Treasurer Jim Chalmers delivered his fifth Federal Budget on 13 May 2026. It’s one of the most complex in recent years. The 2026–27 Budget represents a meaningful shift in Australia’s tax system, with a focus on improving housing affordability, rebalancing tax concessions, supporting cost-of-living relief, and driving economic resilience.
While many changes are not immediate, they will have material implications for individuals, investors and small business owners. Proactive planning is essential.
Key highlights
The major reforms centre around:
- Restricting negative gearing to new properties from 1 July 2027
- Overhauling the capital gains tax (CGT) system from 1 July 2027
- Introducing a 30% minimum tax on discretionary trusts from 1 July 2028
- Supporting small business through a permanent $20,000 instant asset write-off
- Delivering modest tax relief for individuals
Superannuation remains unchanged, providing certainty for retirement planning.
The big shift: taxation of investment
The most significant feature of this Budget is a shift away from tax concessions on investment — particularly property — toward a more broadly neutral tax system. Property investors and trust holders will be most directly affected, but the ripple effects will touch financial planning, business structures, and estate planning alike.
Negative gearing changes
Proposed from 1 July 2027:
- Negative gearing will be restricted to newly constructed residential property
- Existing properties held at Budget night are grandfathered
- For new purchases of established properties, losses can only offset rental income or future capital gains — not salary income
- Losses can be carried forward indefinitely
What this means for investors
- Existing strategies remain largely intact for now
- Future property investment may shift toward new builds
- Investors relying on tax-driven strategies may need to reassess how property fits into their overall wealth creation plan
Capital Gains Tax reform
Proposed from 1 July 2027 by Treasury:
- The current 50% CGT discount will be replaced with inflation-based indexation and a minimum 30% tax on capital gains
- Applies to all assets outside super, including property, shares, and trust assets
- Existing assets are subject to transitional rules, with gains before and after 2027 taxed differently
- Recipients of means-tested income support (e.g. the Age Pension) will be exempt from the minimum tax
- All four small business CGT concessions are preserved
What this means
- Higher-return investments may face higher effective tax rates
- Lower-return investments may be taxed more lightly (only real gains are captured)
- Timing and structuring of asset sales becomes more important, particularly for clients with estate planning considerations
Discretionary trusts
Proposed from 1 July 2028:
- A minimum 30% tax will apply to discretionary trust income
- Individual beneficiaries (not corporates) will receive tax credits, but income-splitting advantages will be reduced
- Transitional relief will be available to assist restructuring
What this means
- Reduced tax effectiveness of family trust structures
- Potential need to restructure into companies or other entities — our business advisory team can model the options for your structure
Small business measures
Instant asset write-off. The $20,000 threshold is now permanent, applying to eligible depreciating assets for businesses with turnover up to $10 million. This provides certainty for capital planning.
Other support:
- Loss carry-back provisions for companies, allowing offset of current losses against prior-year profits
- PAYG instalments payable monthly using ATO-calculated amounts from 2027
- Increased access to refundable tax offsets for start-ups
- R&D tax incentive changes: increased benefits for core R&D expenditure, tighter rules on supporting activities
Our business tax team can help you maximise these provisions in your year-end planning.
Cost of living and individual tax
Key measures:
- $1,000 instant tax deduction from 2026–27
- $250 Working Australians Tax Offset from 2027–28
- Increased Medicare levy thresholds
These measures provide modest relief but are not expected to materially offset broader cost pressures.
Other notable changes
- Changes to the private health insurance rebate for over 65s
- Ongoing NDIS reforms and cost controls
- Additional funding and reforms for aged care services
- Changes to the FBT treatment of electric vehicles purchased from 1 April 2027
- Extending the ban on foreign purchases of established dwellings until 30 June 2029
Economic outlook
The Budget reflects a more challenging environment:
- Growth expected to slow to around 1.75%
- Inflation expected to peak near 5% in 2026, adding to cost-of-living pressures and increasing the probability of further interest rate hikes
While deficits are improving slightly, the Budget projects ongoing structural deficits in the medium term.
What this means for clients
Investors — Review property strategy, particularly future acquisitions. Consider implications of new CGT rules on long-term holdings. Assess the balance between property, shares, and super.
Business owners — Reassess trust structures ahead of the 30% minimum tax (1 July 2028). Take advantage of asset write-offs and loss provisions. Consider whether a company structure may be more appropriate.
Individuals and families — Utilise available tax deductions and offsets. Ensure investment decisions are strategy-driven, not tax-driven.
Retirees and super investors — Stability in super is a positive outcome. Super continues to be one of the most tax-effective structures available, and our retirement planning team can help you make the most of that stability.
Final thoughts
This Budget represents one of the most significant tax shifts in over two decades, with a clear move to reduce reliance on tax concessions in property, rebalance fairness across generations, and support long-term economic productivity.
While many changes are still to be legislated and phased in, they will require careful planning. For tax and financial advice clients, this creates both risks (particularly around property and trust structures) and opportunities through early strategy adjustments.
To discuss how these changes affect you, contact the AGS Financial Group team. We can help you stay informed and prepared as further details and legislation are finalised.
Acknowledgement
This summary has been prepared with reference to Treasury releases, government fact sheets, and commentary from organisations including the Financial Advice Association Australia (FAAA), the National Tax & Accountants’ Association (NTAA), TaxBanter, and other leading advisory providers.