Federal Budget Explained For Investors [2026]
A breakdown of the 2026 Federal Budget changes affecting CGT, negative gearing, trusts and investors.
This article is for general information purposes only, and is not intended as tax, legal or financial advice.
What does the 2026 Federal Budget mean for investors?
The 2026 Federal Budget puts some big investment tax changes on the table.
The main talking points for investors are:
Capital gains tax, also called CGT
Negative gearing on existing homes
Discretionary trusts, often used by families and investors
Superannuation, which is mostly staying the same
The important thing to know up front is this: many of these reforms are proposals and could change as part of the legislative process before becoming law. More details are expected to be announced before the changes come into effect.
Here’s the simple breakdown.
What is proposed in the 2026 Federal Budget?
The Budget announced a few major changes that could affect how investors are taxed on asset growth.
The biggest proposed changes are:
Capital gains tax (CGT)
The government plans to move away from the current 50% CGT discount and replace it with a new inflation-focused system.
There would also be a new 30% minimum tax on capital gains across the board.
Negative gearing
Negative gearing benefits could change for future purchases of existing residential property (old homes). Properties that are currently negatively geared would be exempt from the proposed changes.
Newly built and off-the-plan properties would still fall under existing negative gearing rules.
Discretionary trusts
A new 30% minimum tax is planned for discretionary trusts from 1 July 2028. There would also be extra reporting rules, with more details still to come.
Superannuation
Most super settings are not changing.
Capital gains tax
What is the capital gains tax?
Capital gains tax is the tax you may pay when you sell an investment asset for more than what you paid for it.
For example, if you buy $10,000 worth of shares and sell them later for $20,000, you have made a $10,000 profit or capital gain.
Under the current rules, if you hold the investment for more than 12 months, you may be able to reduce that gain by 50% before tax is calculated.
That 50% discount is one of the rules the government proposes to change.
What could change from 1 July 2027?
From 1 July 2027, the government proposes to replace the 50% CGT discount with a new inflation-based system.
That sounds technical, but the idea is simple.
Instead of cutting the capital gain in half, your original purchase price would be adjusted for inflation.
Inflation is the rise in prices over time. It is usually measured using the Consumer Price Index, or CPI.
So, under the new proposal, the tax is aimed more at the “real” gain you made after inflation. There would also be a new 30% minimum tax on capital gains.
For example: Let’s say an investor buys shares for $10,000 after 1 July 2027, and over the next year, inflation is 5%. This means the $10,000 purchase price is adjusted to $10,500 to account for the hypothetical inflation. Two years later, the investor decides to sell the shares for $20,000. Under the old system, the investor may have been able to use the 50% CGT discount and reduce a $10,000 gain to a $5,000 assessable profit. Under the new system:
The taxable gain would be $9,500, and the newly-proposed 30% minimum tax may apply. |
The example is illustrative only. Actual tax outcomes will depend on individual circumstances. |
What could happen if I sell my assets before 1 July 2027?
If you were to sell the asset before 1 July 2027, the capital gain would be assessed under the existing rules.
That means if you are eligible for the 50% CGT discount, you can still use it. Usually, this means you need to have held the asset for more than 12 months.
What happens to investments you already own with the CGT changes sold after 1 July 2027?
One of the first questions investors usually ask when tax reform is on the table: “Will my existing investments be grandfathered?”
Grandfathering simply means that older investments are protected from new rules, either fully or partially.
For example, if you held an investment before the rules changed, grandfathering may mean the old rules continue to apply to that investment.
The proposed CGT changes carry partial grandfathering. While the changes are not fully backdated, existing investments are not left out either. Instead, those gains would be split into two parts:
Part 1: Growth before 1 July 2027 | Part 2: Growth after 1 July 2027 |
Any gain made before 1 July 2027 would stay under the current CGT rules. | Any gain made after 1 July 2027 would fall under the new system, which could also be subject to the 30% minimum tax |
That means the 50% CGT discount may still apply. | In simple terms, the government is drawing the line on 1 July 2027. |
In short, what happened before that date would be treated one way. What happens after that date would be treated in another way.
What does ‘accrued’ mean?
You may see the word ‘accrued’ pop up in these rules.
It simply means how much your investment increased in value during a certain period.
For example, if your shares rose from $10,000 to $18,000 before 1 July 2027, you’d have an $8,000 accrued gain.
How can investors work this out?
Investors will generally need three numbers:
The original purchase price
The market value of the asset at 1 July 2027
The final sale price when the asset is sold
The government has said investors may be able to use either:
The market valuation at 1 July 2027, or
an ATO-approved formula
More details are expected before the rules begin.
Are pensioners and income support recipients affected?
There is an important exemption.
People who receive means-tested income support, such as the Age Pension or JobSeeker, would be exempt from the proposed 30% minimum tax if they receive an income support payment in the same financial year they realise the capital gain.
That means they may still pay tax at their normal marginal tax rate, even if that rate is below 30%.
Do the CGT proposals apply to SMSFs?
The government has stated that the existing CGT rules for SMSFs would continue.
Under the current rules:
SMSFs in an accumulation phase generally pay up to 15% tax on capital gains
If the asset is held for more than 12 months, the fund may receive a one-third CGT discount
This can reduce the effective tax rate on the gain to 10%
In its pension phase, some capital gains may be tax-free, depending on the fund’s situation
This means that for now, SMSF capital gains rules appear largely unaffected.
Negative gearing
What is negative gearing?
Negative gearing occurs when an investment costs more to own than it earns in income.
For property investors, ‘costs’ can include:
Loan interest
Repairs and maintenance
Property management fees
Depreciation, or
other holding costs
If the property was making a loss, investors could use that loss to reduce their taxable income.
That is the part the government wants to change for some future property purchases.
What could change for property investors?
The negative gearing proposals would apply to future purchases of existing residential property (old homes).
Under the proposed reforms:
Newly built homes will still qualify for negative gearing
Existing residential properties bought after 12 May 2026 would move into a new system
Investment properties already owned before that time would generally stay under the current rules
This means existing investment properties are much closer to being fully grandfathered.
What does that mean in simple terms?
For affected properties, investors would generally not be able to use rental losses to reduce salary or wage income if the proposed rules were passed.
Instead, those losses would be carried forward. In the context of negative gearing, this means the rental loss is preserved and can only be offset against future income generated by the property, such as future rental profits.
For example: An investor buys an existing (old home) property as an investment vehicle after the announcement date. The property makes a loss. Under the proposed rules, the investor generally cannot use that loss to reduce their salary income. Instead, the loss would be saved and may be used later against future rental property profits. |
Would shares still be able to be negatively geared?
Yes, according to the proposals. The Budget proposals would only apply to residential property investments.
That means shares, ETFs and other financial investments would remain under the current rules.
Investors can still generally:
Borrow to invest in shares or ETFs
Claim eligible interest costs
Use investment losses to reduce taxable income
So, negative gearing rules for shares and ETFs are not changing under these proposals.
Discretionary trusts
What is changing for trusts?
The Budget also announced a new 30% minimum tax on discretionary trusts from 1 July 2028.
Discretionary trusts are often used by families and investors to hold assets and distribute income.
Under the proposed rules:
Trustees would potentially pay at least 30% tax on trust income
Beneficiaries would still include trust distributions in their own tax returns
Some beneficiaries may receive tax credits for taxes already paid by the trustee
The government says the aim is to reduce income splitting through family trust structures.
More reporting and compliance details are expected in the coming months.
What happens next?
These changes are not yet law.
Before they officially apply, the government still needs to:
Introduce legislation
Pass that legislation through Parliament
Complete further Treasury consultation
Release more ATO guidance
More details are expected before the proposed start dates in 2027 and 2028.
That means the final version of the rules may still change.
The bottom line
The 2026 Federal Budget has proposed some major changes for investors and everyday Aussies.
The biggest ones are:
Replacing the 50% CGT discount with a new inflation-based system for future gains
Introducing a 30% minimum tax on capital gains
Changing negative gearing rules for future purchases of existing residential property
Introducing a 30% minimum tax on discretionary trusts
But not everything would be changing.
Several key parts of the current system would remain in place:
Existing investments receive some transition protection
Newly built housing keeps favourable negative gearing treatment
Shares and ETFs can still be negatively geared
SMSF capital gains rules appear largely unchanged
Most superannuation settings remain the same
The main takeaway is simple: investors may need to think more carefully about tax when buying, selling or holding assets in the days and years ahead.
But the basics of investing have not changed.
A long-term plan, a diversified portfolio and a clear understanding of the rules still matter most.
As always, tax can be personal. Investors should consider getting professional advice before making big decisions.
Disclaimer
The information contained above is for general information purposes only, and is not intended as tax, legal or financial advice. While every effort has been made to ensure the accuracy of the information at the time of publication, tax laws and regulations are subject to change and may vary depending on your individual circumstances. We recommend you consult with a qualified tax adviser or the Australian Taxation Office (ATO) before making any decisions based on this information. No responsibility is accepted for any loss arising from reliance on the content of this article.
Article sources
[1] Australian Government, Negative Gearing and Capital Gains Tax Reform, 2026 Federal Budget Fact Sheet
[2] Minimum Tax on Discretionary Trusts — 2026 Federal Budget Fact Sheet.
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