| Overview
The 2026 Federal Budget focuses on cost‑of‑living relief for workers, significant tax reform for investors, and structural changes aimed at housing affordability. Many of the measures impact future decisions rather than existing arrangements, making forward planning particularly important.
| Personal Tax Relief (Workers)
- $1,000 Instant Tax Deduction
- From the 2026–27 financial year, employees and sole traders can claim up to $1,000 of work‑related expenses without receipts.
- Average tax saving of approximately $200 per year.
- If actual work‑related expenses exceed $1,000, higher claims can still be made under existing rules.
- $250 Working Australians Tax Offset (WATO)
- A permanent $250 annual tax offset for income earned from work.
- Applies from the 2027–28 financial year (received after lodging the 2027–28 tax return).
- Applies to salaries and business income, not investment income, meaning many retirees will not be eligible.
| Capital Gains Tax (CGT) Changes
From 1 July 2027:
- The current 50% CGT discount is replaced with:
- Indexation of the cost base for inflation, and
- A minimum 30% tax rate on real capital gains.
- Applies to individuals, trusts and partnerships.
- Capital gains accrued before 1 July 2027 continue to be taxed under current rules.
- Assets acquired before 20 September 1985 will now be CGT assessable (valuation date 1/7/2026).
| Negative Gearing Changes
From 1 July 2027:
- Negative gearing for residential property is limited to newly constructed properties only.
- Properties held at 7:30pm (AEST) on 12 May 2026 are fully grandfathered.
- The changes aim to improve housing affordability and encourage new housing supply.
- Borrowing to invest in managed funds, ETFs etc is not proposed to be affected by the Budget changes announced.
| Retirees and Pensioners
- Pensioners and individuals receiving income support are exempt from the new 30% minimum CGT tax rate.
- No major changes were made to superannuation tax concessions.
- Retirees relying primarily on investment income generally do not benefit from the new worker‑focused tax offsets.
| What This Means for You
- Workers receive modest but permanent tax relief.
- Investors face higher long‑term tax on capital growth, particularly from property and growth‑focused assets.
- Strategy, structure and timing of investments are now more important than ever.
- The impact will differ depending on:
- Your mix of employment and investment income,
- Your investment structures (personal, trust, superannuation),
- Your time horizon and retirement timeframe.
| Opportunities for Financial Advice
Investment Structure Review
- Reassess whether assets should be held personally, within a trust, or inside superannuation under the new CGT framework.
Capital Gains Planning
- Review unrealised capital gains.
- Consider whether asset sales prior to 1 July 2027 may be appropriate.
Property Strategy Review
- Re‑test property investment strategies now that negative gearing is limited to new builds.
- Compare property vs diversified investment portfolios on an after‑tax basis.
Portfolio Construction
- Increased focus on:
- Tax‑effective income streams,
- Diversification beyond property,
- Vehicles with tax smoothing or deferral benefits where appropriate.
Retirement Planning
- Confirm retirement income strategies remain effective, given limited new concessions for investment income earners.
- Ensure superannuation continues to be used strategically for long‑term tax efficiency.
Cash‑Flow and Deduction Optimisation
- Ensure eligible clients take advantage of:
- The $1,000 instant deduction,
- Salary sacrifice and concessional super contribution strategies where appropriate.
| Additional considerations (not part of the Budget)
From 1 July 2026, the concessional contribution cap is expected to increase to $32,500. This means the non-concessional cap will also rise to $130,000, as it is generally set at four times the concessional cap.
| Key Reassurance
Although the headlines highlight higher taxes for investors, most changes apply to future decisions and future gains. With proactive planning, these reforms can be managed effectively and, in many cases, turned into planning opportunities rather than disadvantages.
