Budget 2026. What Has Actually Changed.

Two material developments in eight days have reshaped the Budget 2026 tax reform package. The Government announced a set of concessions on 18 June. The Labor–Greens deal of 23 June has now cleared the way for the Treasury Laws Amendment (Tax Reform No.1) Bill 2026 to pass the Senate. This update covers only the changes and what each means for ATB clients. The full briefing on the underlying framework is in our earlier client newsletter. 

Five things have moved. The small business CGT threshold has been lifted from $2M to $10M. All testamentary trusts are confirmed exempt from the trust tax. A new Innovative Business CGT Concession has been designed for startups (with strict eligibility). SMSFs will be banned from new borrowing to acquire residential property. The Treasurer’s discretion to expand the 50% CGT discount has been removed. The Bill is expected to pass the Senate before 2 July 2026. 

This is the most significant practical change for many of our clients. The original $2M threshold effectively excluded a substantial portion of our family business book from the 50% active asset reduction they had to rely on the $6M MNAV test instead. Raising the threshold to $10M opens the concession back up to those clients. 

Combined with the retained 15-year exemption and retirement exemption, the small business CGT concessions remain among the most powerful family wealth protection tools in the system. For ATB clients with turnover in the $2M–$10M band who were nervous about losing concession access under the new regime, the position has been materially improved. 

Practical takeaway: if you are within the next five to ten years of a possible business sale or succession, this change strengthens the case for ensuring your active asset position, MNAV calculation and structure are all in order well ahead of any transaction. 

The original Budget protected only EXISTING testamentary trust assets from the new 30% minimum trust tax. The 18 June announcement extends that exemption to ALL testamentary trusts  including future discretionary testamentary trusts established under Wills written today. 

This is the single most important change for estate planning clients. The original Budget left a critical question unresolved: would testamentary trust provisions written into a current Will, but not yet activated by death, fall under the new regime or the existing rules? That question is now definitively answered they fall under the existing rules. 

Estate plans drafted years ago, without proper discretionary testamentary trust provisions, are leaving real value on the table. For clients with intergenerational wealth ambitions, the case for reviewing the Will, and ensuring testamentary trust provisions are properly designed, has just become significantly stronger. 

Practical takeaway: if your Will has not been reviewed in the past three to five years, or doesn’t currently include testamentary trust provisions, this is the time to bring estate planning forward. The carve-out is real and valuable, but only delivers value if the trust is in the Will. 

The Government has released a consultation paper on the design of the IBCC, intended to preserve the 50% CGT discount for early-stage investors in genuinely innovative startup businesses despite the broader move to indexation plus the 30% minimum tax from 1 July 2027. 

Proposed eligibility the company 

• Annual turnover under $50 million. 

• Operating for less than 10 years (extended to 15 years for some sectors such as biotech, medtech, deep tech). 

• Unlisted and independent. 

• Genuinely focused on developing new or significantly improved innovations for commercialisation, with high growth potential. 

• Must satisfy an ESIC-style 100-point innovation test (or principles-based equivalent). 

Proposed eligibility the shares and the investor 

• Shares must be new equity issued after 30 June 2027 (no retrospective application). 

• Minimum five-year holding period sell before year five and the discount is lost. 

• Available to individuals, partnerships and trusts only NOT companies, foreign residents or super funds. 

• Proposed lifetime cap of $10 million in gains per investor that can benefit from the IBCC. 

• Eligible investors choose between the 50% discount or indexation plus the minimum 30% tax for gains accrued from 1 July 2027. 

Submissions on the consultation paper are due 10 July 2026. Treasury is seeking specifically on the $50M turnover ceiling, the 10-year age limit (and the 15-year extension for biotech/medtech/deep tech), the practicality of the five-year holding period, the appropriateness of the $10M lifetime cap, and the workability of the ESIC-style innovation tests. 

On the face of it, this preserves the 50% discount for founders, employee share scheme participants and early-stage investors in qualifying startups. On a closer read, it is narrower than the headline suggests. 

The five-year holding period is the issue. In Australia’s actual startup market, partial liquidity events, secondary sales, founder buyouts, and pre-IPO trades regularly happen inside that window. Anyone caught by an exit before year five loses the concession entirely. Industry feedback from the consultation has been blunt: this would penalise the very patterns that make the ecosystem work. 

The $10M lifetime cap is also material. Under the existing CGT discount there is no cap. For founders heading toward a genuine large exit, the difference is halving the entire gain versus halving only the first $10M. That meaningfully changes the calculation for the most successful outcomes. 

The ESIC-style innovation test is judgment-heavy and milestone-based. Smaller teams without legal advice may struggle to navigate it. Well-advised, well-funded founders will navigate it more easily  the opposite of what a broad-based innovation policy should achieve. 

Practical takeaway for ATB clients with founder equity, ESS holdings, or angel investment positions: this is worth tracking through to final legislation, but it is not yet final, the design is contested in industry, and the eligibility gates are real. Engagement in the consultation process either directly or through industry bodies is the right response now. Restructure decisions should wait until the eligibility rules are settled. 

The Government has confirmed that the amendments will be made in primary legislation passed by both Houses not in delegated legislative instruments that can be made or changed by ministerial discretion. Several ministerial discretions in the original Bill are being removed and replaced with detail in the legislation itself. 

Technical, but important. Primary legislation requires both Houses of Parliament to amend. Legislative instruments can be remade by a future Minister with limited Parliamentary scrutiny. 

For advisers and clients planning around the new rules, locking the detail into primary legislation gives meaningful certainty about how the system will actually operate  rather than leaving key design questions to the discretion of the Treasurer of the day. 

Practical takeaway: this addresses one of the strongest concerns raised by the legal and accounting profession during the consultation period. It is a win for certainty, even though it does not change the substance of the rules themselves. 

First, a ban on SMSFs entering new limited recourse borrowing arrangements (LRBAs) to acquire residential property. Second, the removal of the Treasurer’s discretion to add any further asset classes to the 50% CGT discount, or to declare any further property classes eligible for negative gearing against salary income. 

The amendment (Senate Amendment 3886, moved by Senator Nick McKim on behalf of the Greens) makes a single operative change to subsection 67A(2) of the Superannuation Industry (Supervision) Act 1993: an SMSF will only be permitted to enter into a new LRBA over real property where the property constitutes business real property. 

Key mechanics 

• Applies prospectively only commencement date is the 45th day after the amending Act receives Royal Assent. 

• With Royal Assent expected in the next week or two, the effective ban is anticipated to commence in mid-August 2026. 

• Existing LRBAs entered into before commencement are grandfathered. 

• Refinancing of pre-commencement LRBAs is permitted (provided the refinance does not increase the borrowing). 

• Acquisition arrangements entered into (contracts exchanged) BEFORE commencement are protected, even where settlement occurs after the ban takes effect. 

• Business real property LRBAs are NOT affected SMSFs can still borrow to acquire genuine business real property used in a business. 

If you are an SMSF trustee currently in the process of acquiring residential investment property using an LRBA finalise contracts before commencement. The legislation explicitly protects acquisitions where contracts are exchanged before commencement, even if settlement is later. Don’t wait for the legal deadline. Lenders typically withdraw products well before any law passes  in 2019 the major banks pulled SMSF residential lending products before any legislation was even drafted. 

Existing SMSF residential LRBAs are completely protected. There is no retrospective application. Your current arrangement continues exactly as before until you elect to dispose of the property. 

Business real property LRBAs are untouched. SMSFs can continue to borrow to acquire commercial property, factory premises, professional rooms and similar business real property used in carrying on a business. This is an important carve-out for our practice owner and SME client base. 

For clients who were considering using their SMSF to enter the residential investment market the window has effectively closed. The alternative pathways (direct personal acquisition under existing negative gearing rules, family trust acquisition, or new build acquisition under the IBCC carve-out for newly built properties) all remain available, and your specific position needs to drive the decision. 

Practical takeaway: any SMSF residential LRBA contemplated should have contracts exchanged in the next several weeks at the latest. Beyond that, the question becomes whether residential property is the right asset for the SMSF at all, given the practical lending market may close before legislation does. 

The original Bill granted the Treasurer broad discretionary power to add additional asset classes to the 50% CGT discount, and to declare additional types of property investment as eligible for deducting losses against salary income (i.e., negative gearing). The Greens have secured the removal of these discretions. 

The carve-outs that exist (the IBCC for innovative startups, the new build negative gearing exemption, the small business CGT concessions package) are locked in by primary legislation. The Treasurer cannot expand them without further legislation. The scope of the concession framework is therefore narrower and more certain than it would otherwise have been. 

For clients planning around the rules, this is again a certainty win. It means the new build negative gearing exemption is what it says it is  it cannot be administratively expanded to other property types. The IBCC is the IBCC  it cannot be expanded by ministerial declaration. 

Practical takeaway: planning conversations can proceed with greater confidence about what the eligibility boundaries will be. The flexibility for future expansion is gone, which is a constraint, but the certainty for clients planning today is an improvement. 

The case for prepare-now-decide-later has been completely vindicated by the past two weeks. Five material amendments in eight days. Clients who restructured on the original Budget framework in May or early June are now confronting a materially softer environment than they prepared for  plus the cost of the restructure, plus state stamp duty in most cases, plus the dismantling of asset protection structures that took years to build. 

With the Bill now expected to pass before 2 July, the legislation moves from “announced and shifting” to “passed primary law with detailed implementing instruments to follow.” The strategic posture for clients can now shift accordingly: 

• For most clients: Continue to prepare. Continue to monitor the implementing instruments and the IBCC consultation outcome. The major decisions  trust restructures, business sales, property dispositions still benefit from waiting for the implementing detail. 

• For SMSF clients holding residential property under existing LRBA: No action needed. Your arrangement is grandfathered. 

• For SMSF clients with residential property purchase in progress: Exchange contracts before commencement (anticipated mid-August). Lender appetite is the practical risk, not the legal deadline. 

• For clients with estate planning needs: Bring the Will review forward. The testamentary trust exemption is real and the design needs to be in the document to deliver value. 

• For clients with founder equity, ESS or angel investments: Engage in the IBCC consultation process before 10 July if your circumstances are affected. Treasury has signalled openness on the 10-year age limit, the holding period and the $10M cap industry submissions matter. 

• For clients with super planning capacity: Maximise concessional contributions before 30 June. The 2020–21 carry-forward window closes for those with super balances under $500,000. 

For everyone: the family wealth protection structures that have been working for years the asset protection role of the trust, the succession control via the appointor mechanism, the creditor firewall continue to deliver exactly as before. Tax outcomes change on certain forms of income from 2028. The structural protections do not.

The Bill is expected to pass the Senate this week. From that point the focus shifts to the implementing instruments, the final design of the IBCC, the definition of “new builds” for negative gearing purposes, and the detailed mechanics for the trust tax from 2028. Each of these will take months to settle. 

ATB will continue to monitor closely and update clients as the detail emerges. Family wealth protection planning remains best done with calm, holistic thinking across tax, structure, super, estate and succession  not in reaction to each press release. 

Sources 

Prime Minister of Australia, “Tax reform implementation for small business and startups” (media release, 18 June 2026).  Treasury, consultation paper on the Innovative Business CGT Concession (released 18 June 2026, submissions due 10 July 2026).  Prime Minister’s Office, statement on Labor–Greens deal (23 June 2026).  Senate Amendment 3886 (McKim, Greens) to the Treasury Laws Amendment (Tax Reform No.1) Bill 2026.  Australian Senate Hansard, second reading speeches (24 June 2026).  Accountants Daily, “Controversial CGT changes clear both houses of Parliament” (24 June 2026).  Coverage in the Australian Financial Review, SmartCompany, SMSF Adviser, Startup Daily and Capital Brief (18–25 June 2026). 

Important information 

This update has been prepared by ATB Partners for the general information of our clients and contacts and is current as at 25 June 2026. The measures discussed are at various stages of the legislative process. Some have been amended in primary legislation expected to pass shortly. Others remain proposals under consultation (including the Innovative Business CGT Concession, with submissions due 10 July 2026). The final form of any legislation may differ from what has been announced or amended. This update is general in nature and does not constitute personal financial, tax, legal, accounting, superannuation or investment advice. It has been prepared without taking into account any individual’s specific objectives, financial situation, family circumstances, business structures, succession plans or personal goals. Every client’s situation is different. Before acting, or refraining from acting, on any matter discussed in this update, clients should obtain professional advice tailored to their own specific circumstances.

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