Jun 29, 2026 RDL Financial Planning

2026–27 Federal Budget: What It Means for Investors and Households

The Federal Budget handed down on 12 May 2026 introduces some of the most significant tax reforms in decades, reshaping how Australians invest, structure their finances, and plan for retirement. While many measures were anticipated, their scope signals a clear shift in policy direction—away from tax-driven strategies and towards a broader, more neutral tax base.

Importantly, most changes are proposals only and not yet law, but they provide a strong indication of future policy and planning considerations.

A Major Reset for Investment Taxation

The headline change is a fundamental overhaul of Capital Gains Tax (CGT). From 1 July 2027, the long-standing 50% CGT discount for individuals will be replaced with a system that adjusts the asset’s cost base for inflation (CPI). At the same time, a minimum 30% tax rate will apply to capital gains.

While gains accrued before July 2027 retain the current discount, future gains will be taxed under the new rules. This effectively reduces the tax benefits of long-term capital growth, particularly for assets such as shares and investment properties.

In practical terms, investors may need to shift focus from capital growth strategies toward income generation and overall after-tax returns. Notably, the changes do not apply to the family home, superannuation funds, or certain concessional housing investments, preserving some key concessions.

Negative Gearing Changes for Property Investors

Another major reform targets negative gearing on residential property. From 1 July 2027, investors will no longer be able to offset rental losses against salary or other income. Instead, these losses will be carried forward to offset future investment income.

However, these changes only apply to newly acquired properties from Budget night (12 May 2026). Existing investments are grandfathered under the current rules, and new-build properties are also exempt to encourage housing supply.

The result is a significant shift in property investment dynamics. While negative gearing is not abolished, its benefits are deferred rather than immediate, reducing its appeal as a tax minimisation strategy.

Trust Structures Face Tighter Rules

Discretionary (family) trusts—commonly used for tax-effective income distribution—will also be impacted. From 1 July 2028, trust income will generally be taxed at a flat rate of 30% at the trustee level, with distributions carrying a non-refundable tax credit.

This reduces flexibility for splitting income among family members, particularly where beneficiaries are on lower tax rates. While some exclusions apply (including fixed trusts and super funds), many families may need to revisit existing structures or consider alternative strategies.

A three-year transition window from 2027 is intended to support restructuring where needed.

Superannuation: Stability and Opportunity

In contrast to broader tax changes, superannuation remains relatively stable, reinforcing its role as a tax-effective savings vehicle.

Key updates include:

• Contribution caps increasing from 1 July 2026
• Introduction of pay-day super, requiring employer contributions to be paid alongside wages
• Continued rollout of the Division 296 tax on balances above $3 million

These changes, combined with tighter taxation outside super, may make superannuation increasingly attractive for long-term wealth accumulation—particularly for those able to maximise contributions within the caps.

Modest Tax Relief for Individuals

The Budget also includes several measures aimed at easing cost-of-living pressures, although these are relatively modest compared to structural reforms.

• The lowest personal tax rate will reduce from 16% to 14% by July 2027
• A new $1,000 standard deduction will simplify claims for work-related expenses
• A Working Australians Tax Offset of up to $250 per year will apply to earned income

While helpful, these measures provide incremental relief rather than a major reduction in overall tax burden.

Support for Small Business

Small businesses receive some benefit from the Budget, with the $20,000 instant asset write-off made permanent from 1 July 2026.

This provides ongoing certainty, allowing eligible businesses to immediately deduct the cost of assets below the threshold, supporting investment and cash flow management.

Other Notable Changes

A range of additional measures may also affect households:

• Electric vehicle incentives will gradually be reduced, lowering FBT concessions over time
• Private health insurance rebates will be simplified, increasing costs for older Australians
• Aged care reforms will reduce some out-of-pocket costs while increasing funding and supply incentives

Looking Ahead

While these measures are not yet legislated, they represent a strong policy direction. Acting early—where appropriate—may provide opportunities to optimise outcomes before changes take effect.

As always, seeking tailored financial advice from your RDL advisor is key to understanding how these reforms apply to your individual circumstances and goals.