On Tuesday evening, 12 May 2026, Treasurer Jim Chalmers delivered the 2026-27 Federal Budget. It’s a significant one. There are major reforms to capital gains tax, negative gearing and discretionary trusts, alongside meaningful changes for small business owners, working Australians, and families navigating aged care.
For property investors and business owners in particular, the implications are substantial. Some changes start within weeks. Others kick in from 1 July 2027 or later, which means you have time to plan, but also time to act before the rules shift underneath you.
Below is our summary of the changes most relevant to our clients across financial planning, insurance, accounting and mortgage finance. Please remember that these measures are proposed and not yet law. They could change as legislation moves through Parliament.
If anything here sounds relevant to your situation, the best step is a quick conversation with your adviser. We’re already mapping client portfolios against the new rules.
The headline changes at a glance
- Capital gains tax is being overhauled from 1 July 2027. The 50% CGT discount is being replaced with cost base indexation plus a 30% minimum tax rate.
- Negative gearing for residential property will be limited to new builds from 1 July 2027.
- Discretionary trusts will face a 30% minimum tax on taxable income from 1 July 2028.
- The $20,000 instant asset write-off is being made permanent for small business.
- Personal income tax cuts roll out further. From 1 July 2026, the 16% bracket drops to 15%, and to 14% from 1 July 2027.
- A new $1,000 instant tax deduction for work expenses (no receipts required) starts 1 July 2026.
- A new Working Australians Tax Offset of up to $250 begins 1 July 2027.
- Aged care receives over $2 billion in new funding across home care, residential care, dementia support and infrastructure.
- The higher Private Health Insurance Rebate for Australians aged 65 and over is being removed from 1 April 2027.
Tax cuts and new offsets for working Australians
Three changes will combine to give working Australians some cost-of-living relief.
Stage three tax cuts continue. The 16% rate applying to taxable income between $18,201 and $45,000 will reduce to 15% from 1 July 2026, and to 14% from 1 July 2027.
A new instant tax deduction of $1,000. From 1 July 2026, you can claim up to $1,000 in work-related expenses without itemising or keeping receipts. If your actual work expenses exceed $1,000, normal substantiation rules apply. Charitable donations, union and professional association fees can still be claimed on top.
Working Australians Tax Offset (WATO). From 1 July 2027, a new permanent offset of up to $250 will apply to income earned from work, including wages, salaries and sole trader business income. It will be applied automatically when you lodge your return.
Combined with the existing Low Income Tax Offset, the effective tax-free threshold rises to $22,866 in 2026-27 and $24,985 in 2027-28.
The Medicare Levy low-income thresholds are also lifting for 2025-26, which is welcome news for pensioners and lower-income households.
Capital gains tax: a major reform from 1 July 2027
This is one of the biggest changes in the Budget, and it affects most property investors and share investors who hold assets outside super.
What’s changing? The 50% CGT discount that has been in place since 1999 is being replaced for individuals, partnerships and trusts. From 1 July 2027, two new mechanisms will apply:
- Cost base indexation. Your cost base will be adjusted upward by CPI, similar to the system used between 1985 and 1999. The ATO will provide tools to help calculate this.
- A 30% minimum tax rate on real capital gains. This reduces the benefit of timing gains for years when your marginal rate is low.
Who’s exempt?
- Assets held inside superannuation funds (including SMSFs) are not affected.
- Your main residence remains CGT-free.
- The four small business CGT concessions are unchanged.
- The 60% discount for qualifying affordable housing is retained in full.
- Recipients of means-tested income support (such as the Age Pension or JobSeeker) are exempt from the 30% minimum tax in any year they receive a payment.
Transitional rules matter.
- Assets bought and sold before 1 July 2027 are unaffected.
- Assets bought from 1 July 2027 fall fully under the new system.
- Assets owned before 1 July 2027 and sold after will be split: the 50% discount applies to gains up to 1 July 2027, and the new rules apply to gains from then on. You’ll either need a valuation as at 1 July 2027 or you can use an ATO apportionment formula.
New builds get a choice. Investors who buy genuinely new residential builds can choose between the old 50% discount or the new indexation plus minimum tax. This is part of a broader push to encourage new housing supply.
Negative gearing: limited to new builds from 1 July 2027
Alongside the CGT changes, negative gearing on residential property is being restricted.
What’s changing? From 1 July 2027, losses from existing residential investment properties purchased after 7:30pm on 12 May 2026 will no longer be deductible against your salary, wages or other non-property income. Excess losses can be carried forward and offset against future residential property income, including capital gains, when the property is eventually sold.
Grandfathering applies. If you owned a residential investment property at 7:30pm on 12 May 2026 (or had entered a contract not yet settled), you can continue to negatively gear it in future years until you sell.
Properties bought between 12 May 2026 and 30 June 2027 can be negatively geared during that period, but not from 1 July 2027.
New builds remain eligible for negative gearing before and after 1 July 2027. This is a deliberate policy choice to push investment toward properties that add to housing supply rather than competing for the existing stock.
Important exclusions. Widely held trusts (such as most managed investment trusts) and superannuation funds, including SMSFs, are excluded from these changes. This is significant for clients holding investment property through their SMSF.
Small business: real wins to plan around
There’s plenty here for our accounting and business advisory clients.
$20,000 instant asset write-off made permanent. From 1 July 2026, small businesses with turnover under $10 million can immediately deduct eligible assets costing less than $20,000. The threshold applies per asset, so you can write off multiple assets in the same year. Assets at or above $20,000 continue to go into the small business simplified depreciation pool.
Two-year loss carry back. From 1 July 2026, companies with aggregated global turnover under $1 billion can carry a tax loss back and offset it against tax paid up to two years earlier. This is useful for businesses with uneven year-to-year profitability.
Loss refundability for start-ups. From 1 July 2028, start-up companies with turnover under $10 million that make a tax loss in their first two years can convert that loss into a refundable offset, capped at the value of FBT and withholding tax on Australian wages.
R&D Tax Incentive reforms. From 1 July 2028, core R&D offset rates will rise by approximately 25 to 50%, the higher refundable offset threshold lifts to $50 million, and the intensity threshold reduces. This is a meaningful improvement for businesses investing in product development.
Venture capital expansion. From 1 July 2027, venture capital incentives are being expanded to reflect modern company valuations, giving start-ups access to larger amounts of capital over longer periods.
Discretionary trusts: a 30% minimum tax from 1 July 2028
This one will have significant structural implications for many business owners and high-income families.
What’s changing. From 1 July 2028, trustees of discretionary trusts will pay a minimum of 30% on the taxable income of the trust. Beneficiaries (other than corporate beneficiaries) will receive non-refundable credits for the tax already paid by the trustee.
What’s excluded.
- Fixed and widely held trusts, including testamentary trusts
- Complying superannuation funds
- Special disability trusts
- Deceased estates
- Charitable trusts
Certain income types are also excluded, including primary production income, income for vulnerable minors, non-resident withholding income, salary and wages paid to employees, and income from assets of discretionary testamentary trusts existing at announcement.
A three-year window to restructure. Rollover relief will be available from 1 July 2027 to support small businesses and others wanting to restructure out of discretionary trusts into other entities, such as companies or fixed trusts. The relief addresses income tax consequences, including CGT, so the cost of restructuring shouldn’t be a barrier.
If you operate a discretionary trust as part of your business or investment structure, this is the change that warrants the earliest conversation. We expect significant consultation before the rules are finalised, and the right course of action will depend on your specific structure.
Aged care: more funding and a more navigable system
There’s substantial new funding for aged care, which matters deeply to many of our financial planning clients who are either approaching aged care themselves or supporting elderly parents.
Home care. The Government is providing $1.0 billion over four years (and $336.8 million per year ongoing) to ensure personal care is fully funded for all care recipients. A further $389.8 million is going toward Support at Home refinements, including assessments, hardship applications and the End-of-Life Pathway, and to bring forward the release of Support at Home places in 2026-27.
Residential aged care. Funding will support 5,000 additional beds and includes capital subsidies for providers:
- $30.00 per day per supported resident for newly constructed homes (payable for up to 25 years)
- $15.00 per day per supported resident for significantly expanded homes (40% bed increase or more, payable for up to 15 years)
Dementia care. The Hospital to Aged Care Dementia Support program will expand from 11 to 20 locations nationally, with up to 20 additional Specialist Dementia Care Program units.
Other improvements. Funding has been allocated to sustain aged care ICT systems, expand the Aged Care Quality and Safety Commission, and continue meeting demand for My Aged Care.
A change to watch. From 1 April 2027, the higher Private Health Insurance Rebate for Australians aged 65 and over will be removed, aligning the rebate with younger ages. This could increase out-of-pocket costs for seniors by up to $80.40 per year per $1,000 of premium. If you’re approaching or in retirement, this is worth factoring into your cash flow planning.
Superannuation: changes already locked in for 1 July 2026
The Budget didn’t introduce new super reforms, but it’s a good reminder that several previously announced changes start from 1 July 2026.
Indexation of contribution caps.
- Concessional contribution cap rises from $30,000 to $32,500 per year
- Non-concessional cap rises from $120,000 to $130,000 per year
- General Transfer Balance Cap rises from $2 million to $2.1 million
Bring-forward thresholds adjust. The Total Super Balance thresholds for accessing the non-concessional bring-forward shift up in line with the new caps.
Division 296 tax begins 1 July 2026. Earnings on Total Super Balance above $3 million face an additional 15% tax. Earnings on balances above $10 million face an additional 10% on top of that.
Payday Super starts 1 July 2026. Employers must pay Superannuation Guarantee contributions within seven business days of each payday. SG will be calculated on a new broader concept called Qualifying Earnings, replacing Ordinary Time Earnings.
What you should do next
A lot has changed, but most of it doesn’t take effect overnight. The right next step depends on where you sit.
If you own residential investment property, review your portfolio and consider how the negative gearing and CGT changes will affect you. Properties held now are grandfathered for negative gearing purposes, but the CGT changes apply on gains from 1 July 2027 regardless of when you bought.
If you run a small business, review your capital expenditure plans to take advantage of the permanent $20,000 instant asset write-off, and talk to your accountant about whether the loss carry back rules could help your situation.
If you operate a discretionary trust, start the conversation about whether restructuring makes sense. The rollover relief window is three years, but planning ahead avoids being rushed.
If you’re approaching retirement or supporting elderly parents, the aged care funding changes open new options, and the PHI Rebate change is one to plan around.
If you’re a working Australian, the tax cuts and new $1,000 instant deduction will flow through automatically, but it’s still worth a quick review of your withholding and any salary sacrifice arrangements.
Talk to us
Budget changes are easier to understand when someone walks you through how they apply to your specific situation. That’s what our team does. Whether your question sits with our financial planners, accountants, mortgage brokers or insurance team, we can pull the right people into the conversation.
If you’d like a short call to talk through any of these changes, get in touch.
This article is general information only and does not take into account your personal financial circumstances. The measures discussed are proposed and not yet law, and may change before they take effect. Please speak with a qualified adviser before making any financial decisions.