Federal Budget 2026: Tax Changes Impacting SMSF Members

There was plenty of tough love in the budget for pretty much every kind of taxpayer except for super funds (including SMSFs).  It was one of those years where not being mentioned in despatches was a great result.

Where super fund members will sit up and take notice, however, is where changes to other tax structures they use might change the way they use their super.

Others who specialise in tax more broadly will have more comprehensive summaries of the budget changes. But a very brief overview of three key (non super) changes most relevant for a typical SMSF member is as follows:

• Capital gains tax will change for individuals, partnerships and trusts (but not super funds):
  • the 50% discount will go, and be replaced by
  • an indexed cost base approach coupled with a minimum tax rate of 30%
  (Changes start from 1 July 2027 with some grandfathering for pre-existing accrued gains)
• Discretionary trusts (even discretionary testamentary trusts) will start paying tax at 30% before distributing to beneficiaries. While individual beneficiaries will get a non refundable tax credit to reflect that, corporate beneficiaries will not. The outcome will be a minimum tax rate of 30% for individual beneficiaries and potentially worse for companies.
  (Changes start from 1 July 2028 with very limited grandfathering for  some types of income eg primary production income.)
• Negative gearing will be pared back for residential properties (but not other assets) for individuals, most trusts, partnerships and companies but not superannuation funds. In future, impacted investors will only be able to offset their costs against all income (not just the income from that property) if they’re buying new residential properties. Owners of established residential properties can’t offset losses from the property against other income (salary, other investments). They can, however, carry these losses forward and offset them against future income or capital gains from the property.
  (Changes start from 1 July 2027 for properties acquired after 12 May 2026)

Implications for super fund members?

Thinking about using a tax deductible super contribution (maybe even using the catch up concessional contributions) to offset capital gains earned personally or discretionary trust distributions?

The maths might change here. Once the minimum 30% tax rate on some capital gains and trust distributions applies, it might not make sense to claim deductions that seek to reduce an individual’s marginal rate below 30%.

Wondering about Division 296?

The tax treatment of capital gains and income for super funds and companies is not changing. So someone planning to withdraw money from super and invest it via an investment company is in the same position as they were pre-budget.
Those envisaging the use of a family trust will need to be wary of relying on:

• distributing income to a bucket company - that's under a cloud,
• distributing capital gains to individuals on lower marginal tax rates - also challenged by the 30% minimum tax rate.

Capital gains tax on high growth assets could now be worse outside super than inside super – even if Division 296 tax applies at the maximum level. 

In fact, it may make more sense for low growth assets to be held outside super than it is at the moment.

Overall, these changes encourage pausing before rushing to withdraw money from super.

Re-doing your Will?

Think about whether your testamentary trust should be discretionary or fixed. Most are discretionary for all the logical reasons – flexibility around how to distribute the income and capital gains – but these will be caught by the new minimum tax rate of 30% on trusts.

Of course, the Budget papers and the Government’s accompanying fact sheets are proposals only. As we saw with Division 296, what ends up being legislated could be vastly different.

But as is often the way, sometimes changes to everything else makes a difference to the role a particular structure plays in an individual’s overall savings approach. This budget just shifted the relativities very much in favour of super.