As was widely leaked, last night’s Federal Budget is set to make significant changes to how investors are taxed. The government has taken aim at investors by taking away the tax benefits of both negative gearing and capital gains tax, both of which have traditionally played a big role in how Australians build wealth.
From mid‑2027, income losses from established residential investment properties bought after 12 May 2026 can no longer be used to reduce other sources of income. Instead, those losses can only be used against residential property rent or residential property capital gains, with any unused amount carried forward for later years. Properties already held before that time, as well as certain newly constructed residential properties are exempt. These changes apply to properties owned individually, or through partnerships, companies and most trusts, but excludes super funds.
The government is also planning to get rid of the 50% CGT discount. This will apply to all assets, not just property. Taxable gains related to the period that the asset is owned from 1 July 2027 will be worked out using the indexation approach. Under the indexation approach, the original purchase price is adjusted for inflation before tax is calculated. This means tax generally applies to the gain above inflation, rather than simply applying a flat 50% discount to the whole gain. These rules apply to investments held by individuals, trusts and partnerships.
From 1 July 2027, a 30% minimum tax rate will apply to capital gains. Interestingly, people receiving income support payments, including the Age Pension, will not be subject to that minimum tax.
For retirees, much stays the same, which will come as a relief to many. The Age Pension age remains at 67, superannuation is largely unchanged for most people, and there’s additional government investment in aged care that may influence longer‑term retirement choices. The main adjustments affect higher‑balance super accounts (over $3 million) and people receiving pension supplements while living or spending extended periods overseas – groups where careful planning will matter more than ever.
On the everyday tax front, the Budget offers modest cost‑of‑living relief through lower income tax rates over time and simpler deductions for work‑related expenses. Taken together, the clear message is that the system is moving away from generous tax concessions and towards a more level playing field. This reinforces the importance of having a clear strategy – focusing less on tax outcomes alone, and more on owning the right assets, in the right structures, aligned with long‑term goals.
Note that most of these measures are proposals only and may change before becoming law. It remains to be seen if the current government can get the changes through both houses of parliament without making concessions.
To help you navigate changes from this year’s Budget and understand if or how they affect you, speak to your tax professional or make an appointment for to see a professional financial adviser at Align Financial. Call (02) 9913 9995.
