2026 Federal Budget: What It Means for Wealth Factory Clients
Last updated: 13 May 2026 The 2026–27 Federal Budget has been handed down, and while there are some cost-of-living measures for households, the bigger story for many Australians is tax reform. For investors, retirees, small business owners and families using structures such as family trusts, this Budget could affect future decisions around property, capital gains tax, business investment, retirement planning and aged care. Many of the measures are still proposals and may need to pass through Parliament before becoming law. That means the best approach is not to rush into decisions, but to understand what may be changing and review your strategy early.
Important: This article is general information only. It does not take into account your personal objectives, financial situation or needs. Before acting on any Budget measure, consider whether it is appropriate for you and seek personal financial, tax or legal advice where required.
Quick summary: the main 2026 Federal Budget measures
The Budget includes several measures that may be relevant for financial planning clients:- Personal income tax cuts from 1 July 2026 and 1 July 2027.
- A new $250 Working Australians Tax Offset from the 2027–28 income year.
- A proposed $1,000 instant tax deduction for work-related expenses from 2026–27.
- Major proposed changes to capital gains tax from 1 July 2027.
- Proposed negative gearing restrictions for established residential properties acquired after Budget night.
- A proposed 30% minimum tax on discretionary trust income from 1 July 2028.
- A permanent $20,000 instant asset write-off for eligible small businesses.
- Changes to electric vehicle fringe benefits tax concessions.
- Expanded aged care and Support at Home funding.
- Higher private health insurance costs for some older Australians from 1 April 2027.
- Superannuation remains largely unchanged in this Budget, although previously legislated changes still matter.
1. Personal income tax cuts
The Budget confirms further personal income tax cuts. From 1 July 2026, the 16% tax rate on taxable income between $18,201 and $45,000 is due to reduce to 15%. From 1 July 2027, it is due to reduce again to 14%.| Income range | 2026–27 tax rate | 2027–28 tax rate |
|---|---|---|
| $0 – $18,200 | Tax free | Tax free |
| $18,201 – $45,000 | 15% | 14% |
| $45,001 – $135,000 | 30% | 30% |
| $135,001 – $190,000 | 37% | 37% |
| Over $190,000 | 45% | 45% |
2. New $250 Working Australians Tax Offset
The Government has proposed a new Working Australians Tax Offset from the 2027–28 income year. This is intended to provide an annual tax offset of up to $250 for people who earn income from work, including salary, wages and eligible sole trader business income. The offset is expected to apply automatically through the tax return process. It is not designed for people who only receive investment income or retirement income.What this means for clients
For working clients, this is a modest annual tax benefit. It is unlikely to change a financial strategy on its own, but it may form part of broader cash-flow planning from 2027–28. For clients approaching retirement, the offset may also be relevant when considering part-time work, semi-retirement or whether they continue earning employment or business income in later years.3. $1,000 instant tax deduction for work-related expenses
From the 2026–27 income year, the Government has proposed a $1,000 instant tax deduction for eligible work-related expenses. This would allow eligible taxpayers to claim up to $1,000 for work-related expenses without needing to itemise those expenses below that amount. Expenses above $1,000 could still be claimed in the usual way, provided the taxpayer keeps appropriate records. Certain deductions, such as charitable donations, union fees and professional association fees, may still be claimed separately.What this means for clients
This may simplify tax time for employees with smaller work-related expenses. However, it is still worth keeping receipts, particularly if there is any chance your total work-related expenses may exceed $1,000. For higher-income professionals, tradespeople, health workers, teachers and others with regular work-related costs, keeping records may still result in a better tax outcome than relying on the standard deduction.4. Capital gains tax changes from 1 July 2027
One of the most significant Budget announcements is the proposed change to capital gains tax. Currently, individuals and trusts may be eligible for a 50% CGT discount where an asset has been held for more than 12 months. The Government proposes to replace the 50% discount with an indexation method for gains arising from 1 July 2027. Under the proposed method, the cost base of an eligible asset would be adjusted for inflation. In simple terms, tax would apply to the real gain above inflation, rather than applying a flat 50% discount. A proposed 30% minimum tax rate would apply to capital gains accrued from 1 July 2027, although recipients of certain means-tested income support payments, such as the Age Pension, are expected to be exempt from that minimum tax.What assets could be affected?
The changes are expected to apply to a broad range of CGT assets held by individuals, trusts and partnerships, including:- Investment properties
- Shares
- Managed funds
- Other investment assets
- Some pre-CGT assets, but only for gains arising after 1 July 2027
What about assets already owned?
Existing assets are expected to receive transitional treatment. Gains up to 30 June 2027 may continue to be assessed under the existing rules, while gains from 1 July 2027 may be assessed under the new rules. This means the tax outcome on a future sale may depend on:- When the asset was purchased
- The value of the asset at 1 July 2027
- How much of the gain occurred before and after 1 July 2027
- The level of inflation during the ownership period
- The owner’s tax rate and whether the 30% minimum tax applies
What this means for investors
This could be a major planning issue for investors with property, shares or other growth assets held in personal names or family trusts. It may also affect decisions around asset ownership, tax structures, superannuation, investment bonds, debt reduction and the balance between growth and income-focused assets. Investors should be careful about making decisions purely because of a proposed tax change. Selling an asset may trigger tax, transaction costs and investment risk. However, it is sensible to review expected future sales, ownership structures and unrealised gains before 1 July 2027.5. Negative gearing changes for established residential property
The Government has proposed limiting negative gearing for residential property to new builds from 1 July 2027. For established residential investment properties acquired after 7:30pm AEST on 12 May 2026, rental losses would no longer be deductible against other income, such as salary and wages, from 1 July 2027. Instead, those losses would generally be quarantined. That means they could be carried forward and used against future residential property income or residential property capital gains.Properties expected to be excluded
The proposed changes are not expected to apply to:- Established residential properties already held before Budget night
- Contracts entered into before Budget night, even if settlement occurs later
- Eligible new residential builds
- Commercial property
- Shares and other non-property growth assets
- Superannuation funds
What this means for property investors
This could significantly change the cash-flow modelling for new property investors buying established homes. For many years, some investors have accepted short-term rental losses because those losses could reduce tax on other income. If that treatment is restricted, the after-tax cost of holding a negatively geared established property may increase. Investors considering a property purchase should model the numbers carefully, including:- Interest costs
- Expected rent
- Repairs and maintenance
- Insurance and rates
- Land tax
- Vacancy assumptions
- Tax treatment of losses
- Expected capital growth
- The proposed CGT changes from 1 July 2027
6. Discretionary trusts and the proposed 30% minimum tax
From 1 July 2028, the Government proposes a 30% minimum tax on the taxable income of discretionary trusts, commonly known as family trusts. Under the proposal, trustees would pay tax at 30% on trust income. Beneficiaries, other than corporate beneficiaries, may receive a non-refundable credit for tax paid by the trustee. This is designed to reduce the tax benefit of distributing income to family members on lower marginal tax rates.What trusts may be excluded?
The proposed measure is not expected to apply to every trust. Exclusions may include:- Fixed trusts
- Widely held trusts
- Complying superannuation funds
- Special disability trusts
- Deceased estates
- Charitable trusts
- Certain testamentary trust arrangements
- Some types of primary production income
What this means for families and business owners
Family trusts can still provide benefits, including asset protection, estate planning, succession planning, control and pooling of family assets. However, the proposed tax changes may reduce some of the income-splitting advantages that have historically made discretionary trusts attractive. If you have a family trust, it may be worth reviewing:- Who receives trust distributions
- Whether corporate beneficiaries are used
- Whether the trust holds growth assets
- Whether the trust still meets its original purpose
- The cost and consequences of restructuring
- Estate planning and asset protection implications
7. Small business: permanent $20,000 instant asset write-off
The Budget proposes to make the $20,000 instant asset write-off permanent from 1 July 2026 for eligible small businesses with aggregated turnover below $10 million. This means eligible small businesses may be able to immediately deduct the full cost of eligible assets costing less than $20,000 each. The threshold applies on a per-asset basis, so multiple assets may qualify. Assets costing $20,000 or more can generally continue to be placed into the small business simplified depreciation pool.What this means for small business owners
This measure may help business cash flow and make it easier to invest in equipment, technology and productive assets. However, a tax deduction is not the same as free money. Business owners should still ask:- Does the asset improve revenue, efficiency or risk management?
- Would I buy it if there were no tax deduction?
- Can the business afford the cash outflow?
- Is finance required, and if so, what is the interest cost?
- Will the asset still be useful in three to five years?
8. Business loss carry-back and start-up support
The Budget also includes proposed measures to support business risk-taking and cash flow. From 2026–27, eligible companies may be able to carry back revenue losses against tax paid in the previous two income years, subject to conditions. From 2028–29, some start-up companies may be able to receive a refund for tax losses in their first two years of operation, limited to the value of fringe benefits tax and withholding tax paid on employee wages.What this means for business owners
These measures may help businesses manage volatile income, expansion costs and early-stage losses. For small companies, this may be particularly useful when investing in new staff, equipment, product development or expansion. Business owners should speak with their accountant before relying on these measures, as eligibility, timing and franking account rules may matter.9. Electric vehicle FBT concessions to be scaled back
The existing fringe benefits tax concession for eligible electric vehicles is proposed to be scaled back. Until 31 March 2027, eligible EVs up to the fuel-efficient luxury car tax threshold may continue to access the full FBT exemption. From 1 April 2027 to 31 March 2029, the full exemption is expected to remain only for eligible EVs costing $75,000 or less. Eligible EVs above $75,000 and below the fuel-efficient luxury car threshold may receive a 25% FBT discount instead. From 1 April 2029, eligible EVs below the fuel-efficient luxury car threshold are expected to receive a 25% FBT discount.What this means for employees
If you are considering an EV through salary packaging or a novated lease, it may be worth comparing the cost before and after the relevant change dates. Existing arrangements may retain the treatment that applied when they commenced, but new arrangements, renewals or changes of provider may need to be reviewed carefully.10. Superannuation: no major new Budget surprise, but important changes remain
The Budget did not announce major new changes to superannuation. However, previously legislated changes and indexation remain important.Division 296 tax for large super balances
From 1 July 2026, an additional tax applies to some individuals with total super balances above $3 million. This measure is particularly relevant for SMSF members, high-balance super members and clients with large unrealised gains or illiquid assets inside super. Clients affected by this measure may need to review liquidity, tax payments, investment structures and estate planning.Pay-day super
From 1 July 2026, employers will be required to pay superannuation guarantee contributions at the same time as salary and wages. This should help employees receive contributions sooner and may improve long-term retirement outcomes through earlier investment of contributions.Super cap indexation
Some superannuation caps and thresholds are expected to increase from 1 July 2026, including:- The general transfer balance cap increasing from $2.0 million to $2.1 million.
- The total super balance threshold relevant to non-concessional contributions increasing from $2.0 million to $2.1 million.
- The concessional contribution cap increasing from $30,000 to $32,500.
- The non-concessional contribution cap increasing from $120,000 to $130,000.
What this means for retirement planning
Super remains one of the most tax-effective retirement savings vehicles for many Australians. The proposed changes to CGT, negative gearing and trusts may make superannuation relatively more attractive for some investors, although contribution caps, preservation rules and personal circumstances must always be considered. This is particularly relevant for:- Pre-retirees wanting to boost super before retirement
- Business owners selling assets
- Clients with investment assets outside super
- SMSF members
- Couples trying to even up super balances
- Clients considering salary sacrifice or personal deductible contributions
11. Low Income Superannuation Tax Offset expansion
From 1 July 2027, the Low Income Superannuation Tax Offset is expected to expand. The income eligibility threshold is expected to increase from $37,000 to $45,000, and the maximum payment is expected to increase from $500 to $810. This measure is designed to help low-income earners receive a better tax outcome on superannuation contributions.What this means for clients
Eligible low-income earners should ensure their super fund has their tax file number and that they lodge their tax return so the ATO can assess eligibility. This may be relevant for part-time workers, lower-income spouses, adult children entering the workforce and people returning to work after time out of the workforce.12. Private health insurance rebate changes for older Australians
From 1 April 2027, the Government proposes to remove the higher private health insurance rebate that currently applies based on age for older Australians. This means some people aged 65 and over may face higher out-of-pocket premium costs, depending on income, policy type and rebate tier.What this means for retirees
If you are 65 or older, it may be worth reviewing your private health insurance before renewal. Before cancelling or reducing cover, consider:- Whether the policy still suits your health needs
- Potential waiting periods if you rejoin later
- Lifetime Health Cover loading implications
- Your ability to self-fund medical costs
- How private health costs fit into your retirement cash flow
13. Aged care and Support at Home
The Budget includes additional aged care funding, including support for more residential aged care beds and more Support at Home packages. From 1 October 2026, personal care services under the Support at Home program are expected to be reclassified as clinical supports. This means eligible participants with approved personal care services and available Support at Home funding may receive those services with no out-of-pocket cost. Personal care services may include help with showering, dressing and non-clinical continence management.Residential aged care
The Government has also announced funding intended to increase residential aged care places and support aged care providers to build, refurbish and improve facilities. This may assist supply over time, although families still need to plan carefully when a parent or spouse enters aged care.What this means for families
Aged care decisions are often made under pressure. The Budget does not remove the need to consider:- Whether to pay a RAD, DAP or combination
- Whether to keep, sell or rent the family home
- Age Pension impacts
- Means-tested care fees
- Cash-flow sustainability
- Estate planning implications
- Family fairness and beneficiary expectations
14. Pension Supplement changes for overseas travel
From 20 September 2026, the rules for the Pension Supplement are expected to change for recipients who travel overseas. The maximum Pension Supplement may continue for up to 12 weeks while temporarily overseas, rather than reducing after six weeks. However, for longer absences or permanent moves overseas, the Pension Supplement may stop after 12 weeks.What this means for retirees
This may be relevant for Age Pensioners planning extended overseas travel, especially those visiting family overseas or considering living overseas for part of the year. Before travelling for more than a short holiday, retirees should check how their Age Pension and supplements may be affected.15. Medicare levy low-income thresholds
The Medicare levy low-income thresholds are expected to increase for singles, families, seniors and pensioners. This may mean some lower-income households pay no Medicare levy or a reduced Medicare levy for the 2025–26 income year.What this means for clients
This is most relevant for lower-income earners, part-time workers, pensioners and retirees with taxable income near the threshold.16. Economic outlook: inflation, deficits and interest rates
The Budget was delivered against a difficult economic backdrop, including higher fuel prices, global uncertainty, inflation pressures and slower expected growth. Economists have noted that while the Budget improves the medium-term deficit position compared with previous forecasts, it still leaves Australia with ongoing structural deficits. The Budget also includes near-term support, which may not make the Reserve Bank’s job easier in controlling inflation. For investors, the key message is that tax changes are only one part of the picture. Interest rates, inflation, wage growth, immigration, housing supply and global markets will continue to influence investment outcomes.What this means for investors
The proposed property tax changes may reduce the after-tax appeal of established residential property for some investors, particularly where the strategy relies heavily on negative gearing. However, housing affordability is still largely driven by supply and demand. Even if investor demand softens in the short term, housing undersupply may continue to support prices over the longer term. Shares, superannuation and income-producing assets may become relatively more attractive for some investors, but the proposed CGT changes also mean the tax treatment of future gains needs to be modelled carefully.Who should review their strategy after the Budget?
Not everyone needs to make changes immediately. But some people should review their position sooner rather than later.Property investors
You should review your strategy if you are planning to buy an established residential investment property, currently hold negatively geared property, or are considering selling property after 1 July 2027.Share investors
You should review your portfolio if you have large unrealised gains, regular dividend reinvestment plans, dollar-cost averaging arrangements or assets held outside superannuation.Family trust users
You should review your structure if you use a discretionary trust for business, investments, property or family wealth planning.Small business owners
You should review whether the $20,000 instant asset write-off, loss carry-back rules or start-up measures affect your cash flow or investment plans.Pre-retirees
You should review whether higher contribution caps, tax changes outside super and retirement income planning create new opportunities.Retirees
You should review Age Pension, private health insurance, aged care, estate planning and investment cash flow.High-balance super members
You should review liquidity, Division 296 tax implications, estate planning and whether your current structure remains appropriate.What should you do now?
The Budget contains several important proposed changes, but many are not yet law. The practical steps are:- Do not make rushed decisions based on headlines.
- Identify which measures may apply to you.
- Review your tax structures before the key start dates.
- Model property and investment cash flow under the proposed new rules.
- Consider whether superannuation should play a greater role in your strategy.
- Speak with your adviser, accountant and solicitor before restructuring assets.
Final thoughts
The 2026 Federal Budget is more than a cost-of-living Budget. It is a tax reform Budget with potentially significant consequences for investors, property owners, family trusts, retirees and small business owners. The biggest risk is reacting too quickly without understanding the detail. The biggest opportunity is reviewing your strategy early, before the major start dates arrive. At Wealth Factory, we help clients understand how changes like this affect retirement planning, investment structures, superannuation, tax planning and long-term financial decisions.If you would like to discuss what the 2026 Federal Budget may mean for your situation, you can book an introductory call here: Book an introductory call with Wealth Factory
General advice warning: This article contains general information only and does not take into account your objectives, financial situation or needs. Before acting on any information, you should consider whether it is appropriate for your circumstances and seek personal financial advice. Taxation, legal and social security information is general in nature and may change. You should seek advice from a registered tax agent, solicitor or relevant professional where required.
