The 2026-27 Federal Budget: The Budget of Broken Promises

On Tuesday, 12 May 2026, Treasurer Jim Chalmers handed down his fifth Federal Budget - and if you own an investment property, operate a family trust, hold shares, or are planning to sell a business, this one should grab your attention.

The government has announced the biggest overhaul of Australia's tax system since the introduction of the GST: the end of the 50% Capital Gains Tax discount (CGT), the restriction of negative gearing on established properties, and a brand new 30% minimum tax on family trust distributions.

The purported "intergenerational equity" is, in our opinion, a gaslight to avoid public debate on the real issues of immigration, government overspending, and the desire to increase tax revenue.

Important: These budget announcements are not yet law. Legislation still needs to pass Parliament. Our advice is not to act until these proposed changes become law.

Individuals

The 50% CGT discount is gone from 1 July 2027. In its place: cost base indexation (your cost base adjusted for CPI) plus a 30% minimum tax on every dollar of net capital gain, regardless of your income.

This hits young savers the hardest. A young person on $35,000 saving for a house deposit, who sells shares to fund that deposit, will pay a minimum 30% tax on every dollar of the net capital gain, despite their marginal tax rate of 15% from 1 July 2027.

For assets you already own, a hybrid treatment applies:

• Gains to 30 June 2027 → still eligible for the 50% discount

• Gains from 1 July 2027 → indexation and 30% minimum tax apply

• You'll need to establish asset values as at 1 July 2027 via an independent valuation.

Pre-1985 assets - a big surprise on budget night. Assets acquired before 20 September 1985 have always been completely exempt from CGT. From 1 July 2027, gains accruing after that date will be subject to CGT under the new rules.

Negative gearing is proposed to be restricted to new builds only from 1 July 2027 (effective Budget Night for new purchases). Rental losses on established residential properties purchased after 7:30 pm AEST 12 May 2026 can no longer be offset against your salary or other income. These losses are quarantined; they can only be used against future positively geared rental income or capital gains from the sale of residential property and are able to be carried forward indefinitely.

Properties you already owned at/before Budget Night are fully grandfathered. New builds retain full negative gearing. Investors in new builds are also expected to retain access to either the 50% CGT discount or indexation methods when selling. Clients considering purchasing investment property may wish to seek advice before entering into any contract.

Other individual changes:

• $250 Working Australians Tax Offset - permanent, from 1 July 2027, applies to workers and sole traders. Paid via tax return in 2028.

• $1,000 instant tax deduction - from 1 July 2026, optional standard deduction for work-related expenses without receipts. If your actual expenses exceed $1,000, claim the higher amount as usual. Donations, union fees and professional memberships remain separately claimable.

• Personal tax cuts - the lowest marginal rate drops from 16% to 15% from 1 July 2026, and to 14% from 1 July 2027

• Medicare levy thresholds - increased 2.9% from 1 July 2025; singles threshold rises to $28,011, and family threshold rises to $47,238.

Business

One of the biggest changes announced in this budget is the treatment of family trusts. If you run your business or hold investments through a family trust, this budget changes everything. From 1 July 2028, trustees pay a 30% minimum tax on discretionary trust taxable income. Beneficiaries (other than companies) receive non-refundable credits; if a beneficiary's personal tax rate is below 30%, the excess credit is lost.

The bucket company strategy is effectively dead, as announced. The budget papers explicitly state that corporate beneficiaries cannot claim credits for tax paid by the trustee. As written: 30% at trust level plus 30% at company level, could equate to at least a 51% effective tax rate. We recommend not making any structural changes until the draft legislation is released,

A 3-year restructuring window from 1 July 2027 has been proposed with CGT and income tax relief. However, this covers federal tax only. State stamp duty is a separate matter. Information regarding the rollover relief period is limited at this stage. We suggest waiting for legislation to pass before beginning this process.

It is unclear if discretionary testamentary trusts are captured by these proposed changes. Some have described this potential implication as a ‘Death Tax’ by stealth.

Trusts NOT affected: Fixed and widely held trusts, self managed superannuation funds (SMSF), special disability trusts, deceased estates, charitable trusts. It appears that primary production income is also excluded.

Other business changes:

• Permanent $20,000 instant asset write-off - finally permanent for businesses with turnover up to $10 million. If you've been holding off on equipment purchases, this is your green light.

• Loss carry-back - from 1 July 2026, companies with aggregated annual global turnover under $1 billion can carry back revenue losses up to two years against prior profits. Loss carry-back applies to companies only - sole traders, partnerships and trusts are not eligible, leaving many small businesses without this safety net.

• Startup loss refundability - from 1 July 2028, startups with turnover under $10 million can convert the first two years of losses into a refundable tax offset, capped at FBT and PAYG withholding paid on employee wages.

• From 1 July 2028, the Government will reform the R&D Tax Incentive scheme. While refundable offset rates will increase for some businesses and the turnover threshold will expand to include more companies, several restrictions are also being introduced. Supporting R&D activities will no longer qualify; refundability will be limited to younger businesses, and minimum spending thresholds will increase. Although the changes appear positive on the surface, the reforms are expected to reduce overall government support for research, development and innovation, meaning businesses should carefully review how the new rules may affect future claims.

Superannuation

Already law - act now:

• Payday Super is in effect from 1 July 2026 - Employers must pay superannuation on or before each employee's payday. If your payroll system isn't updated, it needs to be now.

• Division 296 tax - Additional 15% tax on super earnings for balances between $3M–$10M (up to 30% overall), rising to an additional 10% above $10M (up to 40%). Thresholds indexed to CPI.

Low-Income Superannuation Tax Offset improvements from 2027-28 - eligibility threshold increases from $37,000 to $45,000; maximum amount increases from $500 to $810.

SMSF’s are carved out from both the CGT changes and negative gearing restrictions - making SMSFs a comparatively attractive vehicle for holding investment assets. Existing tax treatment for SMSF-held properties and shares remains unchanged.

Private health insurance rebate - age-based uplift for Australians over 65 will be removed from 1 April 2027. If you're 70+ with gold hospital cover, expect premiums to rise by around $807 per year.

Electric Vehicles

The full FBT exemption for EVs is being phased out. Existing novated leases are not affected. If you're considering a higher-value EV above $75,000, the full exemption disappears from 1 April 2027 - less than 12 months away.

The Final Word on this woeful 2026/27 Federal Budget

This budget will reshape how Australians invest, structure their businesses, and plan for retirement. The CGT, negative gearing and trust changes are the most significant in our generation - and they arrived without the pre-election signalling Australians would ordinarily expect for reforms of this scale. Most major changes don't take effect until 1 July 2027 or 1 July 2028 - there is time to plan. But that time will pass quickly.

Rest assured, our team at National Taxation will work closely with every impacted client to develop personalised solutions and clear next steps, once the proposed changes are legislated and officially become law.

If you wish to read about the proposed legislative changes in more depth, click the link to download our 2026/27 Federal Budget Comprehensive Client Education report.

Contact us HERE

Please contact us in the first instance, where possible, so we can direct your query to the right person and prepare for your conversation.

Disclaimer: General information only. Does not constitute professional tax or financial advice. Budget announcements are subject to change through the legislative process. Seek advice specific to your personal circumstances before acting. National Taxation accepts no liability for any errors or omissions, or for any loss or damage suffered as a result of any person acting without such advice. Current as at 15 May 2026. www.nationaltaxation.com.au. ABN 63 665 545 130.