Federal Budget 2026

Federal Budget 2026–27: what matters most for you 

Each Federal Budget comes with a long list of announcements. Some are minor. Some sound important but may not affect many people in practice. And some have the potential to make a real difference to how people invest, structure assets and plan ahead. 

This year, the biggest issues are the proposed changes to capital gains tax, negative gearing, and discretionary family trusts. These are the measures most likely to affect people with investments, family trusts, or plans involving property. 

There are also changes relating to aged care, home care, private health insurance, small business, and a number of smaller tax measures. 

Importantly, many of the headline tax changes in this Budget are still only proposals. That means they generally still need to pass through Parliament before they become law, and some details may change before that happens. 

How to read this article 

This article is designed to be useful whether you want the short version or the fuller story. 

• If you just want the headlines, read the summary below and stop there. 
• If you want the detail, keep going. The article is broken into sections, and at the top of each section I have noted who that section is most relevant for. 

Quick summary 

If you only want the short version, here it is: 

• The biggest proposed changes are to capital gains tax, negative gearing, and discretionary trusts. 
• From 1 July 2027, the Government is proposing to replace the current 50% capital gains tax discount for individuals and trusts with an inflation-based method, and also introduce a minimum 30% tax rate on capital gains in many cases. 
• From 1 July 2027, the Government is proposing to restrict negative gearing on established residential property. In general, only new builds would keep the current treatment going forward. 
• From 1 July 2028, the Government is proposing a minimum 30% tax on discretionary trusts, which could reduce the tax effectiveness of distributing income to family members on lower tax rates. 
• There are also positive changes in aged care and home care, including more funding and fully government-funded personal care under Support at Home from 1 October 2026. 
• From 1 April 2027, the Government is proposing to remove the extra private health insurance rebate older Australians currently receive because of age. 
• For small business, the $20,000 instant asset write-off is proposed to become permanent from 1 July 2026. 
• Some smaller tax measures are also included, such as a $1,000 instant work-related deduction and a $250 Working Australians Tax Offset, but these are not the main story for most people. 

If any of the major property, trust or tax changes affect you, it would be sensible to review your position early, rather than waiting until the last minute if these proposals move closer to becoming law. 

The big story this year: tax on investments and property 

Most relevant for: Property investors, share investors, families with trusts, retirees with investment assets, people planning future asset sales 

Capital gains tax: the 50% discount is proposed to change 

At the moment, if you hold an investment asset for more than 12 months, individuals and trusts can usually reduce the taxable capital gain by 50%. 

The Budget proposes changing that from 1 July 2027. 

Instead of the current 50% discount, the Government is proposing an inflation-based method. In simple terms, the cost of the asset would first be adjusted for inflation, and tax would then apply to the gain above inflation. The idea is that only the “real” gain is taxed, rather than simply applying a flat 50% discount. 

At the same time, the Government is also proposing a minimum 30% tax rate on capital gains in many cases. 

This is a major change because it applies broadly to investment assets such as: 

• investment properties 
• shares 
• other capital assets held by individuals, trusts and partnerships 

There are some important exceptions: 

• super funds are not included in these changes 
• the main residence exemption is unchanged 
• the existing small business CGT concessions are intended to remain 
• some people receiving means-tested income support, including the Age Pension, may be exempt from the proposed 30% minimum capital gains tax in the year the gain is realised.

Why this matters 

This could materially change how attractive it is to hold growth assets in your own name or through a family trust. 

For many years, the 50% discount has been an important part of long-term planning for people building wealth through shares, property and other investments. If this proposal becomes law, future gains may be taxed more heavily than many people have assumed. 

It may also reduce the value of a common strategy where someone delays the sale of an asset until a lower-income year, such as retirement, to try to reduce the tax payable. If a minimum 30% tax applies, that strategy may become less effective. 

The transition rules matter 

This is not a simple “all old assets, all new rules” approach. 

If you already own an asset before 1 July 2027, the gain up to that date is proposed to stay under the current rules, while gains from that date onward would be taxed under the new rules. 

That means, in effect, an asset may need to be split into two parts for tax purposes: 

• the gain built up before 1 July 2027 
• the gain built up after 1 July 2027 

For listed shares, that may be relatively straightforward. For property and other assets, it may mean needing a valuation or relying on ATO methods at some point in the future. 

That is one of the practical issues with this proposal. It is not just about potentially more tax. It is also about more record-keeping, more complexity, and more care around future sale decisions. 

New builds may get better treatment 

The Government is proposing a more favourable treatment for certain newly built residential properties. 

In broad terms, eligible investors in qualifying new builds may still be able to choose between: 

• the current 50% discount, or 
• the new inflation-based method 

This is part of a broader push to encourage investment into genuinely new housing supply rather than established properties. 

Negative gearing: another major proposed change 

Most relevant for: Residential property investors, people considering buying an investment property, families using trusts, companies holding residential property 

This is the other major headline. 

From 1 July 2027, the Government is proposing to restrict negative gearing for residential property so that, broadly speaking, it only continues for new builds. 

For established residential properties bought from 7:30pm AEST on 12 May 2026, losses would no longer be able to reduce salary, business income or other unrelated income from 1 July 2027. 

Instead, those losses would generally only be able to be used against: 

• residential rental income, or 
• future capital gains on residential property 

Unused amounts could be carried forward to future years. 

Why this matters 

This is a significant change for anyone who has relied on the current tax treatment of investment property. 

A lot of residential property strategies have historically assumed that if the property runs at a loss for a period of time, that loss can help reduce tax on other income. If this proposal becomes law, that support would no longer apply for affected established properties. 

That does not mean investment property stops making sense. But it does mean the numbers may look different, and the tax benefit may be much smaller than it has been in the past. 

Timing is critical 

The dates here matter a lot: 

• If you already owned an established residential property before the Budget announcement, or had already entered into a contract before then, the proposal says that property would generally keep the current treatment. 
• If you buy an established property after Budget night but before 1 July 2027, you could still negatively gear it during that period, but not from 1 July 2027 onward. 
• If you buy an established residential property from 1 July 2027, negative gearing would generally not be available under the proposal. 

That means the same type of property could be treated very differently depending on when it was acquired. 

What counts as a new build? 

This will matter a lot if these rules proceed. 

A qualifying new build generally needs to genuinely add to housing supply. That may include: 

• a new dwelling built on vacant land 
• a development where an older property is demolished and replaced with a greater number of dwellings 

It generally does not mean any property that simply looks new or has been renovated. A knock-down rebuild that does not increase the number of dwellings may not qualify. Significant renovations may also not qualify unless they genuinely add to supply. 

Structure still matters 

These proposed negative gearing changes are broad. They are intended to apply not just to individuals, but also to: 

• partnerships 
• companies 
• most trusts 

That means simply buying through a company or family trust would not automatically avoid the change. 

However, super funds, including SMSFs, are proposed to be excluded from this measure, as are some widely held trusts. That is one of several reasons why ownership structure may become an even more important part of planning if these changes become law. 

Discretionary family trusts: a major issue for many families 

Most relevant for: Families with discretionary trusts, business owners, investors, adult children receiving trust distributions 

The Budget also proposes a minimum 30% tax on discretionary trusts from 1 July 2028. 

In simple terms, this is aimed at reducing the benefit of distributing trust income to family members who are on lower tax rates. 

Under the proposal, the trustee would pay at least 30% tax on taxable trust income. Most non-corporate beneficiaries would then receive a non-refundable credit for that tax. Corporate beneficiaries would not receive the same treatment, which means common “bucket company” strategies may become much less effective. 

Why this matters 

For many families, a discretionary trust has never been just about tax. It can also help with: 

• control of investments 
• asset protection 
• succession planning 
• flexibility in how income is distributed each year 

This proposal does not remove discretionary trusts. But it does reduce one of their biggest tax advantages. 

That means if this becomes law, some families may decide the trust still makes sense for control or protection reasons, while others may want to review whether the structure still gives them the outcome they want. 

Not all trusts are affected 

There are important exclusions. The proposal is generally not intended to apply to things such as: 

• fixed trusts 
• widely held trusts 
• complying super funds 
• deceased estates 
• special disability trusts 
• charitable trusts 
• some testamentary trust arrangements 

Some types of income are also expected to be excluded. 

There may be a restructuring window 

The Government has also proposed rollover relief for three years from 1 July 2027 to help some people restructure out of discretionary trusts into another structure, such as a company or fixed trust. 

That does not mean restructuring will be right for everyone. In many cases there may still be legal, tax or practical issues to work through. But it does mean that if you use a discretionary trust, this is an area worth watching closely. 

Retirees, older Australians, and families supporting parents 

Most relevant for: Retirees, older couples, adult children helping ageing parents, aged care clients 

While the tax measures have taken most of the attention, there are also several important changes affecting older Australians and their families. 

Aged care and home care 

There are some positive changes here. 

The Budget includes more funding for Support at Home and residential aged care, including more aged care beds and more home care support. 

A key change is that from 1 October 2026, personal care under the Support at Home program is proposed to become fully government funded. That includes services such as help with: 

• showering 
• dressing 
• some continence support 

For many older Australians and their families, this is one of the more practical and meaningful parts of the Budget. 

Private health insurance rebate 

There is also a less positive change. 

From 1 April 2027, the Government is proposing to remove the extra private health insurance rebate that older Australians currently receive because of age. 

That means some people aged 65 and over may face higher out-of-pocket premiums, depending on their cover and income tier. 

This is not as large as the property and trust measures, but it may still have a real effect on household budgets, particularly for retirees who value private cover and want to keep it. 

Pension Supplement for people overseas 

For people receiving the Pension Supplement, the rules for temporary overseas travel are also proposed to change. 

The full supplement would continue for up to 12 weeks of temporary absence rather than 6 weeks, but it would then stop after 12 weeks or if the move is permanent. 

That will only affect a smaller group of people, but it is useful to know for anyone planning extended travel. 

Small business and self-employed clients 

Most relevant for: Small business owners, sole traders, family businesses 

For business owners, the most practical measure is the proposed permanent $20,000 instant asset write-off from 1 July 2026 for eligible small businesses with turnover under $10 million. 

This means eligible assets costing less than $20,000 each could continue to be claimed immediately, instead of being written off over time. 

There are also additional company tax loss measures and start-up business measures in the Budget, but for many small business owners, the instant asset write-off is likely to be the measure with the most day-to-day relevance. 

Other measures 

Most relevant for: Employees, workers, some self-employed people, lower-income households, families 

The Budget also includes a number of other measures that may be relevant depending on your circumstances. 

Personal tax changes 

The reduction in the lowest tax rate to: 

• 15% from 1 July 2026 
• 14% from 1 July 2027 

is already law. 

There is also a proposed $250 Working Australians Tax Offset from the 2027–28 financial year. 

$1,000 instant work-related deduction 

From 1 July 2026, the Government is proposing a $1,000 instant deduction for work-related expenses for eligible employees, without needing to itemise smaller claims. 

That may make tax time simpler for some people, although anyone with higher deductible expenses may still prefer to claim the actual amount in the usual way. 

Low Income Superannuation Tax Offset 

From 1 July 2027, the Low Income Superannuation Tax Offset is set to expand, increasing both the income threshold and the maximum payment. 

This will be helpful for eligible lower-income earners, although it will be more relevant for some households than others. 

So what should you take away from this? 

If you only focus on three things from this Budget, focus on these: 

1. If you own investment assets outside super, the proposed capital gains tax changes may matter more than they first appear. 
2. If you own, or are considering buying, residential investment property, the proposed negative gearing changes and the distinction between established property and new builds are critical. 
3. If you use a discretionary family trust, the proposed 30% minimum tax may significantly change how tax-effective that structure is going forward. 



The other key point is this: many of these major changes are not law yet. 

The already legislated tax cuts are locked in. But the major changes to capital gains tax, negative gearing, discretionary trusts, and some other measures still need to pass through Parliament, and some details may change before they take effect. 

That means there is no need to panic. But there is a good reason to pay attention. 

If these measures move closer to becoming law, they may affect how investment assets are best held, when sales are made, whether a family trust still makes sense, and how future property decisions should be approached. 

In short, this Budget is one to watch carefully.