The Australian Government handed down the 2026–27 Federal Budget on 12 May 2026.
Several measures may be relevant to you depending on your income, investments, stage of life, and whether you own property or a business.
Taxation Changes
Changes to Capital Gains Tax (from 1 July 2027)
If you sell assets like property or shares outside superannuation the way capital gains tax (CGT) is calculated is proposed to change.
- The current 50% CGT discount for assets held longer than 12 months will be replaced by cost base indexation.
- Cost base indexation adjusts the original purchase price for inflation using CPI.
- A minimum 30% tax rate will apply to capital gains that accrue from 1 July 2027.
These changes apply to individuals, partnerships, and trusts, but not to superannuation funds.
What this means:
- No changes to assets purchased and sold prior to 1 July 2027
- Assets purchased on or after 1 July 2027, will be treated under new arrangement
- Assets owned prior to 1 July 2027 and sold after 1 July 2027, will be subject to transitional rules (ie gains pre 1 July 2027 under 50% discount & gains post 1 July 2027 under new indexation method.
- Important: This will also apply to pre-1985 CGT assets
- Gains made from pre 1985 to 1 July 2027 will be exempt, however, gains from 1 July 2027 will be assessable
Some important exemptions remain:
- Your main home will continue to be exempt from CGT.
- New residential builds may allow investors to choose between the old CGT discount or the new indexation method.
- New build residential properties include;
- Dwellings constructed on vacant land
- Where existing properties are demolished and replaced with a greater number of properties
- Knock down rebuilds or substantial renovations will not qualify as new build
- New build residential properties include;
- Affordable housing concessions and small business CGT concessions are retained.
If you are in receipt of a means tested income support payment (eg Age Pension), you will be exempt from the minimum tax
Examples
Meet Mary who purchases & sells a property;
| Purchase Date | 01/07/2022 |
| Purchase amount | $800,000 |
| Sale Date | 01/07/2032 |
| Sale amount | $1,600,000 |
| Annual return | 7.2% |
| Value at 1/7/2027 | $1,131,371 |
| Taxable gain pre 01/07/2027
(50% discount method) |
$165,685 |
| Taxable gain post 01/07/2027 (indexation method) | $319,958 |
| Total taxable capital gain | $485,643 |
- If the previous method of 50% discount applied, Mary’s capital gain would have been $400,000.
- Based upon a personal tax rate of 47%, the tax on her gain is $228,252 – compared to $188,000 on the previous method
Meet Jack who sold shares he purchased in 2027/28
| Taxable income | $25,000 |
| Capital gain | $10,000 |
| Tax on capital gain
(based upon Jack’s tax rate) |
$1,400 |
| Additional tax payable | $1,600 |
- Jack must pay an additional $1,600 tax to ensure the minimum tax paid on the capital gain is 30%
Changes to Negative Gearing (from 1 July 2027)
The Budget proposes limiting negative gearing for residential property.
- From 1 July 2027, negative gearing will only apply to new-build residential properties.
- For existing investment properties purchased after Budget night (12 May 2026), rental losses will only be offset against other residential property income, including capital gains, NOT your taxable income including wages and salary.
- Unused losses can be carried forward to future years.
This will apply to individuals, partnerships, companies and most trusts.
Properties already owned at Budget night can continue to be negatively geared until sold. This will apply to properties purchased after 1 July 2027. Properties purchased between 12 May 2026 and 1 July 2027 can be negatively geared until 1 July 2027
Minimum Tax on Discretionary Trusts (from 1 July 2028)
A 30% minimum tax rate is proposed on income earned by discretionary trusts.
- The tax is paid by the trustee.
- Beneficiaries (other than companies) receive a non‑refundable tax credit for tax already paid.
- Several trusts are excluded, including superannuation funds, deceased estates, charitable trusts, and special disability trusts.
Some income types are also excluded, such as certain primary production income.
Trustees that received franked dividends will be required to use those franking credits to pay the minimum tax.
Rollover relief will be expanded for 3 years to allow small businesses and others to restructure out of discretionary trusts to another entity structure (such as company).
Personal Tax Relief Measures
Several measures aim to provide cost‑of‑living relief:
Lower Tax Rates (already legislated)
- From 1 July 2026, the 16% tax rate reduces to 15%.
- From 1 July 2027, it reduces further to 14%.
$1,000 Instant Tax Deduction (from 1 July 2026)
- Workers can claim up to $1,000 of work‑related expenses without keeping receipts.
- If expenses exceed $1,000, normal rules apply.
Working Australians Tax Offset (from 1 July 2027)
- A new $250 tax offset for income earned from work.
- Applied automatically when you lodge your tax return, not a cash payment
Other tax measures
Electric car discount (FBT)
- From 1 April 2029, a permanent 25% discount on FBT available for all electric cars valued up to the fuel efficient luxury car tax threshold (currently $91,387)
- All electric cars valued up to $75,000 before 1 April 2029 will continue to be eligible for 100% discount
Business taxation
$20,000 instant asset write off
- From 1 July 2026, the $20,000 instant asset write off for small business (turnover less than $10 million) will be permanently extended.
Two-year loss carry back
- From 1 July 2026, companies with turnover of less than $1 billion can carry back a tax loss & offset against tax paid from 2 years earlier
Start-up business loss refundability
- From 1 July 2028, start up companies with turnover of less than $10 million that generate a tax loss in first 2 years of operation can utilise the loss to generate a refundable tax offset.
Aged Care
Improving access to Home Care
The Government will provide funding over 4 years from 2026/27 to improve affordability and access to home care;
- $1 billion ton ensure the service type “personal care” is fully funded by the Government for all home care recipients
- $389 million for Support at Home refinements to bring forward the release of places in 2026/27
The Government has also provided funding to a range of programs to provide better care for older Australians over the next four years
Residential Aged Care Supply & Equity of Access
The Government will provide additional funding over 4 years to increase the number of aged care beds by 5,000 each year
- This will be principally for those with limited financial means
Additional funding will be provided to introduce capital subsidies for residential aged care providers to increase the number of beds
Additional funding will also be provided for dementia care support
Other Measures
Social Security
The Government will provide additional funding over 5 years for;
- Additional resourcing
- Enhancements to security and safety
- Cyber Security program
- Improvements to myGov
The Government will amend the eligibility for pension supplement for overseas recipients;
- Extending payment of full rate of pension supplement from 6 weeks to 12 weeks for recipients who are temporarily absent from Australia
- Cease the pension supplement for those permanently residing overseas or temporarily absent for more than 12 weeks.
Private Health Insurance
The Government will remove the age-based uplift of the Private Health insurance rebate from 1 April 2027.
The private health insurance rebate a is a government contribution that reduces the cost of private health insurance premiums for those eligible. Currently those over 65 receive a higher rebate (tiered depending upon your age).
This extra rebate will be removed.
Previously Announced Measures
Whilst not specifically addressed in the 26/27 Federal Budget, the following measures are due to take effect 1 July 2026
- Indexation of contribution caps
- Increase in concessional cap to $32,500
- Increase in non-concessional cap to $130,000
- Therefore, 3 year bring forward rule to $390,000
- Increase to general transfer balance cap to $2.1 million
- The new Div 296 on the superannuation earnings of individuals with balances above # million take effect
- Pay day commences
- Employer (SG) payments must be paid within 7 days of each payday instead of quarterly
- SG contribution rate remains the same at 12%
Final reminder
All proposed measures are subject to legislation and may change.
Should you wish to discuss any of the measures, please contact us on 1300 014 368 or via email info@fpbydesign.com.au
