My Federal Budget Reply
On 12 May the Treasurer, Jim Chalmers, handed down the 2026 Federal Budget. Everyone’s talking about the proposed changes to Capital Gains Tax, or CGT. But there’s a lot of misinformation circulating online. Let’s sort the facts from the fiction.
First, does this budget break an election commitment? Absolutely. Labor promised no changes to CGT during last year’s election campaign. So it’s a broken promise.
Second, are the changes unfair? It depends on your perspective, but many of my clients are feeling aggrieved right now.
Third, should you be angry? Up to you, but I can’t see the point of railing against something I can’t change. I’d rather mitigate any damage these changes might do to my clients’ financial wellbeing.
Anger is emotionally draining. Far better to focus on the opportunities this budget presents, rather than the injustice of it all.
So here are my hot takes on the 2026 Federal Budget.
- Right now, the budget hasn’t even passed the House of Representatives. After it’s debated in the lower house, it goes to the Senate. The opposition will oppose it, while the Greens will seek trade-offs in exchange for their support. So the budget which finally passes may vary from the announcements made on 12 May.
- With so much focus on CGT, you may have overlooked the increased taxation on discretionary trusts. From 1 July 2028, they’ll be taxed at 30%. If you’re growing your business (and your wealth), this increase may crimp your style. However, there are other structures you can use for tax and estate planning. You have two years to sort things out, so get in touch with me if you want to know more.
- From 1 April 2027, private health insurance rebates for seniors will be wound back. For a couple in their 70s, the increase on top-flight cover could exceed $800. That’s why I help my retired clients maximise their income streams, so they can ride out such increases with little impact on their lifestyles.
- Because housing has been the key issue behind the CGT changes, it’s easy to forget that all other investment classes are captured by these changes as well. Stocks, commercial property, precious metals, collectables. If you make a profit on your investments, you need to know how these changes will affect you.
- Up until now, pre-1985 investments have been exempt from CGT. That changes on 1 July 2027. Any gains you realise after that date will be subject to indexation, then taxed at a minimum rate of 30%. If you’re caught by these changes, talk to me. You may wish to adjust your investment strategy.
- Speaking of 30%, that becomes the minimum Capital Gains Tax rate after 1 July 2027. You may decide to sell some investments before that date, so you can still enjoy the current 50% CGT discount. But before you make a hasty decision, talk it through with your Financial Concierge. Everyone’s different. What works for your mate Johnno at the club may not work for you.
- If you’re holding an investment on 1 July 2027, you have two options: obtain a formal valuation, or let the ATO calculate its value. I know which of those two options I’d be choosing. Can you guess which one it is?
- Current negative gearing arrangements will be grandfathered. So if you held negatively geared residential properties before 7.30 PM on 12 May 2026, you’re in the clear. If you had made an offer but hadn’t finalised a contract, seek legal advice. You don’t want to be caught with a mortgage you can no longer afford to service.
- You can still negatively gear new residential builds. Naturally, there will be rules defining what qualifies as a new build. So make sure you know exactly what you’re doing before you sign on the dotted line.
- You can still negatively gear commercial property, good news if you’re planning to expand your portfolio. And business debt, of course, remains deductible.
- If you sell an existing investment after 1 July 2027, your tax will be calculated using two different formulas. Any gains realised before 1 July 2027 will enjoy a 50% CGT discount (this is why you need a formal valuation). Any gains realised after 1 July 2027 will be taxed at a minimum of 30%, after indexation has been applied.
This means accurate record keeping is a must. As a Financial Concierge, this is my bread and butter. Maintaining accurate accounts allows me to maximise your tax advantages, even under the new proposed regime.
Remember: none of this is yet law – but we can see which way we’re headed. There’s plenty of politicking to play out, but I’ll leave others to conduct the running commentary. As your Financial Concierge, I’m here to help you navigate these changes, and seize the opportunities as they emerge. So please, contact me if you have any questions!