. Division 296 surtax.

The Bill removes the previous proposal to tax notional capital gains, but unrealized gains are still included, so accurate valuation of assets at year-end is critical for compliance.

The 50% CGT discount for individuals, trusts, and partnerships will be replaced with cost base indexation and a 30% minimum tax rate on capital gains accruing from 1 July 2027. This means the effective tax rate on discounted gains will increase for many taxpayers, especially those in higher marginal brackets.

The reform introduces tiered holding periods, meaning the tax benefit will vary based on how long an asset is held. Assets held longer may receive a more favourable indexation benefit, but the 30% minimum tax rate will apply regardless of holding period.

Corporate beneficiary look-through rules are tightened, preventing trusts from streaming capital gains to corporate beneficiaries to access the lower corporate tax rate. This will affect trust distribution strategies and require careful planning.

Accountants should review existing trust deeds and distribution resolutions to ensure they have the flexibility to stream capital gains effectively under the new rules. Deeds may need updating to define income and capital in a way that supports optimal tax outcomes.

Consider converting discretionary trusts to fixed unit trusts or establishing corporate trustees before 1 July 2027 to lock in the current CGT discount and preserve access to capital gains concessions. This is a key strategic move for family groups with significant unrealised gains.

For SMSFs, the changes will impact the effective tax rate on capital gains, particularly for funds in accumulation phase. Trustees should review asset sale timing and consider whether to realise gains before the new rules commence.

Section 100A safe harbour rules are codified: The 'ordinary family or commercial dealing' exemption will be statutorily defined, reducing reliance on case law and ATO discretion. Trustees must ensure distributions fall within the new safe harbour to avoid the 47% top marginal tax rate under s 100A.

Annual trustee distribution reporting becomes mandatory: Trustees of closely held trusts must lodge an annual report detailing all distributions, beneficiaries, and any UPEs. This increases administrative burden and requires robust record-keeping from 1 July 2026.

UPEs to corporate beneficiaries face tighter Division 7A rules: Unpaid present entitlements owed to companies will be treated as loans unless formal sub-trust agreements are in place, potentially triggering deemed dividends. Accountants must review existing UPE arrangements and consider establishing compliant sub-trusts before 30 June 2026.

Review trust deed clauses: Beneficiary classes, distribution of income, and streaming provisions (clauses 3, 5, and 6) must be updated to align with the new statutory framework. Outdated deeds may inadvertently exclude safe harbour protection.

Consider converting discretionary trusts to fixed unit trusts: The reform is a catalyst for restructuring. Fixed trusts may offer clearer tax outcomes and reduce s 100A exposure, especially for family groups with corporate beneficiaries.

Act now to avoid retrospective issues: Although the effective date is 1 July 2026, the ATO may apply new rules to existing arrangements. Proactive reviews and restructures before year-end can mitigate risks and ensure compliance.

Outstanding LRBA loan balances will be included in a member's Total Super Balance (TSB) calculation, potentially pushing members over the $3M threshold for the 15% Division 296 tax and affecting non-concessional contribution caps.

Related-party LRBA loans must now meet strict benchmark terms (codifying PCG 2016/5), including interest rate and repayment conditions, to avoid adverse tax treatment and potential non-arm's length income (NALI) issues.

Refinancing an LRBA is prohibited if it alters the single acquirable asset definition, meaning any change to the loan structure or asset security could jeopardise the borrowing exemption.

SMSF trustees with existing LRBAs should review their holding trust deeds and loan agreements now to ensure they comply with the new requirements before 1 July 2026.

Advisers should model the impact of including LRBA debt in TSB for clients with property gearing, as it may affect eligibility for contributions and trigger Division 296 tax liabilities.

Core Minimum Tax (s 101AA-101AG): Trustees of discretionary trusts ('minimum tax trusts') will be directly assessed on minimum tax income starting from 1 July 2028. Non-corporate beneficiaries receive a 30% non-refundable tax offset (s 101AF), effectively creating a 30% minimum floor tax across discretionary distributions.

Rewritten 'Fixed Trust' Definition (s 272-65 Schedule 2F): A trust is only fixed if beneficiaries have fixed entitlements to 100% of income and capital or no material discretionary powers exist. Any power to significantly vary entitlements or issue interests without all-beneficiary consent disqualifies the trust from being fixed.

Excluded Election Trust (EET) Regime (Div 6F s 102UYA-102UYH): Trustees of trusts in existence on 1 July 2028 can lodge a one-off irrevocable EET election. To qualify, trustees must make an EET nomination fixing equal percentages of both income and capital totalling exactly 100% among eligible beneficiaries (excluding complying super funds and discretionary corporate beneficiaries).

Subdivision 126-C Restructure Roll-Over Relief (1 July 2027 to 30 June 2030): A 3-year statutory window enables trustees to transfer all relevant trust assets out of discretionary structures into fixed unit trusts or companies without triggering CGT, trading stock profits, or balancing adjustments (assets carry over transferor's cost base under s 126-455).

Family Trust Distribution Tax (FTDT) Immunity (s 126-451): Transfers under Subdivision 126-C are statutorily protected against punitive FTDT under Schedule 2F, provided family group continuity requirements (s 126-440) are met. However, the transferee must maintain non-discretionary rights for at least 4 income years post-transfer to avoid clawback (s 126-430(5)).

Immediate Action for Accountants & Trustees: Audit all discretionary trust deeds before 1 July 2027. Model whether clients should (a) execute an EET election under Division 6F, or (b) execute an asset rollover under Subdivision 126-C into a fixed unit trust using T Legal's Fixed Conversion precedent to permanently shelter assets from the 30% minimum tax.

AMIT members will need to track two ownership periods: pre-1 July 2027 and post-1 July 2027, affecting the CGT discount percentage applied to capital gains from asset disposals.

The definition of 'post-July 2027 ownership period' now includes days from the trustee's acquisition date for AMIT members (via s 276-80), aligning with trust-level holding periods.

For pre-CGT assets held just before 1 July 2027, any capital gain attributable to the pre-1 July 2027 period is disregarded, but post-1 July 2027 gains may be taxable – review asset registers now.

Main residence exemption days are excluded from the post-July 2027 ownership period, so ensure Subdivision 118-B claims are documented to avoid overstating the discount period.

Update trust deeds and unit holder agreements to clarify trustee acquisition dates and beneficiary attribution rules, as these now directly impact CGT calculations for AMIT members.

The determination introduces a mandatory formula-based apportionment method for capital gains and losses, replacing ad-hoc or discretionary allocation methods currently used by many trusts.

Applies to realisation events (e.g., asset sales) occurring on or after 1 July 2027 that are 'deferral realisation events'—likely those where CGT was previously deferred under Division 100 or similar provisions.

The method uses defined terms such as 'cost base at start date', 'daily growth rate', and 'pre-start date capital proceeds' to split gains/losses between pre- and post-start date periods, requiring detailed asset-level records.

Trustees and accountants must update trust distribution minutes and accounting systems to incorporate the prescribed formulas, ensuring capital gains are correctly attributed to beneficiaries or the trustee.

The determination targets complex multi-class trusts, but SMSFs with direct property or shares that have had deferred CGT events will also be caught—review all trust deeds for streaming and apportionment clauses.

Since this is an exposure draft, there is an opportunity to provide feedback to Treasury on the practicality of the formulas, especially for trusts with historical assets lacking clear cost base data.

Loss quarantining rules (proposed under Division 26) will NOT apply to new residential dwellings, build-to-rent developments, and community housing projects, preserving full negative gearing benefits.

To qualify, the dwelling must be constructed after the announcement time (7:30 PM AEST, 12 May 2026) on land acquired without a dwelling, and a certificate of occupancy must be issued after that time.

Special provisions allow adding multiple new dwellings to existing land parcels, but each new dwelling must meet the same construction and certification requirements.

Capital works deductions (Division 43) and depreciation (Division 40) remain fully claimable for qualifying new residential properties, enhancing after-tax returns for investors.

SMSFs and property syndicates should consider using a Build-to-Rent Unit Trust structure to align with the carve-out and optimise tax outcomes for members.

Accountants must document the acquisition date, construction timeline, and certificate of occupancy issuance to ensure clients meet the eligibility criteria and avoid adverse audit findings.

Loss quarantining applies to established residential properties (not new dwellings) acquired after the 2026 Budget time, where portfolio leverage exceeds designated thresholds.

Exceptions for new residential dwellings and properties acquired before the Budget time are preserved, but careful timing rules apply—surviving spouses and co-owners have special extensions to maintain these exceptions.

The amendments disregard certain capital gains timing rules (e.g., s 118-192(2)) when determining acquisition dates, which may affect eligibility for the new dwelling exception—review all property acquisition dates.

Investors with high leverage should consider holding property via corporate beneficiaries or SMSFs to access structural tax rate differentials and potentially avoid the impact of loss quarantining.

Accountants must model the effect of quarantining on client taxable income and cash flow, and consider restructuring before 1 July 2026 to lock in grandfathering or alternative structures.