The 2026–27 Federal Budget, together with recent legislative changes, signals a shift in Australia’s private wealth landscape. Reforms affecting high-balance superannuation, discretionary family trusts and capital gains tax (CGT) alter the relative efficiency of established wealth structures
These changes have important implications for how different structures are used within long-term wealth planning.
1) Realignment of the CGT Discount
From 1 July 2027, the current 50% CGT discount for individuals, partnerships and trusts will be replaced by a system based on cost base indexation linked to the Consumer Price Index (CPI) for assets held longer than 12 months. A 30% minimum tax floor will also apply to real capital gains.
For portfolios delivering returns above inflation, this is likely to result in a higher overall tax liability on disposal. The introduction of a minimum tax floor also limits the ability to manage outcomes through timing, such as realising gains in lower-income years.
2) Minimum Taxation of Discretionary Family Trusts
From 1 July 2028, a 30% minimum tax rate will be introduced at trustee level on the taxable income of discretionary trusts.
On 18 June, the Government announced a concession for certain testamentary trusts, which will be excluded from the minimum tax.
Under the revised framework, income-splitting strategies become less effective, as tax is applied at a fixed rate regardless of beneficiary circumstances. In addition, excess tax credits allocated to lower-income beneficiaries are non-refundable, reducing overall efficiency. Similar considerations apply where corporate beneficiaries are used.
3) High-Balance Superannuation (Division 296)
Division 296, enacted in March 2026, introduces a two-tier structure for individuals with a Total Superannuation Balance (TSB) exceeding AUD 3 million:
- An additional 15% tax (30% effective rate) on earnings linked to balances between AUD 3 million and AUD 10 million
- An additional 25% tax (40% effective rate) on earnings linked to balances exceeding AUD 10 million
While indexation thresholds have been retained and the tax applies to realised earnings, the changes introduce a clear limit on the tax efficiency of high-balance superannuation structures.
Implications for Planning Structures
Taken together, these changes reduce the long-term effectiveness of traditional approaches, including discretionary trust income-splitting and reliance on CGT discounts.
They also highlight the importance of reviewing how different structures interact within a client’s wider arrangements, particularly where taxation is driven more by fixed rules than individual circumstances.
Within this context, insurance-based solutions may be considered as part of a broader planning framework. Their treatment can differ from direct holdings, particularly in relation to the timing of taxation and the treatment of internal investment activity.
Such structures may support long-term capital accumulation and reduce the need for ongoing recalibration of individual holdings. They may also simplify administration in certain cross-border scenarios. However, their suitability should be assessed considering the client’s wider objectives, residence and tax position.