The 2026 Federal Budget rewrote the rules. Don’t panic.
By Rachel O’Connor, Certified Financial Planner®
The Federal Budget rewrote three of the biggest rules in Australian tax: negative gearing, capital gains tax and family trusts. I’m not going to sugarcoat it; these are huge shifts. But it’s crucially important that you don’t panic and make any knee-jerk reactions.
These reforms are proposals, not law. They still need to pass both houses of parliament, and there's almost certainly going to be consultation, amendment and political horse-trading before any of it becomes legislation.
You have time. The timeline built into these rooms gives you enough time to look at your situation properly, asset by asset, and work out which (if any) of the changes affect you, and how any downsides can be offset.
Negative gearing for residential properties
From 1 July 2027, losses from established residential investment properties bought after 12 May 2026 (7:30pm AEST) can only be deducted against rental income or capital gains from residential property. They won't offset your salary or other income anymore.
Here's how the grandfathering works:
Already own the property as at 12 May 2026? No change. You can keep negatively gearing it forever.
Bought it between 13 May 2026 and 30 June 2027? You can negatively gear during that window, but not from 1 July 2027.
Buying from 1 July 2027 onwards? No negative gearing on established homes.
Buying a brand new build? Fully exempt. Negative gearing will continue to apply both before and after July 2027.
SMSF-held properties and properties in widely held trusts are also exempt.
Capital gains tax: what’s actually changing
From 1 July 2027, the 50% CGT discount will no longer apply. It's being replaced with cost base indexation (your purchase price is adjusted for inflation) and a 30% minimum tax rate on gains.
The new capital gains tax rules apply to almost everything you hold outside super: shares, managed funds, ETFs, investment properties, even assets you’ve held since before capital gains tax existed.
The good news: any gain you’ve built up before 1 July 2027 still gets the 50% discount. You’ll just need a valuation at that date to split the before and after. New builds get to choose whichever method suits. And if you’re on the Age Pension, the new 30% minimum tax doesn’t apply to you at all.
Two things this doesn’t touch: your super (those rules are separate and aren’t changing here) and your family home (still capital-gains-tax-free when you sell).
If you’re holding shares with a big gain that you were planning to sell in the next few years, it’s worth looking at the timing of the sale and the CGT impact.
Current rules
New rules
If you’ve got a family trust
From 1 July 2028, a minimum 30% tax will apply to income kept in a discretionary trust.
If your trust exists for asset protection, that benefit hasn’t changed. But if it was set up mainly to split income to lower-earning family members, the advantage there is being capped. That’s worth reconsidering with both your adviser and your accountant.
There’s also a three-year window from 1 July 2027 to restructure out of a trust without triggering capital gains tax, so there’s room to move thoughtfully.
Tax reforms for employees
The $1,000 instant tax deduction. If your work-related expenses are under $1,000 a year, you can claim a flat $1,000 from the 2026-27 income year without keeping receipts or itemising. If your expenses are higher, claim them the usual way. Donations, union fees and professional memberships sit on top.
Effective tax-free threshold lifts. Between the personal tax rate cuts and the new $250 Working Australians Tax Offset, the threshold rises to around $19,985 for workers.
Electric vehicle FBT changes. If you're salary-packaging an EV under $75,000, the 100% FBT discount stays in place until 1 April 2029. After that, it transitions to a permanent 25% discount across all EVs valued up to the fuel-efficient luxury car tax threshold.
Tax reforms for business owners
The $20,000 instant asset write-off becomes permanent from 1 July 2026 for businesses with turnover up to $10 million. Buy a piece of gear under $20k, deduct it in the same year. No more wondering whether the threshold gets extended.
Loss carry-back returns. Companies with global turnover under $1 billion will be able to carry revenue losses back and offset them against tax paid up to two years earlier, from 1 July 2026. Handy if you're in a growth-then-contract cycle, or investing heavily in a year that wipes out profit.
Start-up loss refundability. Start-ups under $10 million turnover can turn early-year tax losses into a refundable offset (limited to FBT and withholding tax paid on Australian wages) from 1 July 2028.
Other Budget announcements
Division 296 super tax is still coming. This isn't new in the Budget (it became law in March 2026) but worth a reminder. From the 2026-27 income year, super balances above $3 million attract an extra 15% tax on earnings (up to a total 30%). Balances above $10 million attract a further 10% (up to 40%). The thresholds are indexed.
Private Health Insurance Rebate uplift removed. From 1 April 2027, the age-based uplift goes. The savings are being redirected into the aged care system, including more residential beds and better home care affordability.
Fuel excise cut. Already in effect. Petrol and diesel excise was halved on 1 April 2026 (a 32 cent-per-litre reduction) for three months. The heavy vehicle road user charge went to zero for the same period.
Cheaper medicines. $5.9 billion over five years for new and amended PBS listings.
Foreign buyer ban extended for established homes until 30 June 2029.
Tax fraud protection. $86.3 million to modernise fraud detection in the tax and super systems, plus expanded ATO powers to chase fraud committed by tax intermediaries.
Digital ID system. $654 million over four years to maintain and expand Australia's Digital ID infrastructure.
What to actually do right now
Don’t panic. No knee-jerk reactions. The man selling everything is the cautionary tale, not the role model.
Look at every asset on its own merits. Case by case. What’s true for a colleague isn’t true for you.
Bring it back to your plan. A good plan already had room for tax changes. If you’ve got one, lean on it. If you don’t, this is a fine reason to build one.
Wait for the detail before any big move. The legislation isn’t final. Some of this will shift again.
Book a complimentary chat with Rachel at flourixwealth.com.au/contact-us.
At Flourix Wealth, we specialise in helping women take charge of their financial lives. Our first conversation is complimentary, and it's designed to show you what's possible.
FAQs
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If you already owned a negatively geared property before 7:30pm on Budget night, nothing changes. You’re grandfathered. You can keep negatively gearing it for as long as you hold it.
If you’re weighing up whether to hold or sell from here, it comes back to a few real questions:
Is it actually a good investment property?
What are the growth prospects from here?
What are the numbers on selling versus holding?
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Shares and property had delivered similar long-term returns, so the choice mostly came down to your preference and circumstances. The 2026 Federal Budget tax reforms may shift this perspective. Established residential property as an investment looks less attractive than it did, so if you were about to buy one, revisit the plan and make sure it still stacks up.
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Not on the tax break alone. New builds do keep the negative gearing and capital gains perks, which is exactly why the rules might steer you towards one. But they carry their own risks: off-the-plan sunset clauses and build delays can really catch you out. Go in with your eyes open, and never let a tax break be the only reason you buy.
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The new CGT rules impact almost all investments. The new rules cover shares, managed funds, ETFs, investment properties and business assets held by individuals, trusts and partnerships. The main things left out are your super (including an SMSF) and your family home, which stays capital-gains-tax-free.
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No. If you owned it before 7:30pm on Budget night, 12 May 2026, you’re fully grandfathered. You can keep negatively gearing it for as long as you hold it. The change only affects established residential properties bought after that date.
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No. These are proposals. They still need to pass parliament, and the fine detail can change along the way. It’s likely most of it gets legislated, but the timing and the specifics aren’t locked in. That’s a strong reason not to make irreversible moves yet.
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Speak to your accountant and financial adviser, since this reforms spans both areas of advice. They'll help you work through why the trust exists, whether the old income-splitting benefit is worth keeping now that a 30% minimum tax applies to retained income from 1 July 2028, and whether to restructure. There's a three-year window from 1 July 2027 to restructure without triggering capital gains tax, so there's time to do it properly.
Sources and useful links
Budget 2026-27, Tax Reform, official Treasury explainers
This information is current as at 31 May 2026.
The information in this article is general advice only. It doesn't take into account your personal objectives, financial situation, or needs. Before making any financial decisions, you should consult a qualified financial adviser. Rachel O'Connor and Flourix Wealth Pty Ltd are authorised representatives of GPS Wealth Pty Ltd, AFSL 254544 | ABN 17 005 482 726.
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