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The 2026-27 Federal Budget contains three tax measures that, taken together, materially change the calculus for high-income individuals and family business owners who hold wealth through Australian-resident structures. Each measure on its own is significant. In combination they reshape the post-tax economics of holding assets, accumulating wealth and operating a business from Australia, and they push more clients into a serious conversation about whether they should be physically and structurally based here at all.
This article walks through the three measures, explains why they are driving renewed interest in departure and offshore structuring, and sets out what a genuine relocation requires to actually deliver the tax outcome people expect. It is not a sales pitch for going offshore. It is a reality check, written from the perspective of advisers who do this work daily and see the structures that fail.
What the Budget actually changed
1. A 30 per cent minimum tax on discretionary trusts
From 1 July 2028 the trustee of a discretionary trust will pay a minimum 30 per cent tax on the trust's taxable income. Beneficiaries other than corporate beneficiaries will receive non-refundable credits for the trustee's tax. Fixed trusts, widely held trusts (including fixed testamentary trusts), complying superannuation funds, special disability trusts, deceased estates and charitable trusts are excluded. Primary production income, certain amounts for vulnerable minors, income subject to non-resident withholding and income from existing discretionary testamentary trust assets are also excluded.
The Government will provide expanded rollover relief for three years from 1 July 2027 to support restructure out of discretionary trusts into a company or a fixed trust.
For decades the Australian discretionary trust has been the default planning vehicle for private wealth. The Division 6 income-streaming mechanic, paired with a low-rate beneficiary (a spouse on low income, an adult child at university, a bucket company), has produced an effective post-tax outcome materially better than direct ownership. From 1 July 2028 that advantage is significantly reduced. The trustee tax sets a floor of 30 per cent, and the credits flowing to individual beneficiaries are non-refundable, so the low-rate or zero-rate streaming strategy loses much of its point.
2. The 50 per cent CGT discount replaced by indexation and a 30 per cent minimum tax
From 1 July 2027 the 50 per cent CGT discount is replaced by cost base indexation for assets held for more than 12 months, with a 30 per cent minimum tax on net capital gains. This applies to all CGT assets held by individuals, trusts and partnerships, including pre-1985 CGT assets.
Transitional arrangements quarantine gains that accrued before 1 July 2027. The 50 per cent discount continues to apply to those gains, and pre-1985 assets remain exempt for any gain accrued before 1 July 2027. New residential property investors retain a choice between the 50 per cent CGT discount, or cost base indexation with the 30 per cent minimum tax. Income support recipients (including Age Pension recipients) are exempt from the new minimum tax.
The structural shift is important. A high-income individual realising a long-held growth asset will, under current law, halve the gain and pay marginal rates on the balance, often producing an effective CGT rate around 22 to 24 per cent. From 1 July 2027 the same person is on indexation only (which is much less generous than 50 per cent in any normal inflation environment) and pays at least 30 per cent on the resulting net gain. For trusts and partnerships the effect is similar.
3. Negative gearing limited to new builds
From 1 July 2027 losses from established residential property will only be deductible against rental income or capital gains from residential property. Excess losses carry forward against future residential property income. The change applies to established residential property acquired after 7:30pm AEST on 12 May 2026, with grandfathering for properties acquired before that time (including contracts entered into but not yet settled). Eligible new builds are exempt. Widely held trusts and superannuation funds are excluded, and there are targeted carve-outs for build-to-rent and government housing programs.
Negative gearing has been a structural feature of Australian high-income tax planning for more than 40 years. Its restriction does not affect every client, but for clients with geared residential property portfolios it removes a meaningful deduction stream and changes the after-tax return on the investment class most Australians know best.
Why departure is back on the table
Australia has historically been an attractive jurisdiction for accumulating private wealth. A relatively friendly trust regime, a generous CGT discount and a permissive negative gearing system combined to produce post-tax returns competitive with most developed markets. The 2026-27 Budget materially narrows that gap. The aggregate effect on a client holding $5 million to $50 million of private wealth through a discretionary trust with property and long-term equity exposure is straightforward: less income-splitting, more CGT on disposal of long-held assets, and tighter rules on rental property structuring.
At the same time, the international landscape for private wealth has matured. The United Arab Emirates moved to a 9 per cent federal corporate tax in 2023 but retains 0 per cent on Qualifying Income within Free Zones and zero personal income tax. Cyprus moved to a 15 per cent corporate tax rate from 1 January 2026, in line with the OECD global minimum, but remains inside the EU with a competitive overall regime. Singapore retains a 17 per cent rate with the partial exemption and start-up exemption schemes. The Cayman Islands, BVI, Panama and Seychelles remain useful for specific holding and operational structures. Each has tightened its substance and reporting regime since 2018, which means the modern offshore structure is more defensible than the old one, but only if it is built correctly.
It is in this context that more of our clients are asking the same question. Should they stay in Australia and accept the new tax position, or should they relocate, restructure and build the next decade of their wealth offshore?
The honest answer depends on the client's circumstances. But the question is now being asked by people who would not have entertained it five years ago.
What a real departure requires
A move offshore that delivers the post-tax outcome people are looking for is not a passport stamp, a foreign bank account or a Wyoming LLC. It is a genuine change of tax residency, backed by facts that hold up to scrutiny under the residency tests in section 6(1) of the Income Tax Assessment Act 1936 (Cth) and Taxation Ruling TR 2023/1.
Tax residency in substance, not in form
The Australian residency tests are not mechanical. The primary test, ordinary residency, asks where the person dwells permanently or for a considerable time. Domicile, the 183-day count and the Commonwealth superannuation test are statutory backstops. Tax residency is determined on the facts of how the person actually lives, not on declarations or self-assessment.
The Commissioner consistently challenges claimed departures where the facts are weak. Maintaining a family home, family members still in Australia, return visits, ongoing Australian source income, Australian business affairs, school enrolments and a return-ticket mindset will, in combination, support a finding of continued Australian residency even where the taxpayer spends more than 183 days outside Australia.
Australia does not currently have a citizenship-based tax regime. Once residency is genuinely broken, the taxpayer is taxed only on Australian source income (subject to treaties) and foreign source income from that point is outside the Australian tax net. But the threshold for breaking residency is demanding, and the cost of getting it wrong is high.
The exit event nobody plans for
On cessation of residency, CGT Event I1 (section 104-160 ITAA 1997) deems a disposal at market value of CGT assets that are not taxable Australian property. The taxpayer can elect to defer that deemed disposal by treating the assets as taxable Australian property until actual disposal. Either way, the choice has long-term consequences for the structure of the wealth being taken offshore and the timing of liquidity events.
Real planning addresses this directly. It identifies which assets should crystallise in the final Australian year, which should be held over via the section 104-165 election, and which should be restructured pre-departure into a vehicle that better suits the new jurisdiction. The 2026-27 Budget makes the timing of these decisions particularly important, because the CGT regime changes apply from 1 July 2027 and the discretionary trust minimum tax applies from 1 July 2028. A departure window that runs through both dates needs careful sequencing.
Jurisdiction selection
A common error in early-stage relocation planning is treating jurisdictions as fungible. They are not. A jurisdiction needs to be assessed against the client's actual position and goals across at least the following dimensions:
- Personal income tax exposure. Some jurisdictions impose no personal income tax (UAE, Cayman, Bahamas). Others impose meaningful rates but offer favourable treatment of foreign-source income (Cyprus, Malta, Portugal). Others have low corporate tax but moderate personal tax (Singapore, Hong Kong). The right mix depends on whether the client's income is corporate or personal.
- Treaty network. A jurisdiction with no tax treaty with Australia exposes residual Australian source income to non-resident withholding tax at full statutory rates. A jurisdiction with a treaty offers reduced rates and tie-breaker protection.
- Substance and reporting. Post-2018 offshore reform means every reputable jurisdiction now applies economic substance and CRS reporting. A structure that fails substance is no longer just inefficient. It can attract penalties, registration refusal or de-listing.
- Banking and operational reality. A perfect tax structure that cannot open a bank account or accept stablecoin payments is worse than a less efficient structure that can. Banking access by jurisdiction varies and changes frequently.
- Visa and residency permit pathway. Tax residency requires physical presence and a legal right to be present. Some jurisdictions offer attractive visa programs (UAE Golden Visa, Portugal D7, Cyprus Permanent Residency, Malta Residence Programme). Others are slow or restrictive.
- Family considerations. Schooling, healthcare, language, climate and political stability all matter and frequently determine which jurisdictions are actually viable.
Different clients arrive at very different answers. A founder with operating revenue in USD and a remote team often suits the UAE. A family with European exposure and a desire to remain in the EU often suits Cyprus or Malta. A client targeting Asian markets and wanting common law and dependable banking often suits Singapore or Hong Kong. There is no universally correct jurisdiction, only a correct match between client and jurisdiction.
Structure selection
Once the jurisdiction is chosen, the entity and structure question begins. This is where DIY relocations most often fail, because the rules that govern how an entity will be taxed in the new jurisdiction often do not align with how it will be taxed (or treated) by the former jurisdiction.
The classic failure mode
A common pattern: an Australian who relocates buys a Wyoming LLC from an online formation agent because the marketing said tax-free. The LLC is a disregarded entity for US tax purposes. Its income flows through to the member. If the member has any US-sourced income (ad revenue from a US platform, an affiliate commission from a US company, a sponsorship from a US brand), the income is subject to US Effectively Connected Income or FDAP rules. The member must obtain an ITIN, file Form 1040-NR and lodge Form 5472 annually. The 5472 non-filing penalty is USD 25,000 per return.
Worse, the LLC adds nothing the client did not already have. The same income could be earned personally or through an offshore IBC. The LLC introduces US filing obligations that did not previously exist, and offers no advantage in return. Most clients who use this structure either ignore the US filing obligations and accumulate exposure, or pay USD 5,000 to 10,000 per year for the compliance work that should never have been triggered.
There are structures that genuinely work for internationally mobile clients. They tend to be purpose-built. A Foundation holding an International Business Company. An EU holding structure with an operating subsidiary. A Cayman exempted company with substance in the right place. A Cyprus IP holding company for digital assets. Each is suited to a specific client profile and a specific commercial reality. None is a generic solution.
The integration question
The hardest part of post-departure structuring is integration. The structure has to work across at least five axes: the client's new home jurisdiction (residency, personal tax, visa), the entity jurisdiction (corporate tax, reporting, substance), Australia (for any residual ties or assets, including the section 104-165 election), the banking and payments stack (which has its own rules), and the operational reality (where the work is done, where clients pay, where staff sit).
Each of these axes is internally consistent. The challenge is making them work together. A structure that is excellent in one dimension but ignores the others creates more problems than it solves.
How we approach the conversation
When a client asks us about relocating, the first conversation is about whether relocation is the right answer at all. For some clients, the better outcome is to stay in Australia and restructure within the local rules. The 2026-27 Budget changes leave room for well-designed Australian structures, particularly ones that use the three-year rollover relief from 1 July 2027 to migrate discretionary trust holdings into a company or fixed trust, and that take advantage of the transitional CGT arrangements. We work with our sister firm Cadena Legal on Australian-side structuring of this kind.
For clients where relocation is genuinely the right answer, we work through the full framework before recommending any particular jurisdiction or entity. That means a written review of the client's current position, a discussion of personal and family considerations, an assessment of the residency facts the client is prepared and able to support, a side-by-side comparison of the jurisdictions that fit, and a structure proposal that integrates with the new home base. Implementation follows that, not the other way around.
Our standard relocation engagement runs over six to twelve months. The structuring decision itself usually takes four to six weeks. The remainder is implementation, which includes incorporation, banking introductions, visa work where required, transfer of operating platforms, family arrangements, the Australian-side restructure and the formal residency transition. We coordinate the entire process and remain engaged once the client is on the ground.
Closing
The 2026-27 Budget is the most significant change in private wealth tax settings in more than 20 years. It does not make Australia unliveable. It does change the comparative economics for clients who already have international flexibility, and it gives others a concrete reason to consider whether their lifestyle and structure could be better located.
If you are weighing the question, the right next step is a structuring conversation that treats the facts of your life as the inputs, not a generic offshore product as the output. Cadena International is built for that conversation.
This material is produced by Cadena International. It is intended to provide general information and opinions on legal topics, current at the time of first publication. The contents do not constitute legal advice and should not be relied upon as such.
