Budget: Big headlines but not law yet

Budget Shifts: A Turning Point for Property, Tax and Family Wealth

Every so often, a Federal Budget signals more than minor adjustments. The 2026 Budget is one of those.

With proposed changes to negative gearing, capital gains tax (CGT), and discretionary family trusts, the Government has targeted three of the most common strategies Australians use to build wealth.

For many locals this is not just a policy update. It’s a shift that could influence decisions for years to come.

Negative Gearing – A Narrower Approach

Negative gearing has long supported property investors by allowing rental losses to reduce taxable income from other sources. That is now being scaled back.

From 1st July 2027, negative gearing will largely be limited to newly built properties, with existing investments continuing under current rules. New purchases of established properties will still allow deductions, but those losses can no longer offset salary income and instead must be carried forward to offset future property income or gains.

The intention is to direct investment toward new housing supply and improve opportunities for first-home buyers.  

However, investors may become more selective, development demand could increase, and the property market may begin to split between those operating under old and new rules.

Capital Gains Tax – A Structural Shift

Alongside this sits a significant change to capital gains tax.

The long-standing 50% CGT discount is proposed to be replaced with inflation indexation, along with a minimum 30% tax rate on gains from 1st July 2027. Rather than applying a blanket discount, the system will focus on taxing gains above inflation, while ensuring a base level of tax is still paid.

While the concept sounds straightforward, the implications are broader. Investment strategies may need to be reassessed. Importantly, gains accumulated before the change are expected to be protected, which may lead to increased planning and restructuring ahead of implementation.

Family Trusts – Reduced Flexibility

The third key change involves discretionary (family) trusts.

From 1st July 2028, a minimum 30% tax rate is proposed on trust income, regardless of how it is distributed. Historically, trusts have allowed income to be distributed across different tax brackets. Under the new rules, that benefit is significantly reduced.

A Shift in Direction

Taken together, these measures reflect a broader shift.

The system is moving towards more consistent taxation of capital, while easing reliance on concessions that have historically favoured investors. The goals—improving housing affordability and fairness—are clear. However, the outcome will ultimately depend on how markets and individuals respond.

What Should You Do?

At this stage, remember these proposals are not yet law.

For now, the focus should be on awareness, not reaction:

• Understand your current structures

• Be mindful of how future investments may be treated

• Review whether your strategy remains appropriate & seek advice before making major decisions

Final Thoughts

Tax rules evolve, and this Budget marks a clear pivot. For some, that will create opportunity. For others, it may require adjustment.

Either way, those who understand the changes early are best placed to respond.

If you’d like an obligation free review of your financial situation, call us for an appointment today.

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