The 2026/2027 Australian Federal Budget marks a significant shift in Australia’s taxation and financial landscape, with reforms that will reshape how wealth is accumulated, structured and transferred. While many of the measures are not yet legislated, below is a breakdown of the key changes and what they mean in practice.
Capital Gains Tax Reform
One of the most consequential announcements is the overhaul of Capital Gains Tax (CGT). From 1 July 2027, the 50% CGT discount will be replaced with a cost base indexation approach for assets held for more than 12 months, alongside the introduction of a minimum 30% tax on net capital gains.
While transitional rules ensure the current discount still applies to gains accrued before this date, the change represents a fundamental shift in long-term investment strategy. The requirement to establish asset values at 1 July 2027 will be critical, particularly for those with significant investment portfolios.
To continue encouraging investment in new housing supply, investors purchasing newly built residential properties will be able to choose between applying the existing 50% CGT discount or adopting the new cost base indexation method with the minimum tax.
Importantly, income support recipients, including Age Pensioners, will be exempt from the minimum tax—providing some protection for those in retirement.
Changes to Negative Gearing
Negative gearing rules will be tightened, with tax benefits limited to new residential property investments from 1 July 2027.
For established properties acquired after 12 May 2026, rental losses will no longer be offset against other income. Instead, these losses will only be able to offset future rental income or capital gains from property investments.
This change is designed to encourage new housing supply but will materially reduce the attractiveness of established property as a tax-effective investment strategy.
Taxation of Discretionary Trusts
A major structural reform comes in the form of a 30% minimum tax on discretionary trusts from 1 July 2028.
Trustees will pay tax at this minimum rate, and while beneficiaries will receive tax credits, the flexibility of distributing income to lower-tax beneficiaries will be significantly reduced. These rules are intended to address complex tax structuring and enhance fairness in the system.
To support the transition, the Government will allow rollover relief for three years from 1 July 2027, enabling restructuring into alternative entities such as companies or fixed trusts without immediate tax consequences.
Individual Tax Measures
The Budget also introduces modest changes for individuals, including a $1,000 instant tax deduction from the 2026–27 income year.
This allows taxpayers to claim a standard deduction without itemising work-related expenses, simplifying the tax process for many Australians. Those with higher deductions can continue to claim as normal.
In addition, a $250 Working Australians Tax Offset will apply from 2027–28, increasing the effective tax-free threshold for income derived from work.
Medicare levy low-income thresholds will also increase from 1 July 2025, helping ensure low-income earners remain exempt.
- The threshold for singles will be increased from $27,222 to $28,011.
- The family threshold will be increased from $45,907 to $47,238.
- For single seniors and pensioners, the threshold will be increased from $43,020 to $44,268.
- The family threshold for seniors and pensioners will be increased from $59,886 to $61,623.
- The family income thresholds will increase by $4,338 for each dependent child or student, up from $4,216.
Business and Investment Support
For businesses, the Budget includes several supportive measures aimed at improving cash flow and encouraging investment:
- The $20,000 instant asset write-off will be permanently extended for eligible small businesses $20,000 with turnover up to $10 million.
- Loss carry-back provisions will allow companies with aggregated global turnover under $1 billion to offset current year tax losses against profits from the previous two years, generating a refundable tax offset.
- Start-ups will benefit from refundable tax offsets on early losses from 2028, with eligible companies (turnover under $10 million) able to convert losses incurred in their first two years into a cash refund.
These measures are designed to support growth, innovation and resilience—particularly for smaller and emerging businesses.
Aged Care and Retirement Support
The Government has committed significant funding to aged care, including $606.5 million over four years to improve residential aged care infrastructure and affordability.
A further $1.4 billion has been allocated to the Support at Home program, improving access to home care services and ensuring essential care services are more affordable.
However, retirees may face higher healthcare costs over time, with the removal of the age-based uplift in the Private Health Insurance rebate from April 2027.
Supporting you Through Change
At Boutique Advisers Private Wealth, we work closely with individuals, families and business owners to navigate change with clarity and confidence.
This Budget reinforces the importance of proactive planning—whether that’s restructuring investments, reviewing trust arrangements, or preparing for retirement outcomes.
If you would like to discuss how these changes may affect you and your family, please contact us to arrange a time to speak with one of our financial planning advisors.
