Tax-Effective Investing After The Budget

In this episode, Mai and Lee tackle one of the biggest questions coming out of the recent Federal Budget: what investments still make sense when the rules are changing?

There’s a lot of noise right now. Changes to the proposed 50% CGT discount, restrictions on negative gearing, and potential new minimum tax rules for trusts. It’s no surprise investors are feeling uncertain.

But this episode isn’t about fear. It’s about refocusing on what still works and how to adjust your strategy without stepping back from building wealth.

Mai breaks down what’s actually changing, what’s still available, and why the key isn’t to stop investing, but to invest smarter, with the right structure and advice.

In this episode, Mai talks about:

• The proposed removal of the 50% CGT discount and what it really means in practice
• Why a gain is still a gain, even with higher tax, and how to rethink long-term strategy
• What’s still eligible for negative gearing (including new builds and commercial property)
• The impact of proposed trust changes and why bucket company strategies may be less effective
• How double taxation could affect family trust structures under new rules
• Why SMSFs remain one of the most powerful investment vehicles (and what’s still allowed)
• How property, super, and business investments are likely to shift moving forward
• Why investing in active assets (like businesses) still provides strong CGT advantages
• How the SRS framework (Structure, Risk, Sequencing) applies to new investment decisions
• The Identify, Reallocate, Structure framework to help investors adapt quickly

This episode is a reminder that while the rules may change, wealth-building opportunities don’t disappear, they evolve.

If you’re unsure how these changes affect your current structure or future plans, now is the time to get clarity and build a strategy that works under the new rules.

You can also submit questions or topic ideas via the Ask Mai link at the top of the show notes.

Learn more about My Accounting Advantage

Disclaimer

The advice contained in this presentation is general in nature only and should not be acted on without first seeking professional advice.

Your personal circumstances have not been taken into account, and you should consider the appropriateness of the advice to your individual needs.

Transcript

Welcome And Budget Anxiety

Speaker 1 0:01

Hello and welcome back to the podcast My Accounting Advantage featuring Mai Harris. Mai Harris, she joins us again. Mai welcome back. That budget audio definitely hit the mark, and we've got a lot of people with budget anxiety. We'll be discussing that. But our topic today is what investments are still tax effective after the budget? What have we got?

Speaker 0:27

It's been a hot topic. You know, we've talked a lot about, you know, what makes us nervous. Um, there were three. There were um the number one change, which is the proposed abolition of the 50% CGT discount. Um, number two is, you know, the limitation on how you can use negative gearing. And number three is the minimum tax for trust of, you know, the they want to tax trust at a minimum of 30%. So that's a lot of fear out there. But the thing is, what we need to focus on is you can't stay mad forever. So you need to look forward and plan for what's next and what are the um strategies that's still available to you in um terms of investment and in terms of growth. We still gotta live. So, and we still live here in Australia. And, you know, we we have people that make laws, they don't make sense. These changes, from my personal opinion, it's stunt growth and it doesn't encourage people with ambition to work extra hard to build wealth. But anyway, there are still things that you can invest in.

Speaker 1 1:49

Take us to the bright side then. What are the wonderful things we can do to live in this incredible country with the wonderful opportunities that we have, regardless of the politicians and their funny laws? What's the bright side?

CGT Discount Changes Explained

Speaker 1 2:02

What should we do?

Speaker 2:02

Well, the the thing is we can have a look at what happens after the um 50% CGT discount passed as law. So what it means at the moment is that, you know, if you uh purchased a, for example, an investment property or you have an in investment shares portfolio and you held it for over 12 months and you sold it, you are eligible for 50% CGT discount, which means that you know, 50% of your gain, for example, if you have a gain of $100,000, $50,000 is tax-free straight away, which is brilliant, right? It's it's such an incentive to take that risk. The other 50% will be taxed at your marginal tax rates. Now, after 1st of July 2027, the how it the gain will be taxed is will be using the indexation and uh system, which is not as appealing. And the minimum tax will be 30%. So you you're still making a gain, okay, at the end of the day. So it like your gain of $100,000, you still pay a minimum tax of um, you know, after indexation adjustment, you're still paying tax of 30%. So you're still left with, you know, um 70%. That it's not tax, it's still cash. So the bright side is the gain is a gain. You need an adjustment that you're not gonna get as much. You're gonna pay more tax, but it's still a good investment in that case. So the focus now is to um, you know, invest a little bit more in your strategy and get good advice and plan well on what the proposed tax will be for certain type of assets in that case.

Where Negative Gearing Still Applies

Speaker 4:04

And then I'll go into what you can still use negative gearing for. So the what you can use negative gearing for still is the new build, new properties. So if you buy off the plan, for example, that is considered to be new build, you can still use the negative gearing strategy for. And the 50% CGT discount is still applied to those assets. So it's not like a complete closing of doors, just certain assets that will not be eligible for the 50% CGT discount, but in this case, new builds. Also, you can still use negative gearing for commercial property.

Speaker 1 4:48

Yes. That's good.

Speaker 4:49

Yeah.

Speaker 1 4:49

So a lot of people buy their own shop, they buy their own factory. So that's still, and we've spoken about this on the podcast before. That is a great pathway to wealth to be your own blue chip tenant in your own building with the security that you're investing every day backing yourself, not just doing the work. What about all those people with bucket companies?

Trust Tax And Bucket Company Fallout

Speaker 1 5:12

Are the structures still applying to that or are they impacted as well?

Speaker 5:17

So that's comes into, you know, the different the well, the changes to the taxing off family trusts. Because a lot of people have the structure set up well, to me, at the moment until the legislation passes, if it gets passed, because that one's a tricky one with um taxing trust at minimum of 30%. They're still gonna have to, it's still evolving that um that legislation. The bucket company typically is being used, you know, to receive distribution from the family trust. And the family trust um could be uh, you know, a trading business distributed to the bucket company, and the bucket company pays tax on the trading income at 25%. And that's very attractive to a lot of people, and that's why they've been set up that way. And under this new law, the proposed new law, this is an incredible thing that I couldn't believe it's happening because we don't promote double taxing, but it will be in this case.

Speaker 1 6:19

60%.

Speaker 6:20

Yeah. The trust itself will have to calculate, you know, the tax on income and pay, a minimum of 30%. And then if it actually gets distributed, the income distributed over to the bucket company, the bucket company will be taxed again on that income in full. It will not receive the 30% tax that the trustees have already paid. So you're looking at it could be up to about, yeah, um, 60%. They're saying it will land at about 51. But you know what that's 30% under the the trustee level, the trust level, and then another 25 to 30% at uh bucket company level. So yeah, they really want to stamp this one out.

Speaker 1 7:09

So the bucket companies are gonna get hit. Self-managed super is still the best pathway to growth. Or what does it mean for investors now?

Rent Pressures And Property Incentives

Speaker 1 7:20

Like everyone I'm speaking to is just sort of, you know what, we're out. And the rental providers, which is a far better word than investor, is such an important word. We're gonna see rent skyrocket as very few properties are gonna be rent in the rental pool. What's your thoughts?

Speaker 7:38

Well, my thought about, you know, whether or not rent will skyrocketing, that we still need to keep watching because I'm not quite sure in what's going to pan out in the next year. With this is such a massive change in the way properties will be taxed and the way people will be investing in the property market. I really believe that rent will be increasing because you know the new investors who entered the property market will have to be able to sustain the losses themselves. There is no relief because negative gearing used to be a great investment tool, even though you're actually wearing um losses in the meantime from the rental property, you're still getting subsidies from the, you know, um being able to claim the tax deduction on those rental losses against other income. So that's softened the blow. But now going forward from 1st of July 2027, that those losses are quarantined. So you're not getting any incentive for investing in the market. And if you do go there, yes, of course, you're gonna have to compensate yourself with higher rent.

Renovating The Home Versus Liquidity

Speaker 1 9:07

One of the safest places to invest your money in property, which is tax-free, is actually your your own principal place of residence. And for a lot of people, they think, oh, you know, we're gonna live here for the next few years and then we'll probably downsize. I think it's a good time to really invest in that property because anything you invest in that one, it's gonna go up in value. But the fact it is tax-free at the end of it, the only properties that are getting really good prices out there right now go through a price improvement program, which is exactly what is required, and finished product is getting exceptional results. Anything that needs work, needs finishing off is getting absolutely smashed as people don't want to pay for trades to come in at the cost of building. But if you did it over a two-year period, a three-year period, that okay, let's get a building and pest report on our house, because that's what the final buyer's going to do, and let's start investing back in our greatest asset, the family home. What's your thoughts on that?

Speaker 10:12

Yeah, I think it's it's good, but the problem is you're not investing. Because um you you get to live there, you you, you know, and and that's a bonus. But the thing is to me, you know, you want to invest outside your you know, your family home because you're sitting on it, you're living there. So um, what if you need the cash? What if you need to access extra cash? What do you do? You know what I mean? Like if you actually invest outside, like for example, having investment property, you want to access the cash, you know, retire, go on holidays or um whatnot, you can have that option to sell the investment property and and do what you want to do. You don't want to absolutely just pay down that or just put all your money into your home and then for for you to be able to access the cash, you actually have to get a loan out against your home and do your your your private travel or other things.

Speaker 1 11:28

Good advice.

What To Buy Now And Why

Speaker 1 11:30

What would you recommend that people do now? Where would you be investing?

Speaker 11:37

At the moment, it it's really sort of hard to pin down. Like me myself personally, I really like properties. But yeah, with the negative gearing being shut and um being shut down next five or in the next year, I would consider looking at commercial properties or um new build, for example, because there's quite a bit of that popping up. So you need to review your um if you love properties and uh like me, uh you like to invest in properties, you you would seek advice. That's my number one recommendation to you with your accountants to say, look, what would be the most tax-effective way for me to invest, you know, after the after the legislation has passed? Don't panic yet, because it's not they are not law. So there are guidelines that's still coming out. However, you need to plan now how you want to invest, what you're going to do with your money. If you have excess cash, are you better off putting into super instead? Are you better off buying a property under your self-managed super fund? Because you can steal negative gear under the self-managed super fund. But by doing that, you know, you might be paying off that properties a lot faster because you could be injecting, you know, more cash into your self-managed to pay off the loan quicker, but getting tax deductions through your super contribution. So that would be another strategy as well.

SMSFs Still Using Negative Gearing

Speaker 1 13:20

My just for our audience to just understand and unpack that incredible piece of information you're going through there, a self-managed superfund. How come that's still allowed to net use negative gearing?

Speaker 13:33

Yes. So the proposed changes didn't include it, basically. So it goes to show that the government really want to stamp out, you know, other structures investing, but um they want to promote investments under the super environment so that I guess in the future, um, you know, they just not going to have to deal with the pension issue. So and I think that's where um, you know, this still available. Negative gearing um strategy is still available to the self-managed superfund. Another thing, too, I think uh people will also be looking at in terms of investment, it's which is not passive.

Investing In Businesses And Active Assets

Speaker 14:17

It could be investing in businesses. So yeah, it might be an interesting new investment strategy for a lot of people who are quite an entrepreneur who really want to just, you know, invest in other businesses that will create positive cash flow for them. If you buy a turnkey business, for example, and you are a business person, that might just be your thing. Because once you own a business and you own it for um a period of time, you are still eligible for the 50% active asset CGT discount that hasn't been taken away. So, yes, only thing that's been taken away is the general 50% CGT discount. So if you actually sell, you know, an active asset, for example, you own a shop that you have been operating from, and uh that still is like the 50% CGT discount for active asset is still available.

Speaker 1 15:24

Wow. Such an interesting show today. Now, you've just sparked a thought there for many people. Our younger generation's coming through. They are definitely feeling uh the pressure of life and living. And some of these wonderful young people do want to run a business, but they don't have the capital to start how would an external person correctly invest in someone's business like that? What would they do?

Raising Capital With Better Structures

Speaker 15:53

Yeah. So, like um, you know, our previous episode, what you need to do is follow the SRS, you know, structure. Um, and uh it's it the structure structure is first, right? And then you need to assess your risk, because the S stand for structure, R's for risk, and then S and is sequencing, so SRS. So follow that um framework first. So if you actually want to um do capital raising to start your business, so structure is very important, so it needs to allow investors to come in. So you can either form a, you know, like most popular way is to form a company and then you can sell shares within the company in return for that capital injection. Or you can do a unit trust, for example, because that's fixed and you can sell units within the trust. These um do the unit trust structure is very popular under a um joint venture property investment. So if you do want to venture into uh investing in commercial property, for example, like you want to buy a KFC, you can do that under a unit trust structure and sell your shares in the units to various investors like SMSF or um just individuals investors. So there's a lot of ways to invest here and you don't have to do it alone. So there are, you know, options out there. You just gotta ask the right question and go looking for it. And then once you put the right structure in place, you'll be surprised what the options are still available to you to make more money.

Identify Reallocate Structure Framework

Speaker 1 17:47

Mai, we have a little framework here, a little teaching framework of identify, reallocate, and structure. Take us into that.

Speaker 17:54

Yes, Lee. So um this framework that you can follow here is number one is to identify and then reallocate and then structure. So what it means is that identify what's still protected and versus what's been targeted by um the budget itself. And then reallocate is just say move focused towards advantage assets. You know, what are the assets that you can still invest in? And that's not going to fall within those changes, and you can still maximize um the gains on investments and return on investments with without paying massive amount of tax. And then um the structure, use the right entity for, you know, the the new investment and allowable um structure and not family trust, for example. You know, it can still be a self-managed super fund, it can still be a fixed unit trust. So instead of having a bucket company, you can have a holding company. So there's there are other options out there that you can still take.

Speaker 1 19:03

Couldn't agree more, and I've really enjoyed this episode for that. And final thoughts.

Manor Houses And Social Impact Housing

Speaker 1 19:09

There is a new building code now, and it replaces an old one. When we were all growing up, there used to be these boarding houses, and boarding houses just seem to have a lot of old depressed men on a balcony having a cigarette. But it's all changed now, and it's actually called a manor house. And a manor house is one title where you've got all these hotel room styles, and then there's a common area, which is like the big lounge kitchen area. You've still got that in your own apartment, but you come out to the central. Yeah. But there is an enormous amount of single people looking for accommodation in this world, and they don't want to be alone, they want to be in a community, um, they maybe uh have come through something in their life. Actually, on that, I had to appear on another podcast yesterday for a charity, and it was uh a home for all, and it's just come out in its first year, and they've raised so much money. But last night, 122,000 people slept out in the cold. You know, the homelessness is enormous, and homelessness isn't about I've got no money, I've got nowhere to live. It can happen instantaneous with domestic violence. It can happen instantaneously with mental health, company's gone under, you've lost your house, and suddenly you've been wealthy all your life and now you're not. So, not to bring it down on this, but it's an important part of if you are investing, if we could become rental providers in another way, a manor house could be one of those things. What's your final thoughts on this episode?

Speaker 20:40

Yeah, so with again, you know, the if you invest in, you know, housing that support the government um, you know, uh strategies as well and it um support government housing, for example, the um negative gearing is still a thing for you. Yeah.

Speaker 1 20:59

You keep finding them.

Speaker 21:00

Yeah, keep finding them. So that's really good and you are doing a good deed.

How To Get Personal Advice

Speaker 21:06

So um, yeah, if you want to talk about um, you know, the changes or um after the budget and you're feeling a bit um insecure and you're not quite understanding, you know, the changes and how it affects you, you can get in touch with us um on our website. It's myaccountingadvantage.com.au or you can DM me on Instagram. My handle is my um well, it's not my, it's um the _maiharris. So do DM me and then uh my team will get in touch with you, and then we can talk about it a bit more in detail.

Speaker 1 21:47

Mai Harris, thank you for another amazing episode at a very important time in this country to get clean advice and neutral advice in the way of this podcast. It is for people to profit from from your knowledge. We thank you for bringing this information to the world, and we'll see you next week when we discuss tax tax saved is not money made. Yes. See you next week.

Speaker 22:12

Thanks, Lee.