Tax changes: what I’m doing, and not doing, with my own investments (Part 1)

I’ve been a little quieter than usual over the past few months while I’ve been working through the significant tax changes announced in the 2026 Federal Budget and what they could mean for investors.

​The core capital gains tax and negative gearing reforms are due to apply from 1 July 2027. A separate minimum 30% tax for certain discretionary trust distributions is scheduled to commence from 1 July 2028.

​Although the broad framework is now clearer, some important implementation details are still being refined.

​Like many investors, I’ve been asking myself an important question:

What, if anything, should I change?

​Interestingly, the answer is not as much as you might think.

What we’re not changing

Most of our core investment strategy remains unchanged.

​We’re still comfortable using investment debt to support our managed portfolios and property. Good debt used to acquire quality, long-term investments continues to make sense for us. The tax treatment is important, but it doesn’t change the fundamentals of investing.

​We’re also keeping our family trust.

​Much of the discussion about the proposed minimum 30% tax for discretionary trusts has focused on the reduced ability to distribute income to adult beneficiaries on marginal tax rates below 30%.

​In our family’s situation, however, the impact may be relatively limited.

​Over many years, we’ve built a sizeable portfolio of managed portfolios, property and direct shares within our family trust and held personally. It now generates substantial passive income, and the beneficiaries receiving distributions generally already pay tax at rates above 30%.

​Based on the income we expect the portfolio to continue generating, that may remain the case throughout retirement.

​However, my former strategy of distributing income to Max and Rose once they turn 18 to help pay for university, a gap year or other major expenses might change.

​Because they would generally be subject to the minimum 30% tax, I’m reviewing how Greg and I plan to fund their tertiary education, unless we’re comfortable distributing more than around $45,000 per year to each of them... Max already warned me he wants to buy a Lamborghini... oh bless that little kid.

​For us, the trust is also valuable for reasons beyond tax.

​These include asset protection, investment flexibility, control over distributions and long-term estate planning.

Super

We’re also continuing to maximise concessional super contributions where appropriate.

​Personally, I’ve contributed up to my available concessional cap each year in to my Hub24 super account, because super remains one of the most tax-effective structures available for long-term wealth creation.

​We’re considering making further non-concessional contributions as well, provided we’re comfortable preserving those funds until we meet a condition of release.

What I am reviewing

The biggest area I’m reassessing is what we do with surplus investment income and where to invest surplus cash (I’m generally not a fan of holding too much cash for too long!).

​We had previously considered directing surplus income from our family trust to a bucket company.

​However, the proposed minimum tax for discretionary trusts may change the relative benefits of that strategy. Based on the legislation as it currently stands, bucket companies could face an effective tax rate of up to 60% in some circumstances, which is a significant reason I’m reviewing this strategy.

​That means I’m looking more closely at other options, including investment bonds and potentially establishing a separate company for long-term investments.

​A separate investment company is not automatically more tax-effective. Companies generally do not receive the individual 50% CGT discount, and tax may also arise when profits are eventually paid to shareholders.

​However, a separate entity may still provide benefits relating to control, reinvestment, asset separation and the potential benefit of franked dividends, provided the Government doesn’t change those rules too!

​Although we operate businesses through Thomson Wealth and FinCyber Australia, I prefer not to hold long-term family investments inside an operating business. Keeping investment assets separate can be important for asset protection, business succession and future planning.

Property still has a role

The negative gearing changes haven’t fundamentally changed my view of property investing, particularly for investors who already own multiple investment properties.

​We currently own two investment properties. One is positively geared, while the other is close to cashflow neutral and should become positively geared soon.

​I’m still open to purchasing another negatively geared established property, provided it is the right investment.

​From 1 July 2027, negatively geared residential property losses will generally receive more favourable treatment where the investment is a qualifying new build.

​For established properties acquired after the Government’s announcement, losses will generally no longer be deductible against salary and other unrelated income. They may instead be applied against residential property income, with unused losses carried forward under the new framework.

​This means someone with positively geared properties may have greater capacity to use losses from another residential property than an investor purchasing their first negatively geared established property.

​Properties held before 7.30 pm AEST on 12 May 2026 are generally grandfathered, so our current holdings should retain their existing negative-gearing treatment.

​As always, a property should make sense as an investment first and a tax strategy second. In my view, buying a quality property in the right location with strong long-term growth prospects is more important than purchasing a new build purely for its negative-gearing benefits.

Looking ahead

Overall, these reforms haven’t prompted us to make wholesale changes.

​We’re continuing to invest for the long term. We’re comfortable maintaining investment debt against quality assets, retaining our family trust and continuing to maximise super contributions where appropriate.

​The biggest questions for us now are where future investments should be held and how surplus investment income should be reinvested.

​Interestingly, though, one area has changed my thinking more than any other.

​It’s not property.

​It’s not trusts.

​It’s capital gains tax.

​Not because I plan to sell my investments anytime soon. Quite the opposite.

​The new rules mean the decisions you make when you buy an investment could become just as important as the investment itself.

In Part 2, I’ll explain why these changes have completely changed the way I’m thinking about future capital gains, investment structures and why investment bonds have moved much higher on my radar.

Disclaimer: This article contains general information only and reflects my personal views and circumstances at the time of writing. It does not constitute financial, taxation or legal advice. Taxation laws are complex, and the implementation details of some measures may continue to change. Before making any financial decision, seek professional advice tailored to your own circumstances.