Graeme Colley, a respected educator, policy advisor, and technical expert with over 30 years’ experience in taxation and superannuation, is back with a new blog post covering key questions around Payday Super and how to navigate this upcoming change.
2026 Federal Budget Overview
The 2026-27 Federal Budget had little impact from an SMSF perspective, with the main changes impacting CGT, negative gearing and distributions from discretionary trusts. However, for trustees of SMSFs and their advisers, the main issues are to ensure that the fund is ready for the changes that will take place from 1 July 2026 with the introduction of Payday Super and Division 296.
The main issue with Payday Super is to ensure the SMSF is able to receive employer contributions by 1 July 2026. Confirm that the funds electronic service address (ESA) provider can support the updated SuperStream standards, which will allow the client’s SMSF to keep receiving contributions on time.
The issues with Division 296 are not as urgent as the introduction of Payday Super, as the assessments will be made after the fund has lodged its 2026-27 annual return. However, in the interim, it should be ensured that the fund’s trust deed allows payment of the tax, and the valuation of fund assets and income will be accurate for purposes of the legislation.
Here is a summary of the main Budget announcements.
Changes to capital gains tax arrangements
The current 50% discount for CGT assets held for longer than 12 months will be replaced from 1 July 2027 with cost base indexation and the minimum tax of 30% on the capital gain. The change will apply to all CGT assets, including pre-1985 CGT assets. The new rules will apply to individuals, trusts and partnerships, and they will not apply to superannuation funds, including SMSFs. This means the 1/3rd CGT discount will continue for super fund assets held for longer than 12 months.
Assets that are already owned and are realised after 1 July 2027 will have a time-based apportionment, which will calculate part of the taxable capital gain assessed under the 50% discount rule and part under the new indexation rule.
There are transitional arrangements that continue to allow the 50% discount to capital gains that are realised before 1 July 2027. In a similar way, realised capital gains on pre-1985 assets that occur before 1 July 2027 will continue to remain free of CGT.
Where a person acquires a newly built eligible residential property, they can choose either the 50% discount method or the indexation method when the property is eventually sold.
Income support payment recipients, including Age Pension recipients, will be exempt from the minimum 30% tax. It is assumed that the ordinary income tax rates will apply to the taxable capital gains in these cases.
Example – asset acquired before 12 May 2026 (budget night)
Elizabeth and Patrick purchased a property on 8 June 2021 for $500,000, and they intend to sell it on 28 October 2028. The property has been negatively geared, and the losses continue to be fully grandfathered.
Assume that the property is sold on 28 October 2028 for $1.1 million. The pre-12 May pre-Budget period from 8 June 2021 is 1800 days (2/3rds), and the post-12 post-Budget proportion to 28 October 2028 is 900 days (1/3) inclusive.
The taxable capital gain on a time apportionment basis is:
$1.1 million – $500,000 = $600,000
Pre 12 May pre-Budget period = $600,000 x 2/3 x 50% = $200,000
Post 12 May post Budget period = $180,000 (after reduction for indexed cost base) x 1/3 = $60,000
Negative Gearing
Negative gearing on residential property will change from 1 July 2027. Losses from established residential properties will only be deductible against the rental income or the capital gains from residential properties. Losses will be carried forward and can be offset against residential property income in future years. This will also apply to shares and other geared investments.
However, residential property acquired before 12 May 2026 is fully grandfathered, and losses can be claimed as they always have been. Any newly built eligible residential property that is negatively geared are exempt from the change, and losses can be claimed against other income in the year they are incurred.
Superannuation funds, including SMSFs, are exempt from the negative gearing changes, and therefore, there will be no changes to the current arrangements for limited recourse borrowing arrangements.
Minimum tax on discretionary trusts
From 1 July 2028, trustees of discretionary trusts will be liable for a minimum tax of 30%, and beneficiaries other than corporate beneficiaries will receive a non-refundable credit for the tax paid by the trustee.
Any discretionary trust distributions received by SMSFs are treated as non-arm’s length income and are taxed in the fund at 45%.
The Biggest updates coming for Self Managed Super Funds and Businesses remain as Payday Super and Division 296.
You can find some resources below:
● Payday Super – An update from Graeme Colley
● Navigating Payday Super with Graeme Colley – On-Demand Webinar
● Division 296 – An update from Graeme Colley
If you’d like to speak to one of the Cloudoffis experts, you can reach out here.