Australian Federal Budget 2026-27: What Collectors Buying, Selling or Planning Their Legacy Need to Know
The Federal Budget signals a structural shift in how private wealth is taxed in Australia, with the removal of the CGT 50% discount from 1 July 2027, an end to negative gearing for most property and a minimum 30% tax on trust income. In this briefing, we unpack the budget measures that will most impact art collectors and investors, luxury asset owners and those considering private or public cultural infrastructure.
1. The instant asset write-off becomes permanent
The Government has proposed to permanently extend the AUD $20,000 instant asset write-off from 1 July 2026, for small businesses with turnover up to $10 million. Assets of $20,000 or more may continue to be placed into the small business simplified depreciation pool.
The ATO's position, reflected in its effective life rulings, is that qualifying artworks are limited to tangible works - including paintings, sculptures, drawings, engravings and photographs - displayed in open viewing areas in premises used for taxable purposes. That is a narrower category than it may appear. What matters is not simply whether a business favours the work, but whether it was properly acquired, documented, deployed and accounted for as a business asset.
2. CGT reform makes valuation discipline essential
The Budget proposes that, from 1 July 2027, the current 50 per cent CGT discount be replaced by cost-base indexation for assets held for more than 12 months, with a 30 per cent minimum tax on net capital gains. Importantly, the Budget papers state that the changes will apply to all CGT assets, including pre-1985 assets, held by individuals, trusts and partnerships.
Although the politics of the announcement is largely about housing, the drafting is broader. Artworks, jewellery, classic cars, rare books, watches, design objects, wine and other collectable or luxury assets may all become part of the conversation.
Transitional arrangements are expected to limit the changes to gains arising on or after 1 July 2027 and while we will have to wait for the details of the legislation, that date may need to be treated as a valuation marker for serious collectors. Unlike listed shares, art and luxury assets do not have a clean daily market price. Value is shaped by attribution, provenance, condition, exhibition history, rarity, artist momentum, cultural significance, sale context and, sometimes, export or cultural heritage restrictions.
For long-held collections, the proposed treatment of pre-1985 assets is particularly significant. Historical gains before 1 July 2027 may remain outside the CGT net, but future gains may need to be calculated by reference to a defensible market value at that transition point.
While the valuation itself will not necessarily need to be done before 1 July 2027, collectors should be thinking now about gathering the information necessary to obtain a robust and defensible valuation at that date. For art and luxury assets, a credible valuation will typically require: original acquisition records, including the invoice, auction records or dealer correspondence confirming the purchase price and date; provenance documentation tracing the history of ownership; a condition report; exhibition and loan history; any prior independent appraisals; attribution documentation, including certificates of authenticity, catalogue raisonne references or specialist opinions; and any relevant export, import or cultural heritage compliance records. The more complete the documentation, the stronger the foundation for a valuation that can withstand ATO scrutiny.
It is also worth noting that section 118-10 of the Income Tax Assessment Act 1997 disregards capital gains and losses from collectables – including artworks, jewellery, rare manuscripts, stamps, coins and antiques – acquired for $500 or less, and from personal use assets acquired for $10,000 or less. These thresholds are unaffected by the proposed reforms but are unlikely to be relevant to collectors holding works of significance. The valuation and documentation disciplines discussed above remain the central focus.
3. Alternative assets may attract more attention
Through its proposed negative gearing and CGT changes, the Budget seeks to make established residential property less tax-attractive for certain investors. In simple terms, negative gearing allows investors to deduct rental property losses against other income. Under the proposed changes, those deductions would be more limited for established residential properties acquired after the relevant start date, while the CGT reforms would also change how gains are taxed over time.
One consequence of taxing risk capital at 47% is that some investors may begin looking more closely at alternative assets as part of broader portfolio planning. Fine art, jewellery, watches, classic cars, design objects and other luxury collectibles may appeal because they combine scarcity, cultural value, aesthetic enjoyment and the prospect of long-term capital appreciation. Unlike residential property, however, these assets do not typically produce income. There is no equivalent of rental yield. That means there are no losses to deduct against other income, and the negative gearing reforms are largely irrelevant to them. The question for collectors and investors is therefore narrower: it is principally about the CGT treatment of gains on eventual disposal, and about how the asset is classified by the ATO.
This does not mean art and luxury assets become tax-free alternatives. As noted above, they may fall within the proposed CGT changes, and the CGT treatment of any given asset will depend on how the holder is characterised. The ATO draws a meaningful distinction between a private collector who holds works for personal enjoyment and an investor or trader who holds assets on revenue account. Where a holder is carrying on a business of buying and selling art or luxury goods, gains may be assessable as ordinary income rather than as capital gains, meaning the CGT framework - and its proposed reforms - may not apply at all. Conversely, a private collector who sells a long-held work will generally be subject to CGT, and under the proposed changes, the gain will be calculated using cost-base indexation rather than the 50 per cent discount.
The point is not that collections sit outside the tax system, but that the characterisation of the holder and the asset matters enormously. Collectors who have not obtained advice on how their holdings are classified should treat this Budget as a prompt to do so.
4. Trust structures need to be reviewed
The Government has proposed to introduce a 30 per cent minimum tax on the taxable income of discretionary trusts from 1 July 2028. The measure is directed at arrangements under which trust income is distributed to beneficiaries at lower marginal tax rates than would apply if the same income were received directly. The Budget papers indicate that the measure will not apply to certain trusts. The detail of the exclusions will depend on the enabling legislation, which has not yet been released.
For trusts holding art and luxury assets, the practical impact of the minimum tax will depend significantly on the trust's income profile. Where a trust holds assets that produce little or no income – as is commonly the case with art collections, jewellery, classic cars or design objects – there may be limited taxable income against which the minimum tax operates in any given year. The asset protection, estate planning and succession benefits of a discretionary trust structure may therefore continue to make it an appropriate vehicle for these asset classes, notwithstanding the proposed measure. The analysis changes on disposal. Where a trust sells a significant work and realises a capital gain, that gain will form part of the trust’s taxable income for the relevant year, and both the proposed minimum tax and the CGT reforms discussed in section 2 will need to be considered carefully at that point.
Art and luxury assets are often held within private group structures – sometimes established deliberately for succession or asset protection purposes, sometimes simply inherited or accumulated over time. This Budget is a prompt to ask whether the structure still matches the purpose and scale of the collection, and whether it can be maintained efficiently in the changed tax environment.
5. Museums and philanthropy: opportunity, but no shortcut
The Budget allocates $1.1 billion for Australia’s arts and culture sector, including dedicated infrastructure funding for select national collecting institutions and the continued rollout of the Revive National Cultural Policy. For collectors and those considering philanthropic structures, two specific measures are directly relevant: a proposal to streamline deductible gift recipient endorsement by removing certain ministerial declaration requirements, and changes to the structure and obligations of private and public ancillary funds.
The Government has proposed to rename private ancillary funds and public ancillary funds (PAFs) to private giving funds and public giving funds (PGFs), to better describe their purpose. More significantly for collectors, it has proposed to lift the minimum annual distribution rate from 5 per cent to 6 per cent of net assets. For a giving fund that holds illiquid assets such as artworks or cultural objects, meeting that distribution obligation each year may require either holding sufficient liquid assets alongside the collection or disposing of works to fund distributions. Collectors structuring around art holdings should model that obligation carefully before committing to the structure.
This reinforces a central point: a private or public giving fund can be a powerful philanthropic structure, but it is designed to move money, property or benefits to eligible deductible gift recipients, rather than to hold and operate a collection for private or family purposes. A collector who wants to establish a museum, lend works publicly or create an artist foundation will need to consider whether the giving fund structure is fit for that purpose from the outset, or whether a separate charitable trust or company limited by guarantee is more appropriate. Separately, collectors considering donating works to eligible cultural institutions should be aware of the Cultural Gifts Program, which allows donors to claim a tax deduction for the market value of a work gifted to an approved public art gallery, museum or library. That program is unaffected by the Budget as currently announced and remains one of the most tax-effective options available to collectors seeking a philanthropic outcome.
6. Conclusion: what collectors should do now
The Budget does not require every collector to immediately restructure. It does, however, reward discipline. Two dates now matter. Before 1 July 2027, collectors should ensure that acquisition records, provenance files, invoices, loan agreements, insurance schedules, condition reports, valuations and ownership records are in order - the groundwork for any defensible CGT position on disposal. Before 1 July 2028, those holding collections within discretionary trust structures should obtain advice on whether the proposed minimum tax affects their position, and whether the structure remains appropriate.
For family offices and private groups, the priority is to review holding structures in light of both the trust minimum tax and the CGT reforms, and to confirm how the ATO is likely to characterise the holder and the assets. For business owners acquiring art, the focus should be evidence of genuine business use, proper accounting treatment and eligibility under the instant asset write-off rules. For collectors considering philanthropic structures, the focus should be on choosing the right vehicle from the outset - whether a private or public giving fund, a charitable trust or another structure - and understanding the distribution obligations that come with it.
Art and luxury assets remain culturally powerful and personally meaningful. But the Budget confirms that they are also part of the broader economic and regulatory fabric – and that passion assets, like all assets, require professional governance. Collectors who treat them seriously – documenting acquisition, understanding their tax classification, reviewing their holding structures and planning their philanthropic legacy – will be better placed to buy, sell, donate, lend and preserve them on their own terms.
Aurelian Lawyers & Advisers works with families, collectors, and cultural stakeholders to structure these relationships thoughtfully and with foresight. Get in touch with us.
The contents of this article are general information only and should not be relied upon as legal, tax or financial advice. Every situation is different, so it’s important to obtain advice from a lawyer suited to your circumstances.