Federal Budget 2026: the biggest changes to investment taxes in decades

Added: 2026-05-13

[00:00:04]Hi and welcome to tonight's budget coverage. I'm Gemma Dale, NAB Trades Director of SMSF and Investor Behavior.

[00:00:12]We've been covering budgets for a couple of decades now, and every now and then you get some quite extraordinary proposals likely to be legislated that will have a really material impact on how people invest and where they choose to deploy their capital. And tonight looks to be one of those budgets. So, there were a lot of announcements and leaks prior to the budget that gave us quite a good idea of what was going to be proposed tonight, but there are also some surprises, some real changes in there that are different to what we expected. We'll do our best to explain what is proposed at this point in time.

[00:00:45]Please do note though, none of this is legislated yet. And this is really important. It is possible that these things will undergo quite a bit of change before there is legislation that is passed by the parliament. and what affects you is the final legislation.

[00:00:59]So, please get some tax advice prior to taking any kind of action that does affect your situation financially. Let's start with capital gains tax. This was definitely flagged prior to the budget.

[00:01:11]So, from the 1st of July 2027 next year, the current 50% CGT discount will be replaced by costbased indexation for assets that are held more than 12 months. but they'll also be applying a 30% minimum tax on net capital gains.

[00:01:27]The changes will apply to all CGT assets and that includes assets held prior to 1985. And this is going to apply to individuals, to trusts, and to partnerships. So, it's pretty extensive.

[00:01:39]Transitional arrangements are going to limit the impact on existing investments. So, what you hold now, by applying the new rules only to gains arising on or after 1st of July next year, 2027. 50% CGT discount will continue to apply to gains that are acrewed prior to that time. So you do have a little bit of time, but capital gains tax will apply on pre85 assets for the first time. If a pre85 asset is sold prior to 1 July 2027, so in the next 13 months or so, that gain will remain exempt. So to support incentives for new housing supply, investors in new residential properties will be able to choose and you'll be able to choose between the existing 50% CGT discount if it's held for more than 12 months, very important, or costbased indexation and there is that minimum tax threshold though for that one of 30%. Also worth noting income of support recipients. So that includes people who are on the age pension. They will be exempt from the minimum tax, not the changes to how it's applied, but to that minimum of 30%. So we also have negative gearing. And again, this one was flagged, but the real standout is that the negative gearing changes will apply to residential property and will only be applied to new builds. So from the 1st of July 2027, again applying from 1st of July next year, losses from established residential properties will only be deductible against rental income from the residential property or capital gains derived from residential property.

[00:03:16]So it's really important you can no longer deduct that against your wages or other income. any excess losses can be carried forward and they're able to be offset against future residential property income. Changes will apply to established residential properties acquired from budget night. So that's 7:30 p.m. 12th of May 2026. So this one, if it does come into effect, it will be in effect straight away, but it does need to be legislated. For properties that are acquired prior to that time, and that includes contracts that have been entered into but not yet settled, they will be exempt from the changes until they are sold. Eligible new builds will be excluded from these changes, directing negative gearing benefits toward investment that increases housing supply. Widely held trusts and superanuation funds are also going to be excluded and there will be some targeted exemptions as well. So build to rent developments which have been discussed fairly broadly but not a huge number of them out there and private investors supporting government housing programs will also get an exemption. What's really interesting about this one was we thought it would apply to all assets but this one is very clearly targeted just at property and residential property in particular. So very significant implications for some assets and then others excluded entirely. So, one of the really huge announcements for some cohorts. It doesn't apply to everybody is this minimum tax on trust income. It was flagged prior to tonight, but it has very significant implications. And an announcement has been made of a 30% minimum tax on discretionary trust. So, beneficiaries other than corporate beneficiaries will receive non-refundable tax credits for the tax paid by the trustee. So, this is like a franking credit. other types of trusts.

[00:05:07]So that's fixed trusts, widely held trusts, including fixed testimeamentary trusts, blinding superanuation funds, which actually are a form of trust, special disability trusts, deceased estates, and charitable trusts will largely be exempt from this. There's also been an exemption made for farming income on this one. Other exemptions that will play out, we think, apply to certain income relating to vulnerable miners, amounts to which non-resident withholding tax applies and income from assets of discretionary testimeamentary trusts that exist at the time of announcement. So, there's a whole range of different measures that might apply here. We're going to have to see the legislation. Other measures also coming through, we've got the $20,000 instant asset tax write off. That's going to be made permanent for small businesses.

[00:05:57]That one's been fairly broadly flagged.

[00:05:59]The electric vehicle fringe benefits tax exemption will be phased down by limiting the full exemption to vehicles priced at $75,000 or less from April 2027 and transitioning all eligible EVs to a permanent 25% discounted FBT rate from April 2029. But existing leases are grandfathered. So, there's a fair bit of grandfathering going on here. There is an election promise of an instant $1,000 tax deduction without receipts available for the first time that will allow taxpayers to choose to claim an instant tax deduction instead of keeping box of receipts for individual work rellated expenses. There will be two more tax cuts which was promised in the government's first term. Uh and they will be delivered in 2026 and 2027. From 1 July 2026, this 16% tax bracket will be reduced to 15% for income between $18,200 and $45,000.

[00:06:59]And from 1 July 2027, the bracket is reduced further to 14%. There's a new $250 working Australians tax offset which will apply from 1 July 2027, so next year for all eligible Australian workers for their income derived from work, so employees and soul traders and so on.

[00:07:18]And we've got the Medicare levy thresholds which are increased as they are every year. So thank you so much for joining us this evening. We do have papers on this tonight because there's so much detail in this year's budget and it is a little bit different to some of the leaks and flags that we saw prior to the budget. There's a lot to work through. None of this is legislated yet or the vast majority of the major changes are not. Some of them do take effect as of budget night, but that's only if they can get them through the parliament in their current form. So, it's really really important that you stay on top of what the changes do look like before you take any action because they may look a little bit different uh when they come into effect. You can go to nav.com.au/budget U/budget if you'd like to have a look at some of the other work that we've prepared this evening.

[00:08:05]And we'll do our best to keep you up to date.