The 2026–27 Federal Budget introduces a mix of near-term cost of living support and longer-term structural reform that may influence how Australians plan, invest and manage wealth over the coming years.
While many of the headline measures focus on easing financial pressure today, there is a clear shift toward reshaping the taxation landscape, particularly for investors, property owners and those using trust structures.
It’s important to note that most measures are proposals only and may change before becoming law.
A shift away from tax-driven strategies
Historically, areas such as capital gains tax concessions, negative gearing and discretionary trusts have played a central role in wealth accumulation strategies. The proposed changes signal a shift where these strategies may become less effective or require more careful planning going forward.
For many clients, this does not mean immediate action, but it does highlight the importance of:
- Reviewing how assets are structured
- Understanding the tax treatment across different investment vehicles
- Maintaining flexibility as legislation evolves
Capital Gains Tax (CGT) reforms
From 1 July 2027, the Government has proposed replacing the current 50% CGT discount with an inflation-based indexation method, alongside introducing a minimum 30% tax on capital gains.
What this means in practice
- Capital gains may be taxed more heavily in certain scenarios, particularly where inflation is low or assets are held for shorter periods
- The changes apply broadly across investment types, including property, shares and other growth assets
- Existing assets will generally retain current treatment for gains accrued before July 2027
Illustrative Tax Impact: Asset Purchased for $400k / Sold for $800k
| Scenario | Tax Outcome at 47% Marginal Rate |
| Current (50% Discount) | Taxable gain: $200,000 | CGT payable: ~$94,000 |
| Indexation (4% p.a., 10-year hold) | Indexed cost: ~$592k | Gain: ~$208k | CGT payable: ~$97,760 |
| Indexation (4% p.a., 5-year hold) | Indexed cost: ~$487k | Gain: ~$313k | CGT payable: ~$147,000 |
| Indexation (2% p.a., 5-year hold) | Indexed cost: ~$442k | Gain: ~$358k | CGT payable: ~168,000 |
Source: Praemium
Why this matters
This change may alter how investors think about:
- Timing the sale of assets
- Holding periods for investments
- The balance between growth-focused and income-generating assets
Over time, financial strategies may rely less on capital growth supported by tax discounts and more on consistent, after-tax returns.
Negative gearing reforms
From 1 July 2027, negative gearing is proposed to be limited to newly constructed residential properties, with changes applying to established properties purchased from Budget night (12 May 2026).
Under the proposal, losses from these properties will no longer be able to be used to offset income such as wages. Instead, they will be carried forward and applied against future rental income or capital gains from that property.
What this means in practice
- A shift in how property losses are used
Rather than reducing taxable income immediately, losses are deferred and applied in future years when the property generates income or is sold.
- Existing properties are largely unaffected
Properties owned or under contract before Budget night are generally grandfathered under current rules.
- New builds remain an exception
Properties owned or under contract before Budget night are generally grandfathered under current rules.
- A transition period still applies
Properties acquired between Budget night and 30 June 2027 can continue to access existing negative gearing rules until the changes take effect, which may create a natural review point for investors.
Why this matters
This reform changes the role negative gearing plays within an investment strategy.
For many investors, negative gearing has historically helped offset holding costs by reducing taxable income in the early years of an investment. Under the proposed rules, that immediate benefit is reduced, particularly for newer purchases of established properties.
This may influence:
- Cash flow considerations
Investors may need to absorb a greater portion of holding costs in the short term, without the same immediate tax offset
- Investment decisions
The relative attractiveness of new builds compared to established properties may increase
- Portfolio diversification
With changes to both negative gearing and capital gains tax, some investors may reassess the role of residential property alongside other asset classes
How lenders are responding now
While the proposed changes are not scheduled to commence until 1 July 2027, lenders have already begun adjusting how they assess borrowing capacity.
Following the Federal Budget announcement, many lenders updated their servicing calculators from 13 May 2026 to remove the benefit of negative gearing for established residential investment properties.
What this means in practice
- Reduced borrowing capacity
Without factoring in expected tax savings, lenders are now assessing higher out-of-pocket costs. For some investors, this may reduce borrowing capacity materially, depending on individual circumstances.
- Immediate impact on lending decisions
These changes are already being reflected in credit assessments, meaning borrowing limits may differ compared to pre-Budget scenarios.
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- Grandfathering of existing arrangements
Properties purchased or under contract before 7:30pm on 12 May 2026 continue to be assessed under previous settings.
- Grandfathering of existing arrangements
- Different treatment for new builds
New residential developments continue to be assessed differently, in line with current policy settings.
While not yet legislated, this highlights how quickly policy direction can influence lending practices, and the importance of reviewing borrowing capacity and strategy in real time.
What to consider
For many clients, there is no immediate need to act, particularly where existing properties are unaffected.
However, it may be worth considering:
- How future property purchases align with these proposed rules
- The impact on cash flow over the holding period of an investment
- Whether your broader strategy remains balanced and aligned to your long-term goals
As with many of the Budget measures, the focus is not on reacting quickly, but on reviewing strategies in a considered and structured way over time.
Discretionary trusts and structural planning
Perhaps the most significant structural change for wealthy family groups — a 30% minimum tax on discretionary trust distributions has been confirmed in the Budget. The measure takes effect from 1 July 2028, providing a transition period for planning.
What this means in practice
- The ability to distribute income to lower-taxed beneficiaries may become less effective
- Trust income may be taxed at a higher minimum level, regardless of individual marginal tax rates
- Certain exemptions and transitional arrangements may apply
Why this matters
For clients using family trusts, this represents a meaningful shift. Trusts may continue to provide benefits such as asset protection and estate planning flexibility, but the tax advantages may be reduced.
There may also be opportunities to review structures during the proposed transition period before the changes take effect.
Personal tax measures and cost of living support
The Budget includes several measures designed to support take-home income and simplify the tax process:
- The lowest marginal tax rate will reduce to 15% from July 2026 and further to 14% from July 2027
- A $250 Working Australians Tax Offset will apply from 2027–28
- A $1,000 instant tax deduction will simplify claims for work-related expenses
What this means in practice
These measures are relatively modest individually, but collectively aim to:
- Increase take-home pay
- Reduce complexity at tax time
- Provide targeted support for working Australians
Why this matters
While these changes may not significantly alter long-term financial strategies, they contribute to improved cash flow and financial ease, particularly for households managing rising living costs.
Superannuation: Stability with important changes underway
While the broader superannuation framework remains relatively stable in this year’s Budget, there are several important legislated changes already coming into effect that are worth understanding.
What this means in practice
Super remains a core planning tool
The fundamental structure of superannuation, including contribution rules and its role as a tax-effective investment environment, remains unchanged. This continues to provide a level of certainty for long-term retirement planning.
Division 296 tax on higher balances (from 1 July 2026)
A new tax will apply to individuals with total superannuation balances above $3 million. In simple terms:
- An additional 15% tax will apply to earnings on balances above $3 million
- A further 10% tax applies to balances above $10 million
This represents a meaningful shift for higher balance clients, particularly those using super as a primary long-term wealth accumulation vehicle.
While it will only affect a relatively small portion of the population, it reinforces the need to carefully consider how wealth is distributed across super and non-super environments.
Payday super (from 1 July 2026)
Employers will be required to pay superannuation guarantee contributions within 7 calendar days of each payday, rather than quarterly.
This change is designed to:
- Improve transparency and timeliness of contributions
- Reduce the risk of unpaid or delayed super
- Allow balances to build more consistently over time
For employees, this can lead to better visibility and potentially improved long-term outcomes through more regular contributions.
Why this matters
Although the superannuation system remains stable overall, these changes highlight an important shift.
On one hand, super continues to be one of the most consistent and tax-effective structures available for long-term wealth building.
On the other, the introduction of Division 296 signals that very large balances will be taxed more heavily, changing the way some individuals approach accumulation strategies.
At the same time, with proposed tax changes impacting investments held outside of super, its relative attractiveness may increase for many Australians, particularly when viewed over the long term.
What to consider
For many clients, there is no immediate action required. However, it may be worth considering:
- How your super balance sits relative to future thresholds
- The role super plays within your broader wealth strategy
- Whether contribution strategies or asset allocation should be reviewed over time
As with many of the Budget measures, the focus is not on reacting quickly, but on making considered decisions within a structured plan.
Aged care and support for older Australians
Aged care is a key focus in this year’s Budget, with increased funding and reforms designed to improve access, affordability and quality of care.
Key measures include
- Increased government funding to expand aged care services and capacity
- Expansion of home care programmes to support people living independently
- Changes to Support at Home services, including fully subsidised personal care from October 2026 in some cases
What this means in practice
For individuals and families, these changes may:
- Improve access to both residential and in-home care services
- Reduce out-of-pocket costs for certain types of care
- Increase flexibility in how care is accessed and delivered
Why this matters
Planning for aged care is increasingly a key part of financial advice. These measures highlight:
- The growing importance of integrating aged care planning into financial strategies
- The need to consider both financial and non-financial impacts when supporting ageing family members
- Opportunities for earlier conversations and clearer planning pathways
Small business support
The Budget also includes measures aimed at supporting business owners and improving cash flow:
- The $20,000 instant asset write-off will become permanent from 1 July 2026
What this means in practice
- Small businesses can continue to deduct eligible asset purchases immediately
- This supports reinvestment and operational flexibility
Why this matters
For business owners, consistent policy in this area provides certainty and may support ongoing investment decisions.
What this could mean for your financial plan
While the Budget introduces significant proposed reforms, the overall impact will vary depending on your personal circumstances.
Most changes:
- Have future start dates
- Remain subject to legislation
- Require careful consideration before taking action
For many clients, the most important step is not immediate change, but thoughtful review and planning.
Looking ahead
The 2026 Federal Budget signals a broader evolution in financial planning.
There is a clear shift toward:
- Long-term, sustainable strategies
- Structuring assets carefully
- Balancing tax considerations with overall financial outcomes
What to do next
Every individual’s situation is different, and the relevance of these proposed changes will depend on your personal goals and financial position.
If you would like to understand how the Federal Budget may impact your strategy, we encourage you to speak with your adviser.
A considered and proactive approach can help ensure you remain well positioned for the future.
