The Federal Government has handed down the 2026-27 Budget.
In simple terms, the budget details how much money the Government expects to bring in, and where it plans to spend it, over the next financial year.
This budget included changes to the capital gains tax discount and negative gearing, as well as income tax relief measures.
Global pressure
This budget comes against a backdrop of global uncertainty, with the Middle East conflict disrupting global fuel supplies.
Inflation has already climbed to a three-year high of 4.6%, and the Government is now forecasting it will peak at around 5% next month.
However, he said even under a “severe scenario” where oil prices continue to surge, Australia would still avoid a recession.
Tax changes
There were major changes to Australia’s tax system announced.
First, let’s unpack changes to negative gearing.
Negative gearing is when a landlord spends more on an investment property than they make from rent. That loss can be deducted from the owner’s taxable income, meaning they pay less tax overall.
The Government argues the current system disproportionately benefits the wealthiest investors.
In the Budget, the Government announced negative gearing will be restricted to newly built properties from 1 July 2027.
Properties already being negatively geared prior to last night will not be impacted by the reform.
Now, let’s talk about the Capital Gains Tax (CGT) discount.
CGT applies to the profit from the sale of an investment. It’s often talked about in relation to property, but it applies to a wide range of investments (including shares).
Since 1999, there's been a sweetener: if you held an investment for more than 12 months, you only paid tax on half the profit when you sold it. So if you made $10,000, you only got taxed on $5,000 because of the 50% CGT discount. That’s what’s changing.
From 1 July 2027, the flat 50% discount is gone.
Instead, your original purchase price will be adjusted to account for inflation. You'll only pay tax on the gain above that adjusted figure.
But there's a floor: no matter what, you'll always pay a minimum tax rate of 30% (on gains made after 1 July 2027).
For those who already hold assets, the new scheme will only apply to gains made on that asset from 1 July 2027 - not gains accrued before that.
Housing
Aside from these tax changes aimed at changing the housing market, the Government also announced:
- Nearly $60 million to fund social housing for 4,000 young Australians aged 16–24 who are at risk of homelessness.
- A further $100 million to fund remote housing for First Nations communities.
- $106 million for federal environmental agencies to use AI to speed up project approvals
Trusts
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Put simply, trusts are a place where money or property can be held on behalf of another.
The Government has introduced a minimum tax rate of 30% for income distributed through discretionary and ‘family’ trusts.
Currently, income earned from trusts can be split between multiple family members, who are then taxed according to their individual income.
However, from 1 July 2028, a minimum rate will apply to all distributions by trustees.
This means that a trustee cannot receive significant tax discounts by distributing to family members with lower incomes.
Trust beneficiaries will receive non-refundable tax credits.
According to the Government: “The wealthiest 10% of households hold over 90% of the value of private trusts, the majority of which are discretionary [family] trusts.”
Tax offset
The Budget includes a $250 permanent annual tax offset for every taxpayer from July 2027. This is in addition to a $1,000 instant deduction for work-related expenses available on this year’s tax return.
That deduction was announced last year, along with a tax rate cut for low income earners (between $18,201 and $45,000) to 15 cents per dollar from July this year, and 14 cents next year.
For someone on the average income of $81,245, the combined effect of the Government’s tax cut measures is a saving of around $2,816 by 2028.
Fuel
The Government announced a $14.8 billion package in the 2026-27 Budget for fuel resilience in response to the Middle East war.
The package includes $7.5 billion to secure fuel and fertiliser and support for industries to produce gas and liquid fuel locally. This spending was announced last week.
Funding will also be used to expand fuel security reserves to 50 days, around 10 days longer than the current reserve requirements.
NDIS
The NDIS provides support and services for Australians with disability, including access to community services, such as doctors, and assistance for necessary support.
The Government has repeatedly flagged concerns about the rising cost of the scheme, which was projected to cost $46.2 billion in the 2025/26 financial year.
It said it will reduce how much it spends on the NDIS by $37.8 billion over four years.
National security
The Government confirmed $600 million over five years for counter-terrorism measures following the Bondi terror attack.
This includes a new Counter-Terrorism Online Centre ($74 million) to intercept extremist material online, over $46 million for Jewish community security, and $20 million for social cohesion programs in schools.
The university regulator TEQSA will also receive $9.4 million to take action against antisemitism on campuses, following a Senate inquiry prompted by protests at Australian universities.
Migration
The Government will change its migration testing to prioritise “better educated, higher-skilled and younger migrants”.
A National Credit Recognition Framework will also be established to make it easier for migrants who’ve studied overseas to receive relevant qualifications here.
Changes to the Working Holiday Maker (WHM) program will “better control numbers” and a “fairer allocation” of visas. The Government did not explain exactly how it would “control” WHM visa number, nor if it would explicitly cut numbers.
