The 2026 – 27 Federal Budget introduces a range of significant tax and policy measures impacting individuals, property investors, and private groups. The reforms are set against a backdrop of persistent cost of living pressures, elevated interest rates, global uncertainty, and a continued focus on fiscal sustainability.
Many measures are proposed to apply from 1 July 2027 or later and remain subject to consultation and legislative refinement. As such, further detail will be critical in assessing their full impact.
Key Tax Measures
- Capital Gains Tax (CGT) Reform
From 1 July 2027, the Government proposes to:
- Replace the existing 50% CGT discount with an inflation-based indexation method
- Introduce a 30% minimum tax on net capital gains
Practical implications:
- Taxpayers may need to obtain market valuations of assets as at 1 July 2027
- Existing accrued gains up to that date are expected to retain current CGT treatment under transitional rules
- Investment strategies and asset allocation decisions may require reassessment
- The application of the minimum tax to superannuation funds and managed investment vehicles remains unclear
Overall, these changes represent a fundamental shift in the taxation of capital and may reduce the attractiveness of long-term passive investment strategies relative to other asset classes.
- Negative Gearing – Residential Property
From 1 July 2027, negative gearing concessions for residential property will be limited.
- Losses on established residential properties will be ring-fenced
- These losses can only be offset against:
- Rental income, or
- Future capital gains from residential property
- Losses will no longer offset salary or business income
- Grandfathering applies to existing holdings (including contracts entered prior to Budget night)
- Exclusions include:
- New residential developments
- Superannuation funds (including SMSFs)
- Widely held trusts and build-to-rent projects
- Certain government-supported housing investments
This measure is expected to influence investor behaviour, gearing strategies, and ownership structures, particularly in the residential property market.
- Minimum Tax on Discretionary Trusts
From 1 July 2028, a 30% minimum tax is proposed on discretionary trust income.
- Tax will apply at the trustee level, with beneficiaries generally receiving tax credits
- Aimed at limiting income splitting and the use of bucket company structures
- Exclusions include:
- Fixed and widely held trusts
- Complying superannuation funds
- Deceased estates and charitable trusts
- Special disability trusts
These changes are expected to significantly impact family groups and may necessitate review or restructuring of existing trust arrangements, subject to the availability of anticipated transitional relief.
- Business Tax Measures
Several measures are aimed at supporting business cashflow and investment:
- Loss carry-back
Companies (turnover under $1 billion) can offset current losses against profits from the previous two years (from 1 July 2026), subject to franking constraints - Instant asset write-off
The $20,000 threshold will become permanent from 1 July 2026 for businesses with turnover up to $10 million - Start-up support
Early-stage businesses may access refundable tax offsets for losses in initial years (from 1 July 2028, subject to limits)
These measures provide targeted relief, particularly for SMEs and growing businesses.
- Research & Development (R&D) Tax Incentive
From 1 July 2028, the R&D incentive will be re-focused:
- Increased support for core R&D activities
- Reduced benefits for supporting (non-core) expenditure
- Introduction of tighter thresholds and limitations on refundability
Businesses undertaking R&D should review project eligibility, expenditure categorisation, and expected cashflow impacts.
- Venture Capital and Investment Incentives
- Increased thresholds under VCLP and ESVCLP regimes to support larger investments
- Measures aimed at encouraging innovation and growth-stage funding
These changes may enhance access to capital for emerging businesses.
- Personal Tax Measures
- Working Australians Tax Offset (WATO)
$250 annual offset from 1 July 2027 - Standard deduction for work-related expenses
$1,000 deduction from the 2026–27 income year without substantiation - Personal income tax cuts (previously legislated)
The 16% rate reduces to:- 15% from 1 July 2026
- 14% from 1 July 2027
- Medicare levy thresholds to increase from 1 July 2025
These measures aim to provide modest cost-of-living relief and reduce compliance burden.
- Other Measures
- Electric vehicle FBT concessions to be phased down, moving to a 25% concession from 1 April 2029
- PAYG instalments expected to become more dynamic and software-driven from 1 July 2027
- Foreign resident CGT changes expanding the definition of taxable Australian property (including retrospective elements)
- Pillar Two global minimum tax alignment from 1 January 2026
Economic Context and Policy Direction
The Budget reflects a broader policy shift focused on:
- Productivity and investment in innovation
- Housing supply and generational equity
- Energy security and economic resilience
- Fiscal sustainability and revenue integrity
Key structural themes include:
- Reduced reliance on tax concessions for asset-based wealth (property and trusts)
- Increased focus on labour income support and business investment
- Measures aimed at encouraging capital into productive economic activity
DLK Advisory Commentary
The 2026 – 27 Budget represents a material shift in Australia’s tax landscape, particularly in relation to capital taxation and private wealth structures.
While the measures are significant, they are largely targeted rather than forming part of a comprehensive tax reform framework. This raises the potential for increased complexity and unintended interactions between rules.
Importantly:
- Many measures are not yet legislated
- Transitional rules and detailed design will be critical
- A backlog of announced but unenacted measures continues to create uncertainty
What This Means
Clients should consider:
- Reviewing long-held investment positions, particularly in light of CGT reform
- Assessing property investment strategies and gearing approaches
- Re-evaluating trust structures and distribution strategies
- Modelling the cashflow and tax impact of proposed changes ahead of implementation
Next Steps
DLK Advisory recommends:
- Early engagement to model the impact of proposed reforms
- Identifying opportunities for restructuring or repositioning ahead of commencement dates
- Monitoring ongoing consultation and legislative developments closely
DLK Advisory will continue to provide updates as further detail becomes available.
