An Accountant’s Perspective: The 2026 Australian Budget

By Alec Brandon – Director and Principal of Proactive Accounting, 40+ years in the industry.

I’ve been in the accounting industry long enough to see a few budgets come and go. Some have made sense and some not as much. While some have left me scratching my head wondering whether the people creating the budget have ever actually run a business.

This one, if I’m honest, leans toward the latter.

Now before I cause a panic, I urge people not to make any big changes yet. I want to stress that nothing has been legislated. There’s time yet and plenty can still change, however, based on what’s been proposed, there are a few things worth talking about. Particularly if you’re a small business owner… which, by the way, is 97.3% of current businesses in Australia.

The “Wins”… If You Can Call Them That

Let’s start with the positives. It won’t take long.

There’s the $250 tax rebate. Which sounds nice until you realise it’s a little more than $4 a week. These days, that might get you half a coffee if you’re lucky or into sharing. Or two tanks of petrol for the year, so long as you don’t drive very far.

Then there’s the $1,000 deduction everyone is talking about. This is where things get a bit misunderstood.

It’s not $1,000 in your pocket. It’s a deduction. Meaning the actual benefit depends on your tax rate. If you’re on a lower income, you’ll see maybe $160. If you’re in the highest bracket, you might get $450.

So ironically, the more you earn, the more you benefit. Not exactly a groundbreaking redistribution of wealth.

And the $20,000 instant asset write-off? That’s been around for years. Making it permanent isn’t new, it’s just continuing what was already there and available.

So, I wouldn’t say there are too many winners here.

Negative Gearing: “Helping” First Home Buyers

Let’s talk about negative gearing. The idea, as it’s being sold, is to make housing more accessible for younger Australians. Sounds noble but, I’m not quite convinced.

Negative gearing has allowed investors to offset losses on an investment property against their income.

How Negative Gearing Works (worked):

Jack owns an investment property. He collects $500 a week in rent as per market prices. With changes to inflation and increase in rates, after mortgage repayments, Jack has outgoings equalling $700 a week for the property. Essentially, his investment property is costing him $200 a week to keep. Over the course of a year that equals $10,400.

Using negative gearing, Jack can then deduct the $10,400 of his annual taxable income thereby reducing his tax and offsetting his expenses for his investment property.

That’s how negative gearing works and it has helped people build wealth over time.

Remove that, and what happens? Smaller investors get pushed out, larger investors carry on as usual, fewer properties hit the market because people are now holding onto them (thanks to changes in Capital Gains Tax which I’ll get to in a moment) and prices don’t necessarily drop as our migration policy has and is remaining the same.

An effective strategy many first home buyers have used in the past to enter the market was by investing first, use negative gearing to offset expenses. They would then build equity, then upgrade by selling the investment property to boost their deposit for their first home.

That pathway has now effectively gone.

Let’s also not forget, we’re sitting in a market where the average home in any of Australia’s capital cities is around $1 million. Add rising interest rates, cost of living pressures, and limited supply and I don’t see how removing a key wealth-building tool suddenly makes things more accessible. If anything, I feel it may have the opposite effect.

Capital Gains Tax: The Quiet Killer of Incentive

This is the one that really concerns me because it doesn’t just impact property, it impacts shares, investments, and most importantly business.

I’ve been an accountant for well over 40 years and there is a truth most people don’t like to admit. Small business owners do not get paid like employees. When cashflow is tight, staff still get paid (as they should). But it’s the owner who doesn’t. When things go wrong, it’s the business owner/s who carries the risk.

That’s the trade-off in business: risk now, reward later. However, if the reward is significantly reduced, what’s the incentive?

Previously, you might sell a business and pay around 23% tax. Under these changes, that could be closer to 47%. That’s not a small tweak, that’s a fundamental shift with huge implications.

For those building a business from scratch, what we call “sweat equity”, there’s another issue. If your starting cost is effectively zero, indexing it for inflation still gives you… zero.

So, all the years of effort? As far as the tax system is concerned, they don’t count. You can see why people are starting to joke about having a “47% silent partner.” Only it’s not really a joke, rather a depressing reality for those who have worked hard to create their version of the Aussie dream.

In my view, a few things are likely as a result, businesses that can move offshore, will. Innovation will slow locally. Entrepreneurs and investors will look elsewhere. Smaller operators will think twice before even starting.

We’re already seeing countries like New Zealand actively inviting Australian businesses over. And frankly, I can understand why some would consider it.

If the system stops rewarding risk, people will stop taking it.

Trusts Are Not Dead, But They Are Under Pressure

Trusts have been around longer than companies so they’re not going anywhere but a flat 30% tax from the first dollar certainly changes the equation significantly.

For many small business owners, particularly family-run businesses, trusts have been about flexibility and asset protection, not just a tax minimisation strategy.

I’ve heard a few comments along the lines of “trusts are only for the wealthy” or “ordinary Australians don’t use them.” With respect, that’s simply not true.

After 40 years in this profession, I can tell you firsthand, mum-and-dad business owners use trusts all the time. Not because they’re trying to dodge tax, but because they’re trying to run a sensible structure that protects what they’ve built and gives them flexibility. That’s really the key word here – flexibility.

A discretionary trust allows you to distribute income based on circumstances. That might be:

Supporting adult children who are studying or earning less
Retaining income in the structure when needed
Managing risk across a family group when there are issues of capacity and responsibility
Planning for a future that hasn’t happened yet, like distributing wealth to future grandchildren

It’s not about being clever, it’s about being practical.

Now, introduce a flat 30% tax rate on discretionary trusts from the first dollar, and suddenly that flexibility comes at a cost, quite a significant one.

For many small business owners, particularly those earning under $200,000 per year, the numbers just won’t make sense anymore. They’ll be paying more tax than they would under a company structure, which, at 25%, is now comparatively more attractive.

The only option becomes to restructure. Restructuring isn’t just a quick form and a signature, it involves:

Legal advice
Accounting advice
Potential capital gains tax events
Stamp duty considerations
Changes to lending arrangements
Updates to contracts, entities, and compliance obligations

In short, it costs money and not a small amount.

For many business owners, this isn’t just a policy change. It’s a forced decision to spend thousands of dollars just to stay compliant and efficient. All of that for something that worked perfectly well yesterday.

Trusts Were Never Just About Tax

Another misconception is that trusts exist purely for tax minimisation. They don’t. In many cases, they exist for the purpose of asset protection and greater control.

Here’s a simple example.

A family has three children. One is financially responsible. One is still finding their feet. And one, let’s say, has a gambling problem. A discretionary or testamentary trust allows the parents to ensure that wealth is distributed appropriately, supporting each child without putting everything at risk.

Now compare that to a fixed trust or unit trust, which is currently being suggested as the alternative. Those structures distribute wealth strictly based on ownership percentages. There is no flexibility, no discretion or no safeguards. So, in the example above? That third child gets their share whether it’s a good idea or not.

These are real-life family issues that happen all the time.

Testamentary Trusts Implications

This is where it gets even more concerning. Testamentary trusts (those set up through a will) are one of the most effective tools for intergenerational wealth protection. They allow families to:

Protect assets for future generations
Manage distributions over time
Safeguard vulnerable beneficiaries
Maintain control beyond death

Now, if these trusts are subject to the same tax treatment, their effectiveness is significantly reduced. In my view, if there’s one area that should be carved out or protected, it’s this one. Otherwise, we’re not just talking about tax anymore, we’re talking about undermining estate and asset protection planning altogether.

Some might even argue it starts to resemble a form of death tax, whether it’s labelled that way or not.

Who Does This Really Impact?

There’s a narrative that these changes to trusts are targeting the “mega wealthy.”

Again, I don’t see that playing out in reality. Those with significant wealth:

Already have sophisticated structures
Already pay effective tax rates above 30%
Already have access to high-level advice

They’ll adapt, they always do.

The ones who are going to feel this are:

Small family businesses
Everyday investors
People trying to build something over time
Parents trying to set up the next generation

In other words, the middle. I do feel that’s consistent with what we’re seeing across the board in this budget.

Why the Push Toward Companies?

When you step back, there seems to be a clear directional push here. Trusts become less attractive and Companies become more attractive.

Now, there’s nothing wrong with companies, they most certainly serve a purpose. However, they’re fundamentally different.

With a company:

Ownership is fixed via shares
Profits are retained or paid as wages/dividends
There’s less flexibility in distributing income
There are different compliance and superannuation implications

Importantly, there’s more visibility and control from a regulatory perspective. With a discretionary trust, no one “owns” the income until it’s distributed. With a company, ownership and entitlement are clear from day one.

Whether intentional or not, this shift effectively nudges business owners into structures that are more rigid and easier to regulate. I’ll let you draw your own conclusions from that.

Small business employs a huge portion of Australians.

It drives local economies, supports families, communities, and schools. When small business struggles, it doesn’t stay contained, it flows through everything. Yet this budget doesn’t feel like it’s encouraging business growth, it feels like it’s making it harder than it already is.

So, What Should Business Owners Do?

Right now? Not much. It’s very important to remember that nothing has been legislated. There’s still negotiation to come. Things may change, perhaps significantly.

The worst thing you can do is panic and make rushed decisions.

What I would recommend business owners do is:

Get clear on your long-term goals
Understand what you’re building (and why)
Stay informed as things evolve
Speak to your accountant before making structural changes as your strategy now matters more than ever.

Final Thoughts

After four decades in this industry, I’ve learned one thing: Policy comes and goes but behaviour follows incentives. And right now, the incentives for small business, investment, and innovation are not exactly what I’d call inspiring.

That’s the part I find most disheartening. When Governments make it harder for people to build something, eventually fewer people will try. That being said, after 40 years in the industry, we are still here, we have small business clients that are thriving and I am hopeful they will continue to do so. Let’s wait and see.

This is an opinion piece based on experience and general observations. It is not intended as specific financial or taxation advice. Every situation is different, so before making any decisions, I strongly recommend speaking with a qualified professional who understands your personal circumstances.

If you are concerned about what the changes could mean for you, your family and your business, get in touch with the Proactive team for a friendly chat.

The “Wins”… If You Can Call Them That