May 13, 2026

Federal Budget 2026‑27: Implications for Orthodontic Practices and Small Businesses

Federal Budget 2026‑27: Implications for Orthodontic Practices and Small Businesses

This article explores the key tax reforms announced in the 2026–27 Australian Federal Budget and what they mean for orthodontic practices and small businesses. From changes to CGT, trusts and negative gearing through to new small business relief measures, we unpack the opportunities, complexities and risks using our “Straight, Crooked & Rotten” framework.

The 2026‑27 Australian Federal Budget marks a turning point in tax policy. In an effort to rebalance the tax burden and reduce income‑splitting, the government has announced major reforms to the capital‑gains tax (CGT), negative gearing, and trust taxation while providing targeted relief such as a permanent $20 k instant asset write‑off and loss carry‑back.

This whitepaper examines the budget’s key measures and analyses how they will affect orthodontic practices and other small businesses. It also provides an objective assessment – the good, the complex and the risky – using an orthodontic metaphor: Straight, Crooked & Rotten. 

Budget reforms – overview 

1. Minimum 30 % tax on discretionary‑trust distributions 

From 1 July 2028, trustees of discretionary (family) trusts will be required to pay tax at a minimum 30 % rate on the income they distribute, with beneficiaries receiving a non‑refundable credit for tax paid. Exemptions apply to fixed or widely held trusts, super funds, special disability trusts, charitable trusts and primary production income. Rollover relief from 1 July 2027 to 30 June 2030 will allow restructuring into companies or unit trusts without triggering immediate tax or stamp duty. 

2. Capital‑gains tax reform and end of the 50 % discount 

The longstanding 50 % CGT discount will be abolished from 1 July 2027 and replaced by indexation: gains accrued after this date will be increased in line with inflation and taxed at a minimum 30 % rate. All CGT assets, including those acquired before 1985, must be valued at 1 July 2027 to split pre‑ and post‑reform gains. For new residential properties acquired after 1 July 2027, investors can choose between the old 50 % discount and the new indexation regime at the time of sale. 

3. Negative‑gearing restrictions 

Negative gearing will be grandfathered for existing properties and remains available for newly built homes. However, after 1 July 2027, losses from established properties purchased after Budget night will no longer be deductible against wage income. A one‑year grace period applies to assets acquired between budget night and 30 June 2027, after which negative gearing will cease. 

4. Relief measures: instant asset write‑off and loss carry‑back 

Small businesses with turnover under $10 million can immediately deduct the cost of eligible assets costing up to $20 k each from 1 July 2026. This measure encourages practices to invest in equipment such as dental chairs, imaging systems and IT infrastructure. The loss carry‑back (or refundability) measure allows companies to claim back taxes paid in earlier profitable years, improving cash flow during downturns. 

5. Other tax and spending measures 

Personal tax relief comes via the Working Australians Tax Offset and a $1,000 instant work‑expense deduction starting in 2027‑28. The budget also provides additional funding for hospitals, Medicare clinics, aged‑care services and housing infrastructure. 

Impacts on orthodontic practices and small businesses 

Trust‑based practices 

Many orthodontic and dental practices use family trusts to hold practice assets and distribute profits. The introduction of a 30 % minimum tax will erode the tax advantage of discretionary trusts. Practices currently distributing profits to family members on lower marginal rates must evaluate whether to restructure. Unit trusts or company structures may provide better after‑tax outcomes, especially if beneficiaries are already in high tax brackets. Practices should seek professional advice and consider utilising the rollover relief available from 2027 to 2030. 

Service and trading trusts 

Sole practitioners often operate as sole traders and use service trusts to manage administrative functions. If these trusts are discretionary, they will also be subject to the minimum tax. Practitioners may need to adjust service charges or restructure to comply with personal‑services income rules and the new tax regime. 

Property and investment strategies 

Practice owners who hold investment properties will face a significantly different landscape: 

  • Negative gearing: Only newly built properties will qualify for negative gearing from 1 July 2027. Losses from established properties purchased after Budget night will not reduce personal income tax. Existing properties are grandfathered but must be monitored. 

  • Capital gains: Without the 50 % discount, selling an equity stake in a practice or investment property after 1 July 2027 will incur higher tax. Gains will be indexed by inflation and taxed at a minimum 30 % rate. 

For example, if you purchase a 20 % stake in a new dental laboratory on 1 August 2026 and sell it on 1 December 2028, the capital gain will be divided: gains accrued before 1 July 2027 will still attract the 50 % discount, while gains from 1 July 2027 onward will be indexed and taxed at the minimum 30 % rate. Valuations at 1 July 2027 will be essential to determine pre‑ and post‑reform gains. 

Small business operations 

The $20 k instant asset write‑off provides an incentive for practices to upgrade their equipment. However, ordering equipment before the start date (1 July 2026) may not qualify. The loss carry‑back allows practices structured as companies to reclaim past taxes during a downturn, which could be particularly useful for new or expanding practices. 

Start‑ups and innovation 

Start‑ups and high‑growth businesses often use employee share schemes and rely on the CGT discount to attract talent. With the discount’s removal, tax on share‑option gains will increase significantly, potentially discouraging entrepreneurship. Although loss refundability and research incentives remain, venture capitalists have warned that the reforms may hinder the start‑up ecosystem. 

Objective assessment – Straight, Crooked & Rotten 

Straight (the good) 

  • Fairer tax outcomes: The minimum tax on trusts and curbs on negative gearing aim to reduce income‑splitting and speculative investment, aligning the tax burden more closely with wages. 

  • Support for productivity: The permanent $20 k asset write‑off and loss carry‑back encourage investment in equipment and help businesses weather downturns. 

  • Investment in health and housing: Increased funding for hospitals, Medicare clinics, aged care and housing infrastructure addresses key service shortfalls. 

Crooked (the complex) 

  • Uncertain implementation: Many details remain unsettled, including how existing assets will be treated and the final design of trust and negative‑gearing rules. Legislation must define how valuations will be conducted on 1 July 2027 and how multi‑layered trusts will be taxed. Individuals with access to quality advice and guidance will likely find ways to circumvent intended outcomes.

  • Compliance burden: Splitting gains at a specific date and indexing cost bases require valuations and meticulous record‑keeping. The cost of obtaining professional valuations may burden small businesses. 

  • Equity considerations: While targeting high‑income investors, the reforms may impact middle‑income families who use trusts or own a single investment property. Non‑refundable tax credits could create cash‑flow challenges for beneficiaries. 

Rotten (the potential downsides) 

  • Reduced housing supply: Restricting negative gearing to new builds may deter investment in established rental properties, risking a decline in rental stock and upward pressure on rents. 

  • Deterrent to innovation: Removing the CGT discount could discourage entrepreneurship and make it harder for start‑ups to attract talent through share options.

  • Revenue dependence: The budget’s cost‑of‑living relief and health initiatives rely heavily on revenue from trust and CGT reforms. If investor behaviour changes markedly, expected revenues may fall short, leaving fiscal gaps. 

Conclusion and next steps 

The 2026‑27 Budget seeks to straighten Australia’s tax system by closing loopholes and promoting productive investment. For orthodontic practices and small businesses, the reforms present both opportunities and challenges. The $20 k write‑off and loss carry‑back support investment, while the new tax rules on trusts, capital gains and negative gearing require proactive planning. Practitioners should: 

  1. Review business structures: Assess whether your trust or company structure remains optimal under the minimum tax and CGT reforms. Consider restructuring during the rollover relief period (2027–2030). 

  1. Plan asset purchases: Schedule equipment upgrades after 1 July 2026 to benefit from the $20 k write‑off. 

  1. Evaluate property investments: Reassess property holdings and future investments, noting that negative gearing will only apply to new builds and valuations will be required for assets held at 1 July 2027. 

  1. Monitor legislation: Stay informed about draft legislation and seek professional advice on transitional arrangements and compliance requirements. 

By acting early and understanding the nuances of these reforms, practice owners can mitigate risks and take advantage of the opportunities presented in the budget. 

 

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