What Tonight's Budget Means for Your Tax
Please note: This bulletin is a general summary for informational purposes only. Tax changes may affect you differently depending on your individual circumstances. We strongly recommend speaking with us before making any financial decisions.
Treasurer Jim Chalmers described the 2026–27 Budget as "the most important and ambitious in decades" — and on the tax front, he wasn't overstating it. Tonight's announcements include the biggest overhaul to capital gains tax since 1999, sweeping changes to negative gearing, a new minimum tax rate on discretionary trusts, and income tax relief for workers. Most changes have a built-in transition period, but planning starts now.
Capital Gains Tax Reform
Negative Gearing
Discretionary Trusts
Income Tax Cuts
Small Business Measures
Electric Vehicle FBT
Capital Gains Tax Reform Major Change
This is the most significant CGT change in nearly three decades. The current 50% CGT discount for individuals, trusts and partnerships will be abolished from 1 July 2027 and replaced with an inflation-indexation model paired with a 30% minimum tax rate on net capital gains.
Under the new model, the cost base of an asset is adjusted for inflation (CPI), meaning only the real gain is taxed at your marginal rate — subject to a 30% minimum. For long-term investors, this may deliver similar or better outcomes than the current discount in high-inflation environments.
Key Transition Rule
Assets held at 7:30pm AEST — 12 May 2026
Gains accrued before 1 July 2027 are subject to the old rules. The new rules only apply to gains arising on or after 1 July 2027. Investors who buy new residential property can choose whichever method is more beneficial when they sell.
50% CGT discount abolished from 1 July 2027 — replaced with CPI indexation + 30% minimum tax
Changes do not apply to main residences or superannuation tax arrangements
Assets held before tonight's Budget announcement are largely protected on gains to date
For new residential property purchases, investors can elect the most favourable method on sale
What should you do now? If you are considering selling an investment asset, speaking with us before 1 July 2027 is essential. The old 50% discount still applies to gains accumulated before that date, so timing decisions matter greatly.
Negative Gearing Major Change
From 1 July 2027, negative gearing on residential property will be restricted to new builds only. Investors who purchase established homes after tonight will no longer be able to offset rental losses against their other income such as wages or salary.
Investors who buy established property after Budget night can still deduct losses against their property income and carry forward unused losses to future years — they simply cannot offset them against other income sources.
Tonight — 12 May 2026
Announcement Made
Changes legislated. The grandfathering date is 7:30pm AEST tonight.
1 Jul 2026 – 30 Jun 2027
Grace Period
Existing property investors fully unaffected. Old rules continue to apply.
From 1 July 2027
New Rules Apply
Negative gearing on established home purchases no longer deductible against other income. New builds remain fully negatively geared.
Properties you already own are fully exempt — no change to your current position
Investments in new builds retain full negative gearing entitlements
Government-backed affordable housing programs are also exempt
Investors buying established homes after tonight should review their strategy before July 2027
Discretionary Trusts Major Change
If you hold assets or operate through a discretionary (family) trust, this is arguably the most significant change in the Budget for you. From 1 July 2028, a minimum tax rate of 30% will apply to trust distributions, payable by the trustee. This aligns the tax treatment of trusts more closely with the corporate tax rate.
This change targets approximately one million family and small business trusts in Australia and closes a long-standing mechanism used to distribute income to lower-tax beneficiaries.
Who is Affected?
Discretionary (Family) Trusts
Fixed trusts, special disability trusts, charitable trusts, complying super funds, deceased estates, primary production income, and income relating to vulnerable minors are all exempt.
Minimum 30% tax on trust distributions from 1 July 2028 — paid by the trustee
Fixed trusts, charitable trusts, disability trusts and super funds are not affected
Three-year rollover relief from 1 July 2027 for businesses wishing to restructure
Income support recipients (e.g. pensioners) are exempt from the minimum rate
Action recommended: If you operate through a discretionary trust, we strongly suggest booking a review with us well ahead of July 2028. The rollover relief window from July 2027 may offer valuable restructuring opportunities that need careful planning.
Income Tax Cuts Benefit
$268Annual saving for someone on ~$79,000
15%New rate on income $18,201–$45,000 (down from 16%)
13M+Workers receiving a tax cut
Already legislated, the tax rate on income between $18,201 and $45,000 drops from 16% to 15% from 1 July 2026. This kicks in regardless of further budget decisions.
On top of this, the Budget introduces the "Working Australians Tax Offset" — a new permanent offset of up to $250 per year for workers, applying from 2028.
From the 2026–27 tax return, workers can also claim an instant $1,000 standard deduction for work-related expenses without needing to produce receipts — expected to benefit 6.2 million Australians.
Tax rate drop 16% → 15% on income $18,201–$45,000 from 1 July 2026
New Working Australians Tax Offset of up to $250/year — permanent, from 2028
$1,000 instant deduction on your 2026–27 return — no receipts required
Small Business Measures Benefit
Small businesses received a number of positive measures in tonight's Budget, providing both immediate relief and longer-term certainty.
$20,000 Instant Asset Write-Off made permanent from 1 July 2026 for businesses with turnover under $10 million — no more annual renewals, plan ahead with confidence
Tax refunds on prior-year losses available for small start-up companies — cash flow relief for newer businesses
Expanded venture capital tax incentives from July 2027, particularly relevant for businesses seeking investment
R&D threshold increase — the incentive cap is being lifted to $250M–$300M for larger enterprises, while the core program remains intact for SMEs
The permanent instant asset write-off is a significant win for small business owners. Previously renewed year-to-year, the uncertainty made financial planning difficult. This now becomes a reliable tool for asset purchasing decisions year-round.
Electric Vehicle FBT Changes Phase-Out
The full FBT exemption for electric vehicles through novated lease arrangements is being wound back. While the incentive is not removed entirely, it transitions to a 25% discount model over two years.
Now – March 2027
Full Exemption — EVs under $91,387
Current exemption remains in place. Act now if this is on your agenda.
From April 2027
Full exemption capped at $75,000
EVs between $75,000 and $91,387 receive a 25% FBT discount only.
From April 2029
All EVs under $91,387 — 25% discount only
Full exemption ends. All eligible EVs receive the permanent 25% FBT discount.
If you're considering an EV novated lease, the window for the full exemption is closing
A permanent 25% FBT discount replaces the full exemption — still a meaningful benefit
EVs above $91,387 (luxury car tax threshold) receive no FBT concession
Our Overall Assessment
This is a genuinely consequential Budget for taxpayers, investors, and business owners. The income tax cuts and small business measures are welcome and practical. However, the changes to CGT, negative gearing, and discretionary trusts represent a structural shift in how wealth and investment income is taxed in Australia.
Critically, most major changes don't take effect until 1 July 2027 or 1 July 2028 — which means there is time to review, plan, and restructure if needed. That window should not be taken for granted. The decisions made in the next 12–18 months could have lasting consequences for your tax position.
We will be working through the full Budget papers over the coming days and will be in touch with specific advice where appropriate. In the meantime, please don't hesitate to reach out.