Money
Federal Budget: The key takeaways for your money
The 2026 Federal Budget is here with a mix of tax perks and property clawbacks. Discover the real winners and how the new rules impact your wealth.
By Nicole Pedersen-McKinnon
The Federal Treasurer has delivered the biggest “Ta-Da” budget in many years in what will change the financial game for many.
Working Aussies, first homebuyers and small businesses are the big winners while property investors, renters and the top 10 percent of wealthy Australians are fairly massive losers.
Then there are those broken promises on capital gains tax and negative gearing. Let’s unpack the changes and whether they are as bad as they have been made to sound… starting with the main giveaway.
New $250 tax offset
This is less than leaks suggested. What’s more, it’s not delivered until the end of the 2027-28 financial year… more than two years away. However, this a straight-up discount on the tax you pay rather than a deduction on the amount on which you pay tax. So it’s more generous.
It’s also not a one-off but annual.
And this is one for the workers – indeed it’s called the "Working Australians Tax Offset"… and you have to be earning employment income or a sole trader.
Note that this is separate from the $1000 automatic deduction – that other type of tax perk – that comes in from the end of next tax year (2026-2027). That one is not all it’s cracked up to be, in fact, as it may well be more lucrative for people to collect and claim receipts for their expenses.
It’s one or the other and the game will become which works out better.
Then we get to where the government has raised revenue by pulling tax levers…
EV fringe benefits changes
The budget confirmed the details of the phased wind back of the electric vehicle incentives.
The full fringe benefits (FBT) tax exemption will remain for eligible EVs below the luxury car tax (LCT) threshold of $91,387 in 2026–27.
But then it will be replaced with a 25 percent FBT discount for vehicles between $75,000 and that LCT threshold, from April 1, 2027. The exemption will stay for those below that threshold.
And, from April 1, 2029, the full exemption will be removed for all cars and there will instead be a 25 percent discount.
There is no change to existing leases or arrangements, which will retain their tax treatment.
Which this brings us – controversially – to the tax measures for property…
Capital gains tax discount cut
Much-previewed, we now know the detail of the capital gains tax changes.
As expected, the 50 percent discount on the tax on assets you have held for a year or more is to be replaced with a discount only equal to the inflation rate in each year you’ve held it.
So, the flat discount will become an inflation-adjusted indexation model and a 30 percent minimum tax rate on the net gains.
But here’s the thing: it will only kick in for gains made from July 2027.
That’s an interesting line in the sand and by no means the full so-called grandfathering the government could have delivered, which would have been to allow people who already owned to keep the tax treatment for which they signed up, forever.
It’s going to create a conundrum for existing property owners: do they sell before the 2027 implementation date?
In any case, the rush will be on to value properties at July 1, 2027, to bake in the the larger discount for all gains to that date.
The other perhaps unexpected part of the policy is it applies to all assets: shares too. That’s interesting because the move is supposed to be a bid to help young people into the housing market but, because so many have been locked out, they have been increasingly turning to equity investing.
What is a targeted housing measure is a carve out for investors who purchase new homes – they will receive the old, favourable 50 percent discount
The idea is to increase housing supply and keep the rentals coming.
And an exemption for new homes applies to negative gearing changes, too…
Negative gearing clawback
Negative gearing is being touted as the other big, biasing policy that has contributed to a 400 percent rise in property prices since 1990.
From July 2027, new investors will be unable to offset investment property losses against other income (unless that property is a new build).
But there is an interim provision for properties bought between 7:30pm on Budget night on May 12 and July 1, 2027: losses will be quarantined and carried forward rather than being available to reduce other taxable income.
In other words, negative gearing – should the changes pass parliament – is gone for all new investors in existing homes... investors who already own property will be able to negatively gear it until they sell.
Again, it’s hoped the continued ability to claim losses against assessable income on purchases of new homes will keep a flow of new rental properties.
The next measure is squarely aimed at curbing financially engineered tax breaks by wealthier Aussies…
Trust distribution crackdown
Like on capital gains tax, there is to be a minimum 30 percent tax on all distributions paid from family trusts.
This is to stop families minimising tax by ‘income splitting’ and paying money to members who are on tax rates lower than 30 percent.
But it’s a controversial move – these structures are highly favoured and many distribution recipients are adult children, perhaps at university.
The model will shift to tax at a trustee level and beneficiaries will receive non-refundable credits for the tax paid by that trustee.
There is a raft of exemptions, though, for trusts including fixed trusts, special disability trusts, deceased estates and charitable trusts.
The changes, if passed by parliament, would apply from July 1, 2028… and you can bet the race will be on for accountants to restructure a higher number of families’ financial affairs in that lead up.
Many of the measures announced in the 2026 budget are in the name of restoring ‘intergenerational fairness’… leveling the playing field and opening opportunities for younger people to access housing.
And most are largely at the expense of the older generation.
What happens next will be interesting indeed.
Feature image: iStock/alfexe
This article contains general information only. It is not financial advice and is not intended to influence readers’ decisions about any financial products or investments. Readers’ personal circumstances have not been taken into account and they should always seek their own professional financial and taxation advice that takes into account their financial circumstances, objectives and needs.
You might also like: