Earlier this year, the Federal Budget delivered one of the most significant shifts in Australia’s tax system in decades.
For farming families – particularly those with succession plans in progress or assets sitting in trusts – some of what was announced last night will require real decisions in the next 14 months.
Here’s what matters most for your family:
From 1 July 2027, the 50% capital gains tax discount is being scrapped. In its place: cost base indexation for assets held longer than 12 months, and a new 30% minimum tax on net capital gains.
The practical implication is significant. If you’ve been planning to transfer farm assets to the next generation, the window to do it under the current rules is now clearly defined. Sales that settle before 1 July 2027 stay under the existing discount. After that date, the new rules apply.
For pre-CGT assets – those acquired before September 1985 – the exemption holds for gains accrued before 1 July 2027. Gains after that date will be taxable for the first time in 40 years. Good record-keeping of valuations at 30 June 2027 will matter a lot.
From 1 July 2028, a new 30% minimum tax applies to discretionary trust income. That sounds alarming at first read, but there’s an important note: primary production income is specifically excluded.
If your family trust earns its income from farming, it won’t be caught by the new trustee tax. That’s a genuine win, and it protects most operating farm trusts.
Where it does create complexity is trusts that hold non-farm assets alongside farming income, such as rental properties, shares, off-farm businesses, investment land. Those assets will be subject to the new rules, and the way income is distributed from those trusts may need to change.
The other thing worth understanding is the impact on bucket company strategies. Distributions to corporate beneficiaries are being taxed differently under the new rules, which changes the maths on an approach many farming families have used for years. If your trust currently distributes income to a company, it’s worth reviewing whether that still works as well as it used to.
From 1 July 2027, there’s a three-year window to move out of a family trust into a company or other structure without triggering a tax bill.
If you’ve been thinking about simplifying your farm business structure, or if your current setup no longer fits where the business is headed, this is a rare opportunity to make that change without the usual tax consequences attached to it.
A few things from the budget are straightforwardly positive.
The combination of the CGT changes, the trust reforms, and the restructuring window makes this an unusually important planning period.
The families who will get the most out of it are the ones who start early, because the strategies that produce the best outcomes need lead time to execute properly.
If you’d like to work through what these changes mean for your situation specifically, we’ve set aside dedicated sessions for you before 30 September. Book a time with us and we’ll help you identify your farms best path forward.
Want to know more about how we help farmers? Click here.
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