Federal Budget 2026 FAQs

• What does the 2026 Federal Budget mean for property investors in Australia?

  The Federal Budget 2026-27 proposes major changes to property investment taxation. The key proposals include restricting negative gearing for newly acquired established residential properties from 1 July 2027, replacing the 50% CGT discount with cost base indexation and a 30% minimum tax on real capital gains for individuals, trusts and partnerships from 1 July 2027, and introducing a 30% minimum tax on discretionary trust taxable income from 1 July 2028.

  Existing residential properties acquired before 7:30pm AEST on 12 May 2026 are proposed to be grandfathered until disposal, and eligible new builds retain more favourable treatment.

Negative Gearing

• How will the new negative gearing changes affect Australian property investors?

  Under the proposal, investors who acquire an established residential property from 7:30pm AEST on 12 May 2026 will not be able to offset rental losses against salary, business income or other non-property income from 1 July 2027.

  Instead, those losses will generally be quarantined and can only be used against rental income from residential properties or capital gains arising from residential properties. Any excess losses may be carried forward for future years. The proposal applies to individuals, partnerships, companies and most trusts, while widely held trusts and superannuation funds, including SMSFs, are excluded.

• Is negative gearing being removed in Australia from 2027?

  Not entirely. The proposed changes restrict negative gearing on established residential properties bought after Budget night, but negative gearing on new builds remains fully intact, and all existing properties held before 12 May 2026 are grandfathered under current rules. 

• Will I still be able to negatively gear an existing investment property?

  Yes, if you already owned the property or had a contract in place before 7:30 pm AEST on 12 May 2026, the current negative gearing rules are proposed to apply indefinitely until you sell. You are fully grandfathered, which means nothing changes for you unless you sell and buy again.

• Are new builds still eligible for negative gearing after the 2026 Federal Budget?

  Yes. New builds are explicitly exempt from the proposed negative gearing restrictions. If you purchase a qualifying new build, you can still offset rental losses against your salary and wages, and you also retain access to the 50% CGT discount (or can choose the new indexation method). 

  The definition of a new build matters, so check with your adviser whether a specific property qualifies.

• What happens to properties bought before 12 May 2026 under the new negative gearing rules?

  Properties owned (or under a signed contract) before 7:30 pm AEST on 12 May 2026 are fully grandfathered under the current rules and can continue to be negatively geared against all income until the property is sold. 

Capital Gains Tax Changes

• What are the new capital gains tax changes announced in the 2026 Federal Budget?

  The 2026-27 Federal Budget proposes replacing the 50% CGT discount with cost base indexation from 1 July 2027, meaning you’d only be taxed on the real gain above inflation rather than receiving a blanket 50% reduction. 

  On top of that, a minimum 30% tax rate would apply to net capital gains calculated under the new system, regardless of your marginal tax rate.

• Is the 50% CGT discount being removed in Australia?

  Under the proposed capital gains tax changes, the 50% CGT discount would be replaced by inflation-indexed cost base increases from 1 July 2027 for most assets, but it is not being removed for new residential builds, where investors can still choose between the 50% discount or the new indexation method. 

  For all other assets held by individuals, trusts and partnerships, the discount would give way to indexation after 1 July 2027.

• How will CGT indexation work under the new tax rules?

  As per the proposed CGT indexation approach, your original purchase price gets adjusted upward for inflation before the gain is calculated, similar to how the system worked in Australia before 1999. Only the portion of your gain above the inflation-adjusted cost base gets taxed, with a minimum 30% tax floor applying to that real gain.

• How will the new CGT rules affect shares, ETFs, and managed funds?

  The proposed CGT changes are not limited to property; they apply to all CGT assets held by individuals, trusts, and partnerships, including shares, ETFs, and managed funds.

Family Trusts

• What does the 30% minimum tax on discretionary trusts mean?

  From 1 July 2028, under the proposed Budget measures, trustees of discretionary (family) trusts would pay a minimum 30% tax on the trust’s taxable income before it is distributed.

• Are family trusts still worth setting up after the 2026 Federal Budget?

  They still offer asset protection and estate planning benefits that go beyond tax, so they’re not worthless, but the proposed 30% minimum tax would significantly reduce the income-splitting advantage that made them so popular for property and investment. 

  Whether a new trust still makes sense depends on your income levels, structure goals, and whether the legislation actually passes in its current form. Reach out to us to get advice before committing.

• Will family trusts pay more tax from 2028?

  In many cases, yes. If you currently distribute trust income to family members on low marginal tax rates (such as adult children studying, or a non-working spouse), those distributions would be subject to a 30% minimum tax at the trustee level from 1 July 2028 under the proposals

• Can I still distribute income to family members through a trust?

  You can still distribute, but the benefit of doing so to low-income beneficiaries would largely disappear under the proposed 30% minimum tax, since the trust would pay 30% upfront, and the credit available to individual beneficiaries is non-refundable.

Structure

• What is the best structure to buy an investment property in Australia after 2026?

  There’s no single best answer that fits everyone. The right structure depends on your income, asset protection needs, estate plan, and how many properties you own. To know the right structure for your investment property, book a meeting with our accountant today!

Small Business

• How will the Federal Budget affect small business owners?

  Small business owners get some genuine good news from the 2026-27 Federal Budget: the $20,000 instant asset write-off is proposed to be made permanent from 1 July 2026, and a loss carry-back measure would allow companies to get refunds on tax paid in the prior two years.

• Is the $20,000 instant asset write-off continuing for small businesses?

  Yes. The Budget proposes to make the $20,000 instant asset write-off permanent from 1 July 2026 for small businesses with a turnover of up to $10 million. This is a clear positive for small business owners who can now plan capital purchases with confidence rather than waiting for year-to-year extensions.

• How do the Federal Budget changes affect high-income earners?

  Many high-income professionals have used property investing and family trusts as a way to build wealth and manage tax, both tools are being significantly restrained by the proposed Federal Budget 2026 changes. 

  The loss of negative gearing against salary income, combined with the trust minimum tax, means the tax efficiency of common wealth-building strategies for this group is materially reduced if the proposals become law.

Advice

• What should Australians ask their accountant after the 2026 Federal Budget?

  Ask specifically: Does my current property structure still make sense? Should I sell anything before 1 July 2027 to lock in the 50% CGT discount? Does the trust I hold investments in need to be reviewed? Will my borrowing capacity change under the new rules? And (importantly) should I be targeting new builds instead of established properties going forward?

• Do I need tax advice before buying an investment property after the Budget?

  Yes. Taking advice before buying an investment property after the budget is highly recommended. The distinction between a new build and an established property now has very real tax consequences under the proposals, and the structure you buy in (individual, trust, company) matters more than it did before Budget night.