2026 Federal Budget: What it means for you
The 2026-27 federal budget announced significant tax changes affecting individuals and business owners at every career stage. Some changes are already law and take effect from 1 July 2026. Others are proposed and still subject to legislation passing parliament. Here’s what you need to know.
Proposed changes
Proposed change
Negative gearing
1 Jul 2027From 7:30pm AEST on 12 May 2026, negative gearing on established residential properties is restricted for new purchasers. From 1 July 2027, losses can only be offset against rental income or capital gains from residential properties, not against salary or other income.
Properties purchased before 7:30pm AEST on 12 May 2026 (including contracts not yet settled) are fully grandfathered and unaffected. New builds remain exempt.
Proposed change
Capital gains tax
1 Jul 2027The 50% CGT discount will be replaced by cost base indexation for assets held more than 12 months, with a minimum 30% tax applying to net capital gains.
Gains accrued before 1 July 2027 are not affected. Superannuation funds are not impacted by these changes.
Proposed change
Discretionary trusts
1 Jul 2028A minimum 30% tax rate will apply to income distributed through discretionary trusts, paid by the trustee. Non-corporate beneficiaries receive a non-refundable tax credit.
Exempt trusts include fixed and widely held trusts, complying super funds, special disability trusts, deceased estates, charitable trusts, and existing discretionary testamentary trusts.
Negative gearing
From 7:30pm AEST on 12 May 2026, negative gearing on established residential properties is restricted for new purchasers. From 1 July 2027, losses on those properties can only be offset against rental income or capital gains from residential properties, not against salary or other income. Any excess losses can be carried forward and applied against residential property income in future years.
Properties purchased before 7:30pm AEST on 12 May 2026 (including contracts exchanged but not yet settled) are fully grandfathered and unaffected. Properties purchased between 7:30pm AEST on 12 May 2026 and 30 June 2027 can still be negatively geared during that period, but the restriction applies from 1 July 2027.
The restriction applies only to net rental losses from established residential properties. Shares, commercial property, SMSFs and widely held trusts are not affected. Exempt from the changes are eligible new builds, build-to-rent developments, and private investors supporting government housing programs.
Before 7:30pm AEST 12 May 2026
Fully grandfathered
Negative gearing continues as normal for properties purchased before the budget announcement, including contracts not yet settled.
No action required.
12 May 2026 to 30 June 2027
Transition period
Properties purchased in this window can still be negatively geared until 30 June 2027. From 1 July 2027, losses can only offset rental income or residential property gains.
Consider reviewing your position before 1 July 2027.
From 1 July 2027
New rules apply
No negative gearing on established residential properties. Losses offset against residential rental income or capital gains only. Excess losses carry forward.
New builds remain fully exempt.
Capital gains tax
From 1 July 2027, the way capital gains are taxed is changing. The 50% discount you currently get for holding an asset more than 12 months will be replaced by inflation-adjusted indexation, and a minimum 30% tax will apply to net capital gains. These changes apply to individuals, trusts and partnerships. Companies are not affected.
If you already own assets, the good news is that any gain built up before 1 July 2027 is protected under the current rules. You will need to work out what your asset was worth at that date though, and there are two ways to do that.
To establish what your asset was worth at 30 June 2027, you have two options:
Option A
Get a valuation
Have the asset professionally valued as at 30 June 2027. That figure becomes the baseline for working out how much of your gain falls under the old rules and how much falls under the new ones.
More precise, but there is a cost involved.
Option B
Use the ATO formula
The ATO will provide a formula that estimates the value based on how the asset performed over the time you held it. No valuation needed — the ATO will provide tools to help with the calculation.
Simpler, and no upfront cost.
Superannuation funds are not affected by these changes and keep their existing one-third CGT discount. Small business CGT concessions also continue unchanged.
If you buy a new residential property, you will have a choice when you eventually sell: use the current 50% discount, or use the new indexation method. You can pick whichever works out better for you at the time.
Discretionary trusts
From 1 July 2028, a minimum 30% tax rate will apply to income distributed through discretionary trusts. The tax is paid by the trustee, not the beneficiaries. Beneficiaries still need to declare the trust income in their own tax returns, but they receive a non-refundable credit for the tax the trustee has already paid, which can be used to offset their own tax bill for that year.
If you have a discretionary trust and use a company as a beneficiary, it is worth talking to your adviser soon. Based on the proposed changes, the use of corporate beneficiaries will effectively no longer be tax effective once these rules come into force.
The good news is there is time to restructure. The government is providing three years of rollover relief from 1 July 2027 for anyone who wants to move out of a discretionary trust into another structure, such as a company or fixed trust. This relief covers income tax and CGT consequences of the restructure, so the process of moving is not itself a taxable event.
The minimum tax does not apply to every trust. The following are exempt:
- Fixed and widely held trusts (including fixed testamentary trusts)
- Complying superannuation funds
- Special disability trusts
- Deceased estates
- Charitable trusts
- Existing discretionary testamentary trusts
Some types of income are also excluded, including primary production income, certain income relating to vulnerable minors, amounts subject to non-resident withholding tax, and income from assets of discretionary testamentary trusts that existed at the time of the budget announcement.
Step 1
The trust earns income
The discretionary trust receives income during the year in the usual way.
Step 2
Trustee pays 30% minimum tax
The trustee pays a minimum 30% tax on the trust's taxable income before any distributions are made.
Corporate beneficiaries do not receive a credit.
Step 3
Beneficiaries declare and claim credit
Beneficiaries declare the income in their own tax returns and receive a non-refundable credit for the tax already paid by the trustee.
The credit offsets their own tax bill for that year.
If you run a practice or small business
The following changes are already legislated and relevant to anyone running a medical practice or small business.
$20,000 instant asset write-off
From 1 July 2026, the $20,000 instant asset write-off is a permanent feature of the tax system. If your practice or business has an annual turnover under $10 million, you can immediately deduct the full cost of any eligible asset that costs less than $20,000. The threshold applies per asset, so you can write off multiple purchases in the same year with no overall cap.
Asset costs less than $20,000
Instant full deduction
You can deduct the full cost of the asset in the same year you buy it. There is no cap on how many assets you can write off this way in a single year.
No limit on the number of assets.
Asset costs $20,000 or more
Depreciation pool
The asset goes into the simplified depreciation pool and is deducted over time — 15% in the first year and 30% each year after that.
Still a good outcome, just spread over time.
$1,000 standard work-related deduction
From the 2026-27 income year, you no longer need to itemise or keep receipts for work-related expenses if your total claim is under $1,000. The deduction is automatic for Australian residents who earn income from work.
If your work-related expenses are higher than $1,000, you can claim the normal way instead. You pick whichever works better for you.
You can also claim the following on top of the $1,000 deduction regardless of which option you choose: charitable donations, union fees, professional association membership fees, and income protection insurance premiums.
Expenses under $1,000
Use the standard deduction
No need to itemise or keep receipts. The $1,000 deduction is applied automatically when you lodge your tax return.
Simpler and no record keeping required.
Expenses over $1,000
Claim the normal way
If your actual work-related expenses are higher, skip the standard deduction and claim everything individually instead. You will need to keep records and receipts.
Pick whichever gives you the better outcome.
Electric vehicle FBT
If you have a novated lease or provide a vehicle through your practice, the FBT treatment of electric vehicles is changing. Right now, eligible electric cars can be fully exempt from FBT. From 1 April 2029, that full exemption is replaced by a permanent 25% FBT discount for electric cars valued up to the fuel-efficient luxury car tax threshold, currently $91,387.
If you are thinking about a novated lease for an electric vehicle, the timing matters.
Before 1 April 2029 — EVs up to $75,000
Full FBT exemption
Electric cars provided before 1 April 2029 and valued up to $75,000 keep the full 100% FBT exemption. Any arrangement already in place retains the rate that applied when it started.
Act before 1 April 2029 to lock in the full exemption.
1 April 2027 to 1 April 2029 — EVs $75,000 to luxury threshold
25% FBT discount
Electric cars valued between $75,000 and the fuel-efficient luxury car tax threshold (currently $91,387) provided in this window are eligible for a 25% FBT discount.
Worth considering if you are looking at a higher value EV.
From 1 April 2029
Permanent 25% FBT discount
From 1 April 2029, all electric cars valued up to the fuel-efficient luxury car tax threshold receive a permanent 25% FBT discount. The full exemption is no longer available for new arrangements.
EVs above the luxury car threshold get no FBT discount.
Changes already in place from 1 July 2026
Unlike the three measures above, the following changes are already legislated and take effect from 1 July 2026.
Division 296
If your total superannuation balance is above $3 million, a new tax applies to the earnings on the portion above that threshold. The tax is assessed to you personally, not to your super fund, and you can either pay it yourself or elect to have it released from your super.
The rates are: an additional 15% tax on earnings attributable to balances above $3 million (bringing the effective rate on that portion to 30% in total), and a further 10% on earnings attributable to balances above $10 million (40% in total). Only realised capital gains accruing from 1 July 2026 onward are taxed under these rules.
For more detail on how Division 296 works and what it means for doctors, read our full article: What the changes to Division 296 tax mean for you
Payday Super
From 1 July 2026, employers must pay super contributions with each pay run rather than quarterly. Whether you employ staff, you’re employed, or both, this change affects you. For a full breakdown of what to do before 1 July, read our guide: Payday Super from 1 July 2026: What you need to know
Personal income tax cuts
These cuts are already legislated and apply to all individual taxpayers. The lowest marginal tax rate, which applies to income between $18,201 and $45,000, is being reduced in two stages: from 16% to 15% on 1 July 2026, and then to 14% on 1 July 2027. In practice, that means a saving of up to $268 in 2026-27 and up to $536 in 2027-28.
The full rate table is below.
| Taxable income | 2024–25 and 2025–26 | 2026–27 | 2027–28 |
|---|---|---|---|
| $0 – $18,200 | Tax free | Tax free | Tax free |
| $18,201 – $45,000 | 16% | 15% | 14% |
| $45,001 – $135,000 | 30% | 30% | 30% |
| $135,001 – $190,000 | 37% | 37% | 37% |
| Over $190,000 | 45% | 45% | 45% |
These rates do not include the Medicare levy. All figures are based on legislated settings.
Not sure how this affects you?
Every client’s situation is different. Book an appointment with your DPM consultant to understand exactly how these changes affect you and what steps, if any, you may need to take.