The 2026–27 Federal Budget introduced several significant proposals for tax reform relating to capital gains tax, property investing, discretionary trusts and companies.
Outlined below are some pharmacy related measures announced, however, unlike last year’s federal budget, there were fewer new announcements relating to community pharmacy. However, Peak Strategies being tax advisors and pharmacy accountants – we note that many of the tax reform announcements could have an impact on your pharmacy business and personal tax groups.
While several tax measures remain proposals and are not yet law, early consideration is important for planning and structuring decisions. We note that this advice is general and you should contact your tax accountant for advice specific to your needs.
Investors and Individuals
Changes to the capital gains tax discount
The Government announced a proposal to replace the 50% capital gains tax (CGT) discount for individuals, trusts and partnerships, with an inflation-indexed cost base approach for assets held for more than 12 months, and that a 30% minimum tax will apply for capital gains realised on or after 1 July 2027.
Further clarification is still required regarding the implementation of these proposed measures. Based on the information currently available, the key points are outlined below:
· For business owners and property investors, the value of eligible assets as at 1 July 2027 will need to be determined by either:
- Obtaining a market valuation OR,
- Applying an ATO-prescribed apportionment formula, which will estimate the asset’s value at 1 July 2027 based on its growth over the ownership period.
· The 50% CGT discount will apply to the difference between the asset’s cost base and its value at 1 July 2027. Any capital growth arising from 1 July 2027 onwards will instead be subject to the proposed inflation indexation method, with the 1 July 2027 valuation forming the new cost base for CGT purposes.
· Where an asset is sold after this date, a minimum tax rate of 30% would apply to the portion of the capital gain accrued from 1 July 2027 onwards, unless the taxpayer is receiving Government income support payments.
· If an existing asset is sold before 1 July 2027, the proposed new CGT rules will not apply.
· The main residence exemption for CGT purposes will remain unchanged, and the four small business CGT concessions will continue to apply under the existing rules.
· For shares or investment properties acquired before 19 September 1985 (pre-CGT assets), a new cost base will be established from 1 July 2027. As a result, capital gains arising on disposal after this date will no longer be fully exempt from CGT.
Determining capital gains for assets sold after 1 July 2027 may become significantly more complex, requiring gains to be apportioned between pre- and post-1 July 2027 periods, with different calculation methods applying.
Also, some are concerned about the ATO’s ‘specified apportionment’ method and that the outcome may differ significantly depending on holding periods and inflation assumptions.
If these changes are enacted, John may be navigating a particularly busy period performing pharmacy valuations. Further details will be circulated to our readership as further information comes to light.
30% minimum tax on discretionary trusts
This closely watched proposal has tax payers very nervous - the introduction of a 30% minimum tax on the taxable income of discretionary trusts, is scheduled to commence from 1 July 2028. Family trusts remain widely used for pharmacy business ownership and investments among many family group tax structures.
· Under this new proposal, trustees of discretionary trusts would be required to pay this minimum tax, and individual beneficiaries will receive non-refundable credits for the tax paid by the trustee in proportion to the distribution they receive.
· Corporate beneficiaries, often referred to as ‘bucket companies’, however, will not be entitled to any tax credits for tax paid by the trustee. This means both the trust level and the bucket company level are taxed, significantly reducing the incentive for trustees to distribute to bucket companies.
· To support small businesses and others seeking to restructure out of discretionary trusts, the Government will provide expanded rollover relief for three years starting 1 July 2027. This relief will facilitate transitions into other entity types, such as companies or fixed trusts.
Under the current legislation, there are significant transactional costs, in particular, transfer duty, that make restructuring unappealing. While the proposed three-year rollover relief provides some transitional support from an income tax perspective, the big question will depend on complementary relief at the State and Territory level for transfer duty.
Negative Gearing
Under the current rules, where a taxpayer holds a residential investment property and incurs a net loss for the financial year, these losses can be offset against other income earned by the taxpayer.
· From 1 July 2027, negative gearing will be limited to new residential builds only.
· Investment properties held before budget night will be exempt from the negative gearing changes.
· Losses from established properties purchased after budget night will be deductible only against rental income or capital gains from residential properties. If there is an excess rental loss, it will be carried forward so investors can claim a deduction in future years when there is a net rental gain.
· These negative gearing changes do not apply for SMSFs holding residential investment properties or entities holding commercial properties.
Tax Relief Measures For Individuals
In addition to previously announced tax cuts:
· From 1 July 2027, the Government will introduce a new $250 Working Australian Tax Offset (WATO) to be applied against income derived from wages, salaries, and sole trader business income.
· Beginning in the 2026-27 financial year, a $1,000 instant tax deduction will be available to all Australian tax residents who earn income and incur expenses on work, without keeping receipts when they lodge their tax return, making tax time simpler and delivering more cost‑of-living relief. Charitable donations, and other non‑work related deductions can still be claimed on top of the instant tax deduction.
Business Measures
The $20,000 instant asset write‑off for small business will be made permanent, simplifying tax obligations and improving cash flow.
Tax Loss Treatment For Companies
Currently, if a company incurs losses in an income year, it must wait until it returns to profitability before using the tax losses to reduce taxable income.
· For tax years commencing on or after 1 July 2026, companies will be able to carry back revenue tax losses and offset them against tax paid up to two years earlier.
· For companies that elect to apply this measure and meet the requirements, they will receive a tax refund in the loss-making year equal to the tax that has been offset by the losses carried back.
· From 1 July 2028, start-up companies with an aggregated annual turnover of less than $10 million that generate a tax loss in their first two years of operation will be able to use the tax loss to generate a refundable tax offset.
· The offset will be capped at the value of fringe benefits tax and withholding tax on wages paid to Australian employees in the loss year.
These measures are welcomed as they help businesses that manage cyclical downturns, provide greater flexibility for companies to smooth their tax liabilities, support business resilience and provide a valuable cash flow boost for start-up companies.
Rollback of Electric Vehicle FBT Exemptions
Under current law, eligible electric vehicles (EVs) are generally fully exempt from FBT for employers. The Government will transition these arrangements to a permanent 25% fringe benefits tax (FBT) discount. The Treasurer stated existing EV arrangements will not be impacted.
· Until 31 March 2027.
- No changes, EVs remain fully exempt if under the luxury car tax (LCT) threshold.
· 1 April 2027 – 31 March 2029.
- Less than $75,000, still 100% exempt.
- Greater than $75,000 but below the LCT threshold. 25% discount on FBT.
· From 1 April 2029.
- All EVs below the LCT incur a 25% FBT discount.
Dynamic PAYG Tax Instalments
· From 1 July 2027, businesses (and potentially individuals) can opt in to report and pay PAYG instalments monthly. Businesses will also be able to use an ATO approved calculation embedded in their accounting software to calculate and vary their instalments, aligning payments with real-time business activity.
· Taxpayers with a demonstrated history of non‑compliance will be required to report and pay PAYG instalments monthly.
While the measure is intended to streamline compliance and better align instalments with business performance, many taxpayers may prefer to remain on quarterly instalments due to cash flow and administrative considerations.
Pharmacy
The Government will provide funding of $447.9 million over five years from 2025–26 to reduce health risks through preparedness and prevention measures. These include:
· $379.4 million to provide funding for the National Medical Stockpile for pandemic preparedness and response to health emergencies.
· $68.5 million to support elimination of HIV transmission in Australia by 2030 by providing HIV treatment and pre‑exposure prophylaxis (PrEP) to people who are not eligible for Medicare, building on previous HIV prevention measures.
The Government will provide $590.7 million to improve access to medicines, vaccines and health technologies for Australians. This includes:
· Funding to improve vaccination amongst children under five years by expanding the NIP Vaccinations in Pharmacy program to children under five and continuing the childhood immunisation campaign.
· Funding to support the addition of the Respiratory Syncytial Virus (RSV) vaccine Arexvy® to the National Immunisation Program (NIP) for older Australians.
Guild national president, Professor Trent Twomey said this measure is ‘a positive and practical reform’ that will benefit community pharmacy in the coming years.
Conclusion
The 2026–27 Federal Budget proposes a range of significant tax reforms that could affect your business and personal tax circumstances. As many of these measures remain proposals and require further legislative details, taxpayers should avoid making significant decisions until greater certainty emerges. That said, an early review of existing structures, investments and long-term planning strategies may help identify opportunities and prepare for potential changes. If you would like to discuss how these proposed changes may affect your specific circumstances, please contact your trusted tax adviser.
References: Federal Budget 2026–27 Papers; Treasury Budget Statements; Department of Health and Aged Care; Pharmacy Guild of Australia; ATO fact sheets and guidance; commentary from BDO.