The 2026 Federal Budget has introduced some of the most significant proposed taxation reforms in Australia in more than two decades. Whether you agree with the Budget or not, the practical consequences for family law practitioners and separating couples are likely to be substantial.

The proposed reforms relating to capital gains tax (CGT), discretionary trusts and investment structures will inevitably influence how property settlements are negotiated, valued and implemented in family law matters. They will also affect the way courts, advisers and litigants assess future liabilities, asset retention strategies and intergenerational wealth structures.

Real matter examples include:

• A client seeking to retain the family trust and the assets contained within. Post budget reforms, this would mean that you will now be taxed at 30% for any distributions made. How we consider this and other tax reforms under the Budget need to be considered now and need to be considered in conjunction with advice from our experienced counterpart accountants. A trust retained today that provides a $1,000 distribution per week, will soon be a $700 distribution, reducing your client’s income stream by $15,600 a year.  
  
  
• Providing advice on spousal maintenance applications. Post Budget reforms may result in the other parties disposable tax income being reduced, through increases to the CGT and trust distribution tax. A spouse relying on trust distributions for an income stream will receive less as a result of the Budget. A court may struggle to consider an interim sale of an investment property as a result of the proposed replacement of the 50% CGT discount with indexation plus a minimum 30% CGT floor. Is it worth it?
  
  

These changes ultimately will affect our client’s matters in the following ways:

1. property pool valuations;
2. taxation adjustments;
3. trust structures;
4. retained asset calculations;
5. business valuations and liquidity analysis;
6. spousal maintenance assessments; and
7. litigation strategy.

In many property settlements, courts have historically discounted future CGT liabilities where the sale of an asset was not imminent. The rationale has often been that taxation consequences are uncertain and may never crystallise.

However, the proposed Budget reforms significantly change that landscape.

Where taxation regimes become harsher, more immediate and more structurally embedded into investment assets, future tax liabilities become increasingly relevant to present value.

If you are currently in the midst of a property settlement or anticipating separation, obtaining timely and strategic legal advice is essential in light of these proposed reforms. Our team of experienced family lawyers is well placed to guide you through both the legal and practical implications of these changes, ensuring your matter is considered with clarity and foresight.

Importantly, we also work closely with a trusted network of accountants, financial advisers and valuation experts to ensure every aspect of your matter is properly assessed and supported. This allows us to deliver the capability and reach of a large firm, while maintaining the personalised, responsive service of a specialist family law practice.

If you would like tailored advice in relation to your circumstances, our team is here to assist. You can contact us on 1300 052 224, email us at info@bwbfl.com.au, or submit an online enquiry through our website.