August 2026 Newsletter
As we begin to wrap up the winter season, we can embrace the last of the cooler days and make the most of the opportunities the months ahead may bring.
July provided some welcome signs for the Australian economy, although inflation pressures persist. CPI eased to 3.8% in the year to June, down from 4.0% in May, supporting expectations that the Reserve Bank may be less likely to raise interest rates in the short term. But underlying inflation was unchanged at 3.6% because of persistent price pressures.
Consumer confidence improved a little, rising 4.1% to 83.9 in July. Despite the gain, sentiment is still deeply pessimistic.
Oil prices were volatile throughout July but ended well below the peaks reached earlier in the year.
Australian share markets finished the month stronger, with the ASX 200 moving above 9,000 points following the latest CPI figures. But caution in US markets following the Federal Reserve's decision to keep rates on hold tempered sentiment.
The Australian dollar delivered a resilient performance throughout July to close above $0.70, hitting a six-week high.
Market movements and review video - August 2026
Stay up to date with what's happened in the Australian economy and markets over the past month.
July provided some welcome signs for the Australian economy, with inflation easing more than expected last month, cooling bets of interest rate hikes in the short term.
Globally, shares delivered strong gains and Australian equities reached their highest level since early March.
However, risks remain elevated. Caution in US markets following the Federal Reserve's decision to keep rates on hold tempered sentiment and served as a reminder of lingering inflation concerns.
Please get in touch if you’d like assistance with your personal financial situation.
Discretionary trusts: What the proposed changes mean
Family trusts have long been a popular structure for managing business income, investments and succession planning. However, a major change is proposed from 1 July 2028, with the Federal Government planning to introduce a 30 per cent minimum tax on discretionary trust income and reduce some of the tax advantages these structures have traditionally offered.i
Treasury estimates there are approximately 840,000 discretionary trusts in Australia and around 350,000 active small businesses operating through these structures.ii
The proposal, outlined in a consultation paper, is that from 1 July 2028, trustees will pay 30 per cent tax at trust level before distributions to beneficiaries.iii
Because the trustee-paid tax credits would be non-refundable, individual and other non-corporate beneficiaries generally would not be able to reduce the tax on discretionary trust income below 30 per cent, even if their personal tax rate is lower.
Proposed exemptions
A number of entities are exempt, with fixed and widely held trusts, complying superannuation funds, charitable trusts, deceased estates and special disability trusts, all excluded. Testamentary trusts established for genuine testamentary purposes are also exempt.
Certain types of income (such as primary production income, select income for vulnerable minors and amounts already subject to non-resident withholding tax), are also excluded from the new rules.
Until the final legislation is released, key questions are yet to be clarified about calculation of taxable income, treatment of capital gains, franking credits and carried-forward losses.
Trustee-level tax changes the mechanics
Under the proposed rules, trustees would pay the 30 per cent tax upfront and beneficiaries would receive a tax credit for their share of that tax. Beneficiaries would still need to include their trust income in their tax returns, but the way the tax is collected would change.
Trustees will be required to calculate, report and pay the minimum tax and notify beneficiaries of their entitlements and associated tax credits.
Tax offsets for beneficiaries
Individual and other non-corporate beneficiaries will receive a non-refundable tax offset for the tax paid by the trustee and will be required to declare their trust income in their tax return.
Corporate beneficiaries, however, will not be able to claim credits for tax payable by the trustee. This is designed to ensure the minimum tax cannot be avoided by cycling income through a ‘bucket’ company set up simply to receive discretionary trust distributions.
As currently proposed, distributions to corporate beneficiaries could be subject to tax at both the trust and company level because corporate beneficiaries would not receive a tax credit for trustee-paid tax. Treasury is still consulting on aspects of this treatment.iv
Restructure options
For small businesses and other taxpayers wishing to restructure out of a discretionary trust into another arrangement, expanded relief from income tax consequences (including capital gains tax) will be available for three years from 1 July 2027 to 30 June 2030. The relief is an expanded version of the existing Small Business Restructure Roll-over.v
For small businesses wishing to reduce the impact of the new rules, there are other alternatives to consider, including employing beneficiaries working in the business rather than paying them trust distributions. Salary or wage payment to employees will not attract the minimum tax.
Restructuring into a company would allow you to access dividend imputation and the lower 25 per cent corporate tax if your aggregated annual turnover is less than $50 million.
What are the implications?s
While no immediate action is recommended before the legislation is finalised, business owners and investors should begin assessing how the proposal could affect their current structure and whether alternative arrangements may be worth considering.
For many families, discretionary trusts will continue to provide valuable asset protection and succession planning benefits, even if some of their tax advantages are reduced.
If you would like help understanding how the new rules will affect your trust, contact our office today.
i Tax reform | ATO
ii Minimum tax on discretionary trusts factsheet | Federal Budget papers
iii Minimum tax on discretionary trusts | Consultation Paper
iv Deloitte | tax@hand
v Small business restructure roll-over | ATO
What lies ahead for property investors?
Property investors are facing a whole new world this financial year following the tax reforms announced in the May Federal Budget, the ATO tightening the rules around claiming deductions for holiday homes and the government’s decision to abolish the ability to purchase residential property through self-managed super funds (SMSFs).
While there is no need to panic, the reforms will usher in significant change and require careful thought and detailed modelling of the financial implications for your investment portfolio and cash flow going forward.
Time to reassess your property portfolio
Given this strict new interpretation of the deduction rules by the ATO, the Budget tax reforms to CGT, along with the banning of SMSFs from Limited Recourse Borrowing Arrangement (LRBA) for residential properties, property investors are urged to seek professional advice early on and review their property investment strategy in light of the changes.
Transitional rules, valuation approaches and record-keeping requirements will be critical. Investors should ensure documentation is up to date, consider timing of transactions carefully.
If you would like to discuss any of the changes and how they may affect you, please contact our office today.
i Proposed reforms to the CGT rules |Treasury
ii Negative gearing explainer | Treasury
iii Rental property deductions | ATO