Budget Reforms, Card Surcharges, and EV FBT Changes
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Budget Reforms, Card Surcharges, and EV FBT Changes
Federal Budget
(Source: Unsplash)
Federal Budget Changes: What They Actually Mean for You
The May 2026 Budget proposed some big changes to how investment properties, capital gains, and family trusts are taxed. These changes haven't become law yet, but if they do, they could affect your tax bill, especially if you're a property investor or run a business through a trust.
Negative Gearing: What's Changing from July 2027
Negative gearing is when your investment property costs more to run than the rent it brings in, and you use that loss to reduce tax on your salary or other income.
What stays the same:
- Properties you already own: If you already have an investment property (or had signed a contract before Budget night), nothing changes. You keep your current deductions.
- New builds: Brand new properties will still get the current negative gearing rules, which is meant to encourage more housing supply.
- Commercial property, shares, etc: The new restrictions only apply to residential property. Your other investments aren't affected.
📊 Example: Sarah's Situation
Sarah bought a unit in 2023 that runs at a $15,000 loss each year after rent and expenses. Currently, she uses this loss to reduce tax on her $95,000 salary.
If the changes become law: Sarah keeps her current setup because she bought before the cut-off date. But if her friend Tom buys a similar unit in 2027, Tom won't be able to offset his rental losses against his salary, he'll have to carry them forward until he has rental profits or sells the property.
Capital Gains Tax Discount: A New Approach from July 2027
When you sell an investment that's gone up in value, you normally get a 50% discount on the tax you pay, provided you've owned it for more than 12 months. This is being replaced with a different system.
Key points:
- Split treatment: Any gain that built up before 1 July 2027 still gets the current 50% discount. Only the gain from after that date uses the new rules.
- You'll need a valuation: To work this out, you'll need to know what your property or shares were worth on 1 July 2027.
- Applies to everything: Property (residential and commercial), shares, business assets, the lot.
📊 Example: James and His Investment Property
James bought a house in 2022 for $600,000. By July 2027, it's worth $800,000 (a $200,000 gain). He holds it until 2032 when it's worth $950,000.
Under the current rules, he'd get a 50% discount on the full $350,000 gain and pay tax on $175,000.
Under the proposed rules, the first $200,000 of gain gets the 50% discount (tax on $100,000). The remaining $150,000 of gain gets the inflation adjustment plus 30% minimum tax, likely meaning he pays tax on more of that second portion. Net result: probably a higher tax bill overall.
Family Trusts: A New Minimum Tax from July 2028
Many families use discretionary trusts to run businesses or hold investments because they can distribute income to family members in lower tax brackets, reducing the overall tax paid. The Government wants to change this.
What this means:
- Higher effective tax rate: Even if you distribute to family members on low tax rates, the trust still pays 30% first.
- Some exemptions apply: Fixed trusts, super funds, deceased estates, charities, and certain other trusts are excluded.
- Restructuring window: You'll have three years to restructure if you want to (for example, moving to a company structure).
📊 Example: The Chen Family Business
The Chens run a café through a discretionary trust. The business makes $250,000 profit. Currently, they distribute $120,000 to mum and dad (who work in the business) and split the remaining $130,000 among their three adult children who have minimal other income. Total family tax: around $55,000.
If the 30% minimum tax applies, the trust would first pay $75,000 (30% of $250,000). The family members would then get credits for that tax paid, but because it's a non-refundable credit, they can't get it back if their personal tax rate is lower. The family's total tax would jump to around $75,000, about $20,000 more for the same profit.
Other Budget Changes Worth Knowing About
- $250 tax offset for workers (from 2027–28): A small bonus that effectively increases the amount you can earn before paying tax.
- $1,000 standard deduction (from 2026–27): Instead of keeping receipts for every work expense, employees can just claim a flat $1,000. Much simpler.
- $20,000 instant asset write-off: Small businesses can immediately deduct the cost of equipment up to $20,000 (this is now permanent).
Payments
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Card Surcharges Are Being Banned: What Businesses Need to Do
From 1 October 2026, businesses will no longer be allowed to add a surcharge when customers pay by card. Whether it's "1.5% surcharge on credit cards" or a flat fee, it all has to go. Customers will see one price, regardless of how they pay.
Why Is This Happening?
- Australians pay around $1.6 billion a year in card surcharges, most of it at cafes, restaurants, and small retailers.
- The Reserve Bank says the underlying fees banks charge businesses are coming down too, so businesses should actually save money overall.
- Expected savings for businesses: around $910 million per year across the economy.
The Three Big Changes
You can't add any extra fee for card payments, not a percentage, not a flat fee. The price on the shelf (or website) is the price everyone pays. 2. Lower bank fees for you
The wholesale fees banks charge each other (which get passed on to businesses) are being reduced. This should directly lower your card acceptance costs. 3. More transparency
Banks and payment providers have to be clearer about their fees and show that they're passing on the savings to businesses like yours.
What You Should Do Before October 2026
1. Check your current costs
Look at your merchant statements. How much are you paying in card fees? Have you been using surcharges to cover those costs? If so, you might need to adjust your prices slightly to maintain margins.
2. Talk to your payment provider
With lower fees coming, now's the time to negotiate. Ask for better rates, updated pricing plans, or terminal upgrades. Small businesses often pay close to the current fee caps, so they stand to gain the most from the changes.
3. Update your systems and signage
Remove any "surcharge applies" signs, update your website checkout, and make sure your POS system isn't adding percentage fees automatically. All prices need to be all-inclusive.
4. Factor this into your budgets
The fee savings won't happen overnight, but most businesses should see reduced costs during the 2026–27 financial year. Worth revisiting your budgets, especially if you do a lot of small card transactions (cafes, retailers, tradies).
📖 Jargon Explained
- Interchange fee: The fee banks charge each other when someone pays by card. Part of this gets passed on to you as a business owner.
- Merchant service fee: The total fee you pay to accept card payments, usually shown as a percentage on your statements (e.g., 1.2% + 25¢ per transaction).
Electric Vehicles
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EV Tax Benefits Are Being Wound Back: Here's the Timeline
Since 2022, electric vehicles have been exempt from Fringe Benefits Tax (FBT), making them incredibly tax-effective for salary packaging and novated leases. The Government is now phasing out this exemption, but it's happening gradually over three stages.
The Three Phases
Phase 1: Now to Mar 2027
Full exemption continues. EVs under the luxury car threshold (~$91,387) are completely FBT-free. No change to current arrangements.
Phase 2: Apr 2027 to Mar 2029
Split treatment. EVs $75,000 or less: still fully exempt. EVs between $75,000 and the threshold: only get a 25% FBT discount.
Phase 3: From Apr 2029
Reduced benefit. All eligible EVs get a flat 25% FBT discount regardless of price. Still better than no discount, but not as good as now.
What About Existing Leases?
If you already have a novated lease or salary package for an EV, you're protected. The Government says existing arrangements will be "grandfathered", meaning the new rules won't apply to leases already in place. Draft legislation will confirm exactly how this works.
Why Is This Happening?
- The exemption has been very successful, leading to around 64,000 extra EVs on the road in its first three years.
- But it's also expensive for the budget (costing around $1.7 billion over five years) and mostly benefits higher-income earners.
- The phased approach is meant to keep supporting EV uptake while making the cost more sustainable.
What Should You Do?
- Act before March 2027 if you're keen: If you've been thinking about an EV through salary packaging, getting in before the first phase ends means you lock in the full benefit for the life of the lease.
- Focus on sub-$75,000 models after that: In Phase 2, cheaper EVs remain fully exempt. More affordable models are becoming available all the time.
- Consider the total cost: Even with reduced tax benefits, EVs can still be cheaper to run than petrol or diesel vehicles when you factor in fuel and maintenance savings.
SMSF
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SMSF Year-End Checklist: Don't Leave These Until the Last Minute
With 30 June fast approaching, here's a quick rundown of the key things SMSF trustees need to sort out. Missing these deadlines can mean losing tax benefits or creating compliance headaches.
Contributions: Get the Timing Right
If you want to claim a tax deduction:
- You need to give your fund a "notice of intent to claim a deduction" and get their acknowledgement.
- This has to happen before you lodge your tax return (or before 30 June next year, whichever is earlier).
- Tricky situation: If you're planning to start a pension in early July, you need to get the notice sorted before the pension starts, or you'll lose the deduction entirely.
Contribution Strategies to Consider
- Use up past caps: If your total super balance was under $500,000 last 30 June, you might be able to use unused concessional contribution caps from previous years. Handy if you've had a big capital gain this year and want to offset it.
- The 28-day rule: SMSFs have a special ability to hold a June contribution in "reserve" and officially allocate it to a member in July, meaning it counts towards next year's cap, not this year's. Must be documented properly and allowed by your trust deed.
- Spouse contributions: Contributing to your spouse's super can get you a tax offset in some cases. Low-income spouses might also qualify for a government co-contribution.
Contribution Caps Are Increasing
Pensions: Make Sure Minimums Are Paid
- Account-based pensions: The minimum annual payment must be received by 30 June. Miss it, and you could lose the tax-free status of your pension earnings.
- Transfer balance cap increasing: From 1 July 2026, the cap goes from $2.0 million to $2.1 million. If you're thinking about starting a pension, timing matters, as starting before or after 1 July can affect how much you can move into tax-free retirement phase.
Paperwork and Valuations
- Get everything valued: All assets need to be valued at market value as at 30 June. This is especially important for property, unlisted shares, and anything you've bought from or sold to related parties.
- Check related-party arrangements: If your fund leases a property to a family member's business, or pays for services from a related party, make sure it's all documented and the rates are commercially reasonable.
- Get your minutes done: Any pension commencements, lump sum payments, or other decisions need to be properly documented with trustee minutes and signed paperwork.
Need Help With Any of This?
Whether it's understanding how the Budget changes might affect your investments, preparing your business for the card surcharge ban, or getting your SMSF in order before 30 June, we're here to help.
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Disclaimer: This blog is for general information only and doesn't constitute financial or tax advice. The Budget proposals discussed aren't law yet and may change. Tax rules vary based on individual circumstances. Always get proper advice before making decisions, contact JPR Business Group to discuss your specific situation.