The 2026–27 Federal Budget has introduced a range of proposed changes that could have a meaningful impact on investors, property owners, business owners and retirees.
The 2026–27 Federal Budget has introduced a range of proposed changes that could have a meaningful impact on investors, property owners, business owners and retirees.
While many of the announcements had been widely expected before Budget night, the scale of some of the proposed tax reforms is significant. In particular, changes to capital gains tax, negative gearing and discretionary trusts may reshape how Australians think about wealth accumulation, tax planning and investment structures.
At the same time, the superannuation system was not directly overhauled in this Budget. That may reinforce super’s role as a tax-effective long-term savings vehicle, particularly when compared with some of the proposed changes outside super.
It is important to remember that most Federal Budget announcements are still proposals only and are not yet law. As legislation is introduced, details may change.
Below, we outline some of the major measures and what they could mean for investors.
If you are unsure how the proposed changes will affect your situation, ensure to speak with a Financial Adviser.
Book a meeting with an independent Financial Adviser.
Table of contents
1. Capital gains tax changes could be one of the biggest shifts for investors
One of the most significant Budget announcements is the proposed removal of the 50% capital gains tax discount for capital growth that accrues on or after 1 July 2027.
Under the proposal, assets held for more than 12 months would instead use CPI indexation to adjust the cost base when calculating the gain. A 30% minimum tax rate would also apply to capital gains calculated under this method for most taxpayers.
This would effectively return Australia to an older CGT calculation model, while also introducing a more complex transitional framework.
Why this matters
For investors, this could affect:
- the after-tax value of selling growth assets
- the timing of future asset sales
- whether assets are held personally, through trusts, companies or super
- the long-term attractiveness of different investment structures
Which assets may be affected?
Broadly, the new approach would create three categories:
- assets acquired and sold before 1 July 2027, where current rules continue to apply
- assets acquired before 1 July 2027 and sold after that date, where transitional rules would apply
- assets acquired and sold from 1 July 2027, where the new indexed method would apply
Importantly, the proposal does not apply in the same way to:
- superannuation funds, including SMSFs
- companies
- a taxpayer’s principal residence
- small business CGT concessions
- the existing affordable housing CGT discount
This means investors may need to revisit whether their current ownership structure is still the most appropriate for their long-term goals.
2. Negative gearing changes may alter property investment strategy
The Budget also proposes major changes to negative gearing for residential investment properties.
From 1 July 2027, losses from eligible residential investment properties would no longer be available to offset other forms of assessable income, such as salary and wages. Instead, those losses would be quarantined and carried forward to offset future investment income or gains.
Who would this affect?
The proposed change applies only to residential investment properties acquired from 7:30pm on 12 May 2026, being Budget night.
The measures would not apply to:
- residential investment properties acquired before Budget night
- commercial properties
- other investment assets such as shares
- residential properties regarded as new builds
Why this matters
For investors considering a property purchase, this could affect:
- cash flow planning
- debt structuring
- the tax effectiveness of future property purchases
- the relative appeal of property versus other investments
For some investors, the key issue may no longer be whether a property is negatively geared, but whether the loss can actually improve short-term cash flow outcomes.
3. Discretionary trust tax changes could have broad implications
Another major proposal is the introduction of a 30% tax rate on discretionary trust income from 1 July 2028.
Currently, discretionary trusts can distribute taxable income to beneficiaries, who are then taxed at their own marginal tax rates. Under the proposed rules, the trustee would instead pay tax at 30%, unless a higher tax rate applies.
For many families and business owners, this would represent a substantial change to how trusts are used in tax planning and wealth management.
Why this matters
Discretionary trusts are commonly used for:
- family wealth planning
- investment ownership
- tax management
- asset protection
- intergenerational planning
A flat trust tax rate may reduce flexibility and change the value of existing trust structures for some households.
The Budget papers also indicate that rollover relief may be available from 1 July 2027 for three years, which could support restructuring into other arrangements such as companies.
Given the complexity of trust planning, this is an area where tailored advice will be especially important.
4. Small businesses receive more certainty with the instant asset write-off
Not all of the Budget measures were restrictive.
The Government has announced that the $20,000 instant asset write-off for eligible small businesses will become a permanent measure from 1 July 2026.
To qualify, a business must have aggregate turnover of up to $10 million.
This means eligible small businesses can continue to immediately deduct the full cost of eligible assets costing less than $20,000 in the income year the asset is first used or installed ready for use.
Why this matters
This provides greater certainty for small business owners when planning:
- equipment purchases
- technology upgrades
- vehicle acquisitions
- capital expenditure timing
Rather than waiting each year to see whether the write-off will be extended again, businesses can now plan with more confidence.
5. Personal tax measures may provide modest relief
The Budget also builds on previously announced personal tax changes.
The current 16% personal income tax rate is set to decrease:
- to 15% from 1 July 2026
- to 14% from 1 July 2027
In addition, from 1 July 2026, individuals earning income from work may be able to claim a standard tax deduction of up to $1,000 instead of claiming certain work-related expenses individually.
The Government also announced a Working Australians Tax Offset of up to $250 per year from 1 July 2027 for people earning income from work.
Why this matters
While these measures may not dramatically change long-term wealth outcomes on their own, they may slightly improve disposable income and simplify tax claims for some workers.
For households already managing rising living costs, even small changes may still be relevant.
6. Superannuation remains a key planning opportunity
Although the Budget did not directly change the core taxation arrangements for superannuation, a number of previously announced or indexed changes are still important.
These include:
- Division 296 tax for large super balances
- pay-day super commencing from 1 July 2026
- indexation of the transfer balance cap from $2.0 million to $2.1 million
- indexation of the total super balance threshold from $2.0 million to $2.1 million
- an increase in the concessional contribution cap from $30,000 to $32,500
- an increase in the non-concessional contribution cap from $120,000 to $130,000
Why this matters
For many Australians, these changes may create opportunities to:
- review salary sacrifice arrangements
- make larger contributions to super
- reassess retirement income planning
- accumulate more wealth in a tax-effective environment
In the context of the proposed Budget changes outside super, superannuation may become even more important in long-term wealth planning.
What should investors do now?
At this stage, there is no need to make rushed decisions. These are still proposed measures, and the law may change before any reforms take effect.
However, this Budget is significant enough that many Australians should consider reviewing their strategy, especially if they:
- hold investments outside super
- are planning to buy an investment property
- use a discretionary trust
- are approaching retirement
- want to maximise tax-effective wealth accumulation
The right response will depend on your circumstances, ownership structures, time horizon and broader financial goals.
Speaking to a Financial Adviser can be beneficial if your situation is complicated, or if you are unsure how the proposed changes will affect your situation.
Speak with an independent Financial Adviser.
Final thoughts
The 2026–27 Federal Budget may mark a major shift in how investment income, capital growth and wealth structures are taxed in Australia.
Even before the measures become law, they may prompt important conversations around strategy, timing and structure. For many investors, the key question is not just what has been announced, but how those proposed changes may affect their financial plan over the long term.
If you would like help understanding what these proposals could mean for your personal situation, seeking tailored financial advice can help you make informed decisions with confidence.
Sources:
Tax reform | Budget 2026–27
Australian Federal Budget 2026-7 - Adviser overview | BT Professional
Important information: The information above is general in nature and is based on Budget announcements made on 12 May 2026. These measures are proposals only and may be subject to legislative change. It does not take into account your personal objectives, financial situation or needs. You should seek personal advice before acting on any of this information.
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