On 12 May 2026, the Federal Government delivered the 2026-27 Federal Budget. This year’s Budget contains some of the most significant changes to the taxation system in more than 25 years, particularly in the areas of Capital Gains Tax, negative gearing, and discretionary trusts. The superannuation system itself has not been directly impacted, with existing taxation arrangements remaining in place.
At this stage, most announcements are statements of intended change and are not yet law. Some details may be refined through consultation and legislation. Your Emerald Wealth adviser is already considering what these changes may mean for you, and we will continue to update you as the proposals progress
Below is a summary of the key measures that may affect you.
Capital Gains Tax: A Major Reset
From 1 July 2027, the Government will replace the existing 50% CGT discount (for individuals, trusts and partnerships) with two new rules:
1. Cost base indexation – the purchase price of the asset will be adjusted in line with inflation (CPI) before the gain is calculated. This is similar to the method used before 1999.
2. A 30% minimum tax rate on the resulting net capital gain.
These reforms apply to CGT assets such as shares and property held for at least 12 months.
How the CGT changes apply based on when you bought and sold
This is one of the most important parts of the announcement. The treatment of your gain depends on when you purchased the asset and when you sell it.
Category 1: Assets purchased AND sold before 1 July 2027
- The existing CGT rules continue to apply. No change.
Category 2: Assets purchased BEFORE 1 July 2027 and sold ON OR AFTER 1 July 2027
The treatment depends on the original purchase date:
- Acquired before 20 September 1985 (pre-CGT assets):
– The value of the asset as at 1 July 2027 becomes the new cost base.
– Any gain made from 1 July 2027 onwards is calculated using the indexation method.
– The 30% minimum tax rate applies to that net gain.
– In effect, these previously CGT-exempt assets are brought into the CGT regime from 1 July 2027 (gains prior to that date remain exempt). - Acquired after 20 September 1985:
– The 50% CGT discount still applies to the gain that accrued up to 30 June 2027.
– The indexation method applies to any gain that accrues from 1 July 2027 onwards.
– The 30% minimum tax rate applies to the resulting net capital gain from 1 July 2027 onwards.
Category 3: Assets purchased AND sold on or after 1 July 2027
- The capital gain is calculated using the indexation method only.
- The 30% minimum tax rate applies to the net gain.
A note on new residential property builds
Where the asset is a new residential property build, the taxpayer can choose between:
- Applying the 50% discount to the entire gain, or
- Using the indexation method with the 30% minimum tax.
How will the 1 July 2027 value be determined?
For assets owned across the 1 July 2027 boundary, the value at that date can be established by either:
- Obtaining a valuation (for example, quoted market prices for listed shares), or
- Using a specified apportionment formula based on the asset’s overall growth rate during the holding period. The ATO will provide tools to support this.
Important: What is NOT changing
- Superannuation funds (including SMSFs) continue to receive the existing 1/3 CGT discount.Your principal residence (family home) remains fully CGT exempt.
- Companies are unaffected (they currently do not receive a CGT discount).
- Small business CGT concessions for active business assets are unchanged.
- The 60% CGT discount on qualifying affordable housing is fully retained.
- Pension and JobSeeker recipients are exempt from the new 30% minimum tax on gains realised in a year they receive an income support payment.
Negative Gearing on Residential Investment Property
From 1 July 2027, losses on residential investment properties (where deductible expenses exceed rental income) will no longer be able to offset other income such as salary and wages. Instead, any loss will be quarantined and carried forward, available to offset future positive net income or capital gains from investment properties.
The loss is not lost: only the timing of using it is deferred.
Who is affected, and from when?
This measure applies only to residential investment properties acquired from 7:30pm on 12 May 2026 (Budget night) by individuals, trusts, companies and partnerships.
- Properties held before Budget night: Existing negative gearing rules continue to apply for as long as the property is held.
- Properties purchased between 7:30pm 12 May 2026 and 30 June 2027: Can be negatively geared during this period only. Quarantining begins from 1 July 2027.
- Properties purchased from 1 July 2027: Cannot be negatively geared against other income.
- New builds: Can continue to be negatively geared before and after 1 July 2027.
The change does not apply to commercial property, shares, ETF’s or managed funds.
Discretionary Trust Distributions
From 1 July 2028, the trustee of a discretionary trust (such as a family trust) will be liable to pay tax at a rate of 30% on the trust’s taxable income, unless a higher rate applies.
- Distributions to beneficiaries (other than companies) will carry the value of that 30% tax as a non-refundable tax credit.
- Beneficiaries whose average tax rate is below 30% will not receive a refund of the excess.
- Beneficiaries whose average tax rate is above 30% will pay additional tax to top up to their personal rate.
- Company beneficiaries do not receive the tax credit.
Some trusts and types of income are excluded, including fixed trusts, complying superannuation funds, special disability trusts, deceased estates, and certain primary production income.
Rollover relief will be available for three years from 1 July 2027 for discretionary trusts that want to restructure into another type of entity, such as a company.
Tax Relief Gearing on Residential Investment Property
Personal income tax rate cut (already legislated)
- The 16% rate applying to taxable income between $18,201 and $45,000 will reduce to 15% from 1 July 2026, then to 14% from 1 July 2027.
$1,000 instant tax deduction (from 1 July 2026)
- A new standard deduction of up to $1,000 can be claimed in place of itemising work-related expenses, without the need for receipts.
- Covers items such as working-from-home costs, car expenses and depreciation on work-related items.
- Charitable donations, professional association fees and other non-work deductions can still be claimed on top.
- If actual work-related expenses exceed $1,000, normal substantiation rules apply.
Working Australians Tax Offset (from 1 July 2027)
- A new permanent tax offset of up to $250 per year for those with earned income (wages, salary, or sole trader business income).
- Not available to retirees or those whose only income is from investments.
- Any unused portion of the offset is not refundable.
Effective tax-free thresholds (with LITO and WATO combined)
Financial year Effective tax-free threshold
| Financial year | Effective tax-free threshold |
| 2025-26 | $22,575 |
| 2026-27 | $22,866 |
| 2027-28 | $24,985 |
Superannuation Updates
The Government has not introduced new changes to the superannuation system in this Budget.
However, several measures already legislated will take effect from 1 July 2026 and may create planning opportunities:
Indexation of contribution caps and the Transfer Balance Cap
| Cap | 2025-26 | 2026-27 |
| Concessional contribution cap | $30,000 | $32,500 |
| Non-concessional contribution cap | $120,000 | $130,000 |
| General Transfer Balance Cap | $2.0 million | $2.1 million |
| Total Super Balance threshold | $2.0 million | $2.1 million |
The higher non-concessional cap also flows through to the bring-forward arrangements (up to $390,000 over three years for those with a Total Super Balance below $1.84 million on 30 June 2026).
These increases may open opportunities to revisit salary sacrificing or after-tax contribution strategies.
Pay-day super (from 1 July 2026)
Employers will be required to pay Superannuation Guarantee on the same day they pay wages, with the funds received by the super fund within 7 business days and allocated to the member within 3 days of receipt. This means your super accumulates in the tax-effective environment more quickly.
Division 296 tax on large super balances (from 1 July 2026)
- An additional 15% tax on earnings attributable to the portion of a member’s Total Super Balance above $3 million.
- A further 10% on earnings attributable to the portion above $10 million.
- This was announced in the 2023-24 Budget and is now legislated.
For Small Business Owners
- $20,000 instant asset write-off becomes permanent from 1 July 2026, for small businesses with aggregated turnover under $10 million. Applies on a per-asset basis.
- Two-year loss carry-back available from 1 July 2026 for companies with global turnover under $1 billion.
- Start-up loss refundability (from 1 July 2028) for new companies in their first two years, limited to the value of FBT and PAYG withholding paid on Australian employees.
- Research & Development Tax Incentive reforms from 1 July 2028, with higher offset rates and an expanded turnover threshold.
Electric Vehicles and FBT
For new salary packaging arrangements from 1 April 2027:
- Full FBT exemption only where the taxable value of the electric vehicle is below $75,000 (down from the current $91,387 fuel-efficient luxury car threshold).
- Between $75,000 and the fuel-efficient luxury car threshold: a 25% exemption.
- From 1 April 2029, the exemption reduces to 25% for all electric vehicles below the fuel-efficient luxury car threshold.
Pension Supplement and Overseas Travel
From 20 September 2026, Pension Supplement recipients travelling overseas for longer than 6 weeks but less than 12 weeks will receive the full Pension Supplement rate during that time. For overseas absences beyond 12 weeks, the Pension Supplement will reduce to nil from the 13th week.
What Should You Do Next?
These are significant changes, particularly for investors holding shares or property across the 1 July 2027 boundary, families using discretionary trusts, and anyone considering a new investment property purchase between now and 30 June 2027.
There may be planning opportunities to consider before the new rules commence, as well as opportunities arising from the higher super caps and transfer balance cap from 1 July 2026.
It is also important to remember that most of these measures are not yet law and may be refined as the legislation progresses.
For our client who are part of our ongoing advice program we will be assessing the impact on our original plan and will be in contact where changes are required.
If your not engage in our ongoing advice program and want to discuss what these changes mean for your personal situation to see if updated advice may be required please contact your Emerald Wealth adviser.
This summary has been prepared by Emerald Wealth for the general information of our clients. It is based on the 2026-27 Federal Budget announcements as at 12 May 2026 and the proposals outlined may change before becoming law. The information is general in nature and does not take into account your personal objectives, financial situation or needs. You should consider its appropriateness having regard to these factors, and seek personal advice from your Emerald Wealth adviser before acting on any of the information contained in this summary. Taxation considerations are general statements based on an interpretation of current and proposed tax laws and do not constitute tax advice.