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The 2026–27 Federal Budget marks one of the most significant shake-ups to Australia’s tax system in decades, with sweeping reforms targeting property investors, trusts, and capital gains, alongside meaningful relief for workers and small businesses.
Handed down on 12 May 2026 by Treasurer Jim Chalmers, the Budget reflects the Government’s response to housing affordability pressures, inflation volatility, and long-term fiscal sustainability.
Below is a practical summary of the key changes and why they matter.
Major Changes for Property Investors and Capital Gains
End of the 50% CGT Discount
From 1 July 2027, the long-standing 50% capital gains tax (CGT) discount will be abolished and replaced with inflation-based indexation.
In addition, capital gains from property will be subject to a minimum tax rate of 30%, meaning individuals, trusts, and partnerships will pay at least 30% tax on taxable capital gains.
Transitional rules will ensure that gains accrued prior to this date retain access to the existing 50% CGT discount
What this means:
Investors will need to re-evaluate long-term asset strategies, particularly those relying on discounted CGT outcomes on exit.
Negative Gearing Limited to New Builds
Negative gearing on residential property will be restricted to newly constructed dwellings from 1 July 2027.
Properties held prior to Budget night on 12 May 2026 will retain existing negative gearing arrangements and be grandfathered until sold.
Investors who acquire newly constructed properties after Budget night will continue to be able to offset losses against salary, business income, or other assessable income.
However, losses on established residential properties acquired after Budget night will no longer be deductible against wages or other non-property income and can only be carried forward to offset future residential property income or capital gains.
Why this matters:
The change significantly reshapes property investment incentives and is designed to redirect capital into new housing supply.
Major Reform to Discretionary Trusts
From 1 July 2028, a minimum tax of 30% will apply to the taxable income of discretionary trusts, regardless of the beneficiary’s marginal tax rate.
Beneficiaries (other than companies) will receive non-refundable tax credits, meaning excess tax paid cannot be refunded.
Certain trusts are excluded, including:
- Fixed and widely held trusts
- Complying superannuation funds
- Deceased estates
- Charitable and special disability trusts
To ease the transition, the Government will offer temporary rollover relief from 1 July 2027, allowing eligible restructures into companies or fixed trusts.
Cost-of-Living Relief for Australian Workers
New $250 Working Australians Tax Offset (WATO)
From 1 July 2027, eligible workers will receive a permanent $250 tax offset, automatically applied through their tax return.
Combined with other measures, this increases the effective tax-free threshold to almost $20,000, or close to $25,000 for low-income earners.
Personal Income Tax Cuts Confirmed
Previously legislated tax cuts remain on track:
- The tax rate for income between $18,201–$45,000 reduces to 15% from 1 July 2026 and 14% from 1 July 2027.
These changes deliver up to $536 per year in tax savings for eligible taxpayers.
$1,000 Standard Deduction for Work Expenses
From the 2026–27 income year, workers can choose a $1,000 standard deduction instead of tracking individual work-related expenses, simplifying tax compliance for millions of Australians.
Support for Small Business and Start-Ups
Key business-focused measures include:
- Permanent $20,000 instant asset write-off for small businesses
- Reintroduction of the loss carry-back regime from 1 July 2026
- Refundable tax losses for eligible start-ups from 1 July 2028
- Expanded venture capital tax incentives from 1 July 2027
- A major overhaul of the R&D tax incentive to better target innovation support
What Should You Do Next?
This Budget fundamentally changes the tax landscape for:
- Property investors
- Family and discretionary trust structures
- High-income earners and retirees
- Small businesses and start-ups
With many measures commencing over the next two to three years, early planning is critical.
Reviewing structures, investment strategies, and succession plans now can prevent unnecessary tax exposure later.
Get in touch with our team today to discuss how the 2026–27 Federal Budget changes may impact your financial strategy and future planning, fill out this online form or call +61 (02) 9099 9109 to book a consultation at our Bella Vista office in Sydney, NSW.
