Federal Budget 2026–27: What It Means for You

Published 13 May 2026 | General Information Only | Not Financial Advice

The Federal Government handed down its 2026–27 Budget on Tuesday 12 May 2026. Framed around the theme of "Resilience and Reform", it contains some of the most significant proposed changes to personal taxation in a generation, particularly around capital gains tax, negative gearing, and discretionary trust structures.

Below is a plain-English summary of the key announcements most likely to affect our clients. Where relevant, we've noted who is most likely to be impacted and how urgently it may be worth speaking with your accountant or adviser.

Important: Many of these measures are proposals only and have not yet been legislated. Nothing in this article constitutes financial advice. Please speak with your adviser before making any decisions.

🔑 Urgency Key- Rating Meaning

🔴 High Act or seek advice before 1 July 2027, decisions made now may lock in existing treatment

🟡 Moderate Worth reviewing your situation in the next 6–12 months

🟢 Low Changes are a few years away or have limited practical impact for most people

1. Capital Gains Tax (CGT) Overhaul

Proposed start date: 1 July 2027 Urgency: 🔴 High

This is the headline change of the Budget. From 1 July 2027, the current 50% CGT discount for assets held longer than 12 months is proposed to be replaced with cost base indexation (adjusting the purchase price for inflation using CPI). A minimum 30% tax rate on net capital gains will also apply.

What this means in practice:

• Gains on assets such as shares, investment property, and other investments will likely be taxed more heavily than under the current rules.
• Assets sold before 1 July 2027 are not affected, the 50% discount continues to apply.
• For assets you already own and plan to sell after 1 July 2027, a split calculation will apply: gains up to 1 July 2027 use the current rules; gains after that date use the new indexation method.
• The main residence exemption and small business CGT concessions are not changing.
• Superannuation funds are not affected, they retain their existing one-third CGT discount.
• Income support recipients, including Age Pensioners, will be exempt from the 30% minimum tax.
• Investors in new residential properties (not existing/established) can choose between the old 50% discount or the new indexation approach.

Who is most impacted: Anyone holding shares, managed funds, or investment properties (purchased after Budget night) with large unrealised capital gains. Retirees or lower-income individuals who previously planned to sell assets in a low-income year to minimise CGT may find that strategy less effective.

Talk to your accountant about: Whether there are assets you should consider reviewing before 1 July 2027, or whether your current investment structure remains appropriate.

2. Negative Gearing Restricted to New Builds

Proposed start date: 1 July 2027 (for properties purchased after 7:30pm AEST 12 May 2026) Urgency: 🔴 High

The Government has announced that from 1 July 2027, losses from established residential investment properties purchased after Budget night will only be deductible against rental income or capital gains from other residential properties, not against wages or other income.

Key details:

• Properties you already owned before Budget night (or had contracts in place for) are grandfathered, the existing rules continue to apply until you sell.
• Properties purchased between Budget night and 30 June 2027 can be negatively geared during that transition period, but not from 1 July 2027 onwards.
• New builds remain fully eligible for negative gearing, this is intended to incentivise new housing supply.
• Properties held in superannuation funds (including SMSFs) and widely held trusts are excluded from these changes.
• Excess losses can be carried forward and applied against residential property income in future years.
• Shares, commercial property, and other asset classes are not affected.

Who is most impacted: Investors considering purchasing established residential investment properties. Those already holding established properties are not affected while they keep them.

Talk to your accountant about: Any plans to purchase residential investment property and how the new rules would affect your tax position. If you hold property in an SMSF, this may also prompt a broader review.

3. Discretionary Trusts: 30% Minimum Tax

Proposed start date: 1 July 2028 Urgency: 🟡 Moderate (act before July 2028)

A 30% minimum tax on the taxable income of discretionary (family) trusts is proposed from 1 July 2028. The trustee pays the tax, with non-corporate beneficiaries receiving a non-refundable tax credit.

Key details:

• The main impact is on distributions to low-income beneficiaries (e.g. adult children, spouses with low income) who previously benefited from lower marginal tax rates on trust distributions.
• Corporate beneficiaries ("bucket companies") will not receive the tax credit, meaning the same income could effectively be taxed twice, this eliminates a widely used income-splitting strategy.
• Fixed trusts, super funds, deceased estates, special disability trusts, and charitable trusts are excluded.
• Primary production income and certain other income types are also excluded.
• A rollover relief window runs from 1 July 2027 to 30 June 2030, allowing restructuring out of a discretionary trust into a company or fixed trust without triggering immediate CGT or income tax, though stamp duty may still apply.

Who is most impacted: Families who hold investment assets, a business, or rental properties through a discretionary trust structure, particularly those who distribute to lower-income family members or use a bucket company.

Talk to your accountant about: Whether your existing trust structure remains effective and whether restructuring before the rollover window closes makes sense for your situation.

4. Personal Income Tax Cuts

Start date: Already legislated - commencing 1 July 2026 Urgency: 🟢 Low (already legislated, no action required)

Previously announced tax cuts are proceeding as scheduled.

The lowest bracket rate falls by 1% per year over two years, delivering up to $268 in savings in 2026–27 and $536 in 2027–28 for those earning above $45,000.

Who is most impacted: All Australian taxpayers benefit, with proportionally greater benefit for lower and middle income earners.

5. Working Australians Tax Offset (WATO)

Proposed start date: 1 July 2027 Urgency: 🟢 Low

A new permanent $250 tax offset will apply to income earned from work (wages, salaries, or sole trader business income). It is applied automatically through the tax return, similar to the Low Income Tax Offset.

This effectively increases the tax-free threshold for working income by approximately $1,800 to around $19,985 for most workers, or up to $24,985 for those also eligible for the Low Income Tax Offset.

Who is most impacted: Primarily middle and lower-income workers. Does not apply to investment income, superannuation income streams, or other passive income.

6. $1,000 Instant Tax Deduction for Work Expenses

Proposed start date: 2026–27 income year Urgency: 🟢 Low

From this financial year, eligible workers can claim up to $1,000 in work-related expenses without itemising or keeping receipts. This applies automatically, but taxpayers with actual work expenses exceeding $1,000 can still claim using the standard substantiation rules.

Charitable donations, union fees, and professional membership costs can be claimed separately on top of this deduction.

Who is most impacted: Employees with relatively low or straightforward work-related expenses who previously had to keep receipts and substantiate claims.

7. Superannuation: Division 296 Tax (Already Legislated)

Start date: 1 July 2026 Urgency: 🔴 High for affected individuals

This measure has already passed Parliament. From 1 July 2026, individuals with total superannuation balances above $3 million will face an additional 15% tax on earnings attributable to the balance above that threshold (bringing the effective rate to 30%). Balances above $10 million face an additional 10% (40% total).

This is a personal tax assessed by the ATO, not a fund-level tax. Individuals can choose to pay it personally or have it released from their super.

For more information on the Div296 Tax read our most recent blog here.

Who is most impacted: High super balance individuals, particularly those in SMSFs or defined benefit schemes. This is now law and comes into effect this financial year.

Talk to your financial adviser and accountant about: Whether your superannuation balance is approaching or exceeding $3 million, and what strategies may be available.

8. Payday Super (Already Legislated)

Start date: 1 July 2026 Urgency: 🟡 Moderate for business owners and employers

Employers will be required to pay Superannuation Guarantee contributions at the same time as wages, moving from quarterly to each pay run. This increases visibility for employees and reduces the risk of unpaid super.

Who is most impacted: Employers and small business owners who currently manage quarterly super payments. Also beneficial for employees who want to monitor their super contributions more closely.

9. Contribution Caps Increasing (Already Scheduled)

Start date: 1 July 2026 Urgency: 🟡 Moderate

The following contribution cap increases will take effect:

• Concessional (pre-tax) contributions cap: increases from $30,000 to $32,500
• Non-concessional (after-tax) contributions cap: increases from $120,000 to $130,000
• Transfer Balance Cap (the maximum amount that can move to a tax-free pension): increases from $2 million to $2.1 million

Who is most impacted: Anyone making voluntary contributions to super, especially those in the pre-retirement phase looking to maximise their super balance.

10. Private Health Insurance Rebate: Age-Based Uplift Removed

Proposed start date: 1 April 2027 Urgency: 🟡 Moderate for older Australians

Currently, Australians aged 65–69 receive a higher private health insurance rebate (28.139%) and those 70+ receive an even higher rate (32.158%) compared to the base rate of 24.118% for those under 65. From 1 April 2027, the age-based uplift is proposed to be removed, with all ages receiving the base rebate rate.

Who is most impacted: Australians aged 65 and over with private health insurance, particularly those in higher age brackets who currently benefit most from the uplift. Out-of-pocket premium costs are likely to increase.

In Summary

This Budget contains some genuinely significant structural changes, particularly around CGT, negative gearing, and family trusts. For many clients, decisions made in the next 12 months could materially affect their long-term tax position.

The most time-sensitive actions to consider:

• If you own assets with large unrealised capital gains, speak with your accountant about timing.
• If you're considering purchasing an established residential investment property, the rules have already changed as of Budget night.
• If you operate through a discretionary trust, now is a good time to begin reviewing your structure.
• If your superannuation balance is near or above $3 million, Division 296 applies from this financial year.

We will be in touch with clients where we believe these changes may be particularly relevant to their individual situation. In the meantime, if any of the above has raised questions, please don't hesitate to reach out.

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This article is general information only and does not constitute financial advice. All proposed measures are subject to the passage of legislation and may change. Please consult your financial adviser and accountant before making any decisions based on Budget announcements.