The 2026–27 Federal Budget introduces several significant tax changes, with additional workforce, supply?chain and funding measures. The most substantial changes relate to the new minimum tax on discretionary trusts, the replacement of the 50 per cent Capital Gains Tax (CGT) discount, the permanent extension of the instant asset write?off, emerging reforms to the Working Holiday Maker program, new fuel and fertiliser supply?security measures, and notable reductions in funding across the Agriculture, Fisheries and Forestry portfolio. While some elements are clear, others require further interpretation, and we are seeking clarification from government in coming weeks.

 

The Government has announced that from 1 July 2028, discretionary trusts will be subject to a 30 per cent minimum tax on taxable income, applied at the trustee level. Non?corporate beneficiaries will receive a non?refundable credit for tax paid, while corporate beneficiaries will not, effectively ending the use of bucket companies for income?splitting. Importantly, the Budget confirms that primary production income is excluded from this new minimum tax. Under existing tax law, production nurseries engaged in propagation, cultivation and growing activities are treated as primary producers and therefore appear to fall within the exemption. It is less clear whether retail nurseries, which may be classified as retail businesses rather than primary producers, will also be exempt. We are seeking clarification from government on the treatment of retail nurseries, vertically integrated operations and mixed?activity trusts.

 

The Budget also introduces major changes to the CGT system. From 1 July 2027, the Government will replace the current 50 per cent CGT discount for individuals, trusts and partnerships with cost?base indexation and a 30 per cent minimum tax rate on capital gains. Indexation will be calculated using the Consumer Price Index in a manner similar to the arrangements that applied between 1985 and 1999, and the ATO will provide tools and guidance to support taxpayers in calculating the adjustment. These changes will apply to all CGT assets held for at least 12 months, including property, shares and business assets, and are intended to create a more asset?neutral CGT system with only targeted exemptions. A minimum tax rate of 30 per cent will apply to real capital gains accruing from 1 July 2027, with no impact until the gain is realised. Individuals whose capital gains are already taxed at rates of at least 30 per cent will not be affected. It is not clear at this time whether any primary production?specific CGT concessions will continue beyond the transitional period, and we are seeking clarification from government on whether production nurseries will retain access to any form of concessional CGT treatment.

 

 

The Budget also signals reform of the Working Holiday Maker program, although very little detail is provided in the Budget papers. Given the nursery industry’s reliance on seasonal and supplementary labour, any changes to visa settings, eligibility, mobility or employer obligations may have material workforce implications. We will work with government to understand the nature and timing of these reforms as further announcements are made.

 

The Government has also reaffirmed measures aimed at strengthening Australia’s fuel and fertiliser supply security. These include steps to increase national fuel stockholdings and improve resilience in the event of global supply disruptions. While the Budget papers provide only limited detail, the intent is to reduce exposure to international volatility and ensure essential industries—including agriculture and horticulture—have more reliable access to diesel, transport fuels and key fertiliser inputs during periods of disruption. 

 

Finally, the Budget includes significant savings measures across the Agriculture, Fisheries and Forestry portfolio, totalling $191.6 million over five years from 2025–26 and $30.5 million per year ongoing. These savings are achieved through reductions in uncommitted funding across a range of grant programs, including Pest and Disease Preparedness and Response, Wine Tourism and Cellar Door, low?emissions agriculture initiatives, wood?processing innovation, regional trade events and seaweed industry development. Additional savings include reductions to uncommitted funding for the Future Drought Fund from 2026–27 and reductions to the agriculture stream of the Natural Heritage Trust from 2028–29. These changes may affect future program availability, industry capability funding and the broader policy environment in which nurseries operate.

 

We are continuing to analyse the Budget measures and are seeking clarification from government on several outstanding issues, including the scope of the primary production exemption for the trust tax, the treatment of retail nurseries, the application of CGT changes to primary producers, the implications of Working Holiday Maker reforms, the impact of DAFF funding reductions on biosecurity and industry programs, and the practical effect of new fuel and fertiliser supply-security measures. A further update will be provided to members once detailed explanatory materials and draft legislation are released.

 

 

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