Federal Budget 2026-27

13 May 2026

Key changes and what they mean for you

Treasurer Jim Chalmers has delivered his fifth Federal Budget — and one of the most complex and wide-ranging 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

• Driving productivity and economic resilience

While many changes are not immediate, they will have material implications for individuals, investors and small business owners, making proactive planning essential.

Key highlights

The major reforms centre around:

• Restricting negative gearing to new properties

• Overhauling the capital gains tax (CGT) system

• Introducing a 30% minimum tax on discretionary trusts

• Supporting small business through a permanent $20,000 instant asset write-off

• Delivering modest tax relief for individuals

Importantly, 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) and toward a more broadly “neutral” tax system.

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

• New purchases of established properties:

  • Losses can only offset rental income or future capital gains

  • Losses can be carried forward, but not used against salary income

What this means for investors

• Existing strategies remain largely intact

• Future property investment may shift toward new builds

• Investors relying on tax-driven strategies may need to reassess

Capital Gains Tax (CGT) reform

Proposed from 1 July 2027:

• 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

  • Trust assets

• Existing assets are subject to transitional rules, with gains before and after 2027 taxed differently

• Recipients of means-tested income support payments, such as the Age Pension, will be exempt from the minimum tax

• All four small business CGT concessions preserved.

What this means

• Higher-return investments may face higher effective tax rates

• Lower-return investments may be taxed more lightly (only real gains)

• Timing and structuring of asset sales becomes more important

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

What this means

• Reduced tax effectiveness of family trust structures

• Potential need to restructure into companies or other entities

• Transitional relief will be available to assist restructuring

Small business measures

The Budget includes some positives for business owners:

Instant asset write-off

• $20,000 threshold made permanent

• Applies to eligible depreciating assets for businesses with turnover up to $10 million

Other support

• Loss carry-back provisions for companies, allowing companies to offset current losses against profits from prior years

• Businesses may be able to pay PAYG instalments 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 R&D activities

What this means

• Improved cash flow and investment certainty

• Continued support for SME growth and reinvestment

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 aimed at improving access, affordability and quality of aged care services

• Continued investment in healthcare, infrastructure and defence

• 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 still projects ongoing structural deficits in the medium term.

What this means for clients

These changes are significant and will impact many planning strategies.

Investors

• Review property strategy, particularly future acquisitions

• Consider implications of new CGT rules on long-term holdings

• Assess balance between property & shares (outside super) 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 company structures 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 investment structures

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

• 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)

If you would like to discuss how these changes affect you, please 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 a range of professional and industry materials, including Treasury releases, government fact sheets, and commentary from organisations such as the Financial Advice Association Australia (FAAA), the National Tax & Accountants’ Association (NTAA), TaxBanter, and other leading advisory and research providers. We acknowledge these organisations for their detailed technical insights and analysis, which have contributed to a clearer understanding of the 2026–27 Federal Budget and its implications for clients.