The 2026 Federal Budget at a glance

This year’s Federal Budget marks the most significant personal tax changes in decades, and has meaningful implications for investors. There are also marked differences to some of the pre Budget suggestions that were discussed in the media, and further changes may occur through consultation and negotiation with the cross bench and Opposition required to secure passage of the legislation through Parliament. 

As these changes have not yet been legislated, please ensure you seek tax advice before making any changes to your personal situation. 

Changes to capital gains tax

From 1 July 2027, the 50 per cent CGT discount will be replaced by cost base indexation* for assets held for more than 12 months, with a 30 per cent minimum tax on net capital gains. 

This is largely a return to the regime that applied prior to 1999, when the 50% discount was introduced. 

These changes will apply to all CGT assets, including pre-1985 CGT assets, held by individuals, trusts and partnerships. 

Transitional arrangements will limit the impact on existing investments by ensuring the changes only apply to gains arising on or after 1 July 2027. The 50 per cent CGT discount will continue to apply to gains arising before 1 July 2027, giving investors an opportunity to realise capital gains and be taxed at current rates prior to this date. 

Capital gains on pre-1985 assets arising before 1 July 2027 will remain exempt from CGT. 

New residential properties will be exempt from the blanket application of indexation, investors in new residential properties will be able to choose either the 50 per cent CGT discount, or cost base indexation and the minimum tax. 

Those receiving income support, including the Age Pension, will be exempt from the minimum tax.

The application of a 30% minimum capital gains tax rate is designed to prevent individuals from selling assets in years when their taxable income is reduced, such as after retirement. 

Transitional arrangements 

For eligible CGT assets (other than new residential properties): 

• There will be no changes in arrangements for assets purchased and sold prior to 1 July 2027. 
• Assets purchased after 1 July 2027 will be treated wholly under the new arrangements. 
• Assets owned prior to 1 July 2027 and sold after 1 July 2027 will be treated under current arrangements on gains made prior to this date, and under the new arrangements for gains made after this date (with no impact until gains are realised). 

The 50 per cent CGT discount will apply to the difference between the asset’s cost base and its value at 1 July 2027. Indexation and the minimum tax will be used to calculate the CGT on gains accruing from 1 July 2027 (using the asset’s value at 1 July 2027 as the asset’s cost base).

* Indexation refers to increasing the cost base in line with inflation, specifically the Consumer Price Index (CPI). This ensures that capital gains are taxed on the ‘real’ increase in the value of the asset, adjusted for inflation. The ATO will provide guidance as to how indexation will apply – between 1985 and 1999, indexation occurred quarterly.

Reforming Negative Gearing 

Negative gearing will no longer be available for existing residential properties purchased after Budget night. Positive gearing and neutral gearing (where borrowing costs are lower than rental income, for example) are not affected by this change.

From 1 July 2027, losses from established residential properties will only be deductible against rental income or the capital gains from residential properties. Excess losses will be carried forward and able to be offset against residential property income in future years. 

These changes will apply to established residential properties acquired from 7:30PM (AEST) on 12 May 2026. 

Properties acquired prior to this time (including contracts entered into but not yet settled) will be exempt from the changes until they are sold. Eligible new builds will be exempt from the changes. 

Properties in widely held trusts and superannuation funds will be excluded, alongside targeted exemptions for build-to-rent developments and private investors supporting government housing programs.

Despite conjecture, negative gearing appears to remain viable for non-residential property assets, such as shares and commercial property.

Minimum tax on trust distributions

The Government will introduce a 30 per cent minimum tax on discretionary trusts. There are currently over 900,000 family trusts in Australia, many of which may be affected. 

From 1 July 2028, trustees will pay a minimum tax of 30 per cent on the taxable income of discretionary trusts. 

Beneficiaries, other than corporate beneficiaries, will receive non-refundable credits for the tax payable by the trustee. 

The minimum tax will not apply to other types of trusts such as fixed and widely held trusts (including fixed testamentary trusts), complying superannuation funds, special disability trusts, deceased estates and charitable trusts. 

Some types of income such as primary production (farming) income, certain income relating to vulnerable minors, amounts to which non-resident withholding tax applies, and income from assets of discretionary testamentary trusts existing at announcement will also be excluded. 

Expanded rollover relief will be available for three years from 1 July 2027 to support small businesses and others that wish to restructure out of discretionary trusts into another entity type, such as a company or a fixed trust.

In addition to a review of many existing trusts, individuals may wish to revisit their Wills and estate plans to review the desirability of including a testamentary trust. 

Working Australians tax offset

A new $250 Working Australians Tax Offset will be introduced from the 2027–28 income tax year. This will be a permanent annual tax offset for income derived from work, such as wages and salaries and the business income of sole traders, from 1 July 2027. 

Instant tax deduction $1000

As promised, an instant tax deduction of up to $1,000 will be introduced from the 2026–27 income tax year. Australian tax residents who earn income from work will be eligible for the instant tax deduction and will not need to itemise and claim work‑related expenses if claiming less than $1,000. 

Individuals who incur work‑related expenses greater than the instant tax deduction can continue to claim their deductions in the usual way. 

Charitable donations, union and professional association membership fees and other non‑work‑related deductions can still be itemised separately and claimed on top of the instant tax deduction.

Instant asset write off

The $20,000 instant asset write‑off for small businesses with turnover up to $10 million will be permanently extended from 1 July 2026. 

Assets valued at $20,000 or more can continue to be placed into the small business simplified depreciation pool. 

The provisions that prevent small businesses from re-entering the simplified depreciation regime for 5 years after opting out will continue to be suspended until 30 June 2027.

Medicare levy threshold

The Medicare levy low‑income thresholds for singles, families, and seniors and pensioners will be increased by 2.9 per cent from 1 July 2025. The thresholds exempt low-income individuals and families from paying the Medicare levy. 

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.

Electric vehicle FBT

From 1 April 2029, a permanent 25 per cent discount on fringe benefits tax (FBT) will be available for all electric cars valued up to and including the fuel-efficient luxury car tax threshold, implemented through a 15 per cent rate in the FBT statutory formula. The following transitional arrangements will be put in place: 

• All eligible electric cars will retain the FBT discount rate that was in place when the arrangement commenced; 
• All electric cars valued up to and including $75,000 that are provided before 1 April 2029 will continue to be eligible for a 100 per cent discount on FBT, implemented through a 0 per cent rate in the FBT statutory formula; and 
• Electric cars valued above $75,000 and up to and including the fuel-efficient luxury car tax threshold that are provided between 1 April 2027 and 1 April 2029 will be eligible for a 25 per cent discount on FBT, implemented through a 15 per cent rate in the FBT statutory formula. 

The existing 20 per cent statutory rate will continue to apply for all other cars, including electric cars costing more than the fuel-efficient luxury car tax threshold. Reportable fringe benefits will continue to be determined for eligible electric cars as if a 20 per cent FBT statutory formula rate or cost basis method applied.

All prices and analysis at 12^th May 2026.  This information has been prepared by National Australia Bank Limited ABN 12 004 044 937 AFSL 230686 ("NAB"). Any advice and information in this publication is of a general nature only. Any general tax information provided in this publication is intended as a guide only and is based on our general understanding of taxation laws. It is not intended to be a substitute for specialised taxation advice or an assessment of an individual’s liabilities, obligations or claim entitlements that arises, or could arise, under taxation law, and we recommend that you consult a registered tax agent. WealthHub Securities Ltd is not a registered tax agent.  The content is distributed by WealthHub Securities Limited (WSL) (ABN 83 089 718 249)(AFSL No. 230704). WSL is a Market Participant under the ASIC Market Integrity Rules and a wholly owned subsidiary of National Australia Bank Limited (ABN 12 004 044 937)(AFSL No. 230686) (NAB). NAB doesn’t guarantee its subsidiaries’ obligations or performance, or the products or services its subsidiaries offer.  This material is intended to provide general advice only. It has been prepared without having regard to or taking into account any particular investor’s objectives, financial situation and/or needs. All investors should therefore consider the appropriateness of the advice, in light of their own objectives, financial situation and/or needs, before acting on the advice.  Past performance is not a reliable indicator of future performance.  Any comments, suggestions or views presented do not reflect the views of WSL and/or NAB.  Subject to any terms implied by law and which cannot be excluded, neither WSL nor NAB shall be liable for any errors, omissions, defects or misrepresentations in the information or general advice including any third party sourced data (including by reasons of negligence, negligent misstatement or otherwise) or for any loss or damage (whether direct or indirect) suffered by persons who use or rely on the general advice or information. If any law prohibits the exclusion of such liability, WSL and NAB limit its liability to the re-supply of the information, provided that such limitation is permitted by law and is fair and reasonable. For more information, please click here.