2026 Federal Budget breakdown

There was plenty of discussion leading into Treasurer Jim Chalmers’ 2026 Federal Budget, and as expected, the Government has proposed some of the most substantial tax reforms Australians have seen in decades.

While many of the measures had already been flagged, the scale of the proposed changes sends a clear message about the future direction of wealth creation, property investment and taxation in Australia. It is important to remember that these measures are not yet law and will still need to pass Parliament. However, the proposed reforms are significant enough that individuals, families and business owners should now begin reviewing how they structure and manage their wealth moving forward.

The team at AFPG believes the most important thing Australians can do right now is avoid reacting emotionally and instead focus on understanding how these proposed changes may impact their long-term financial strategy. One of the clearest takeaways from this Budget is not necessarily what is changing, but what is staying the same.

Despite widespread speculation, superannuation remains largely untouched. Against the backdrop of tighter taxation on property investment and discretionary trusts, superannuation may now be one of the most effective long-term wealth-creation vehicles available to Australians.

One of the headline announcements is the proposed overhaul of Capital Gains Tax (CGT).

From 1 July 2027, the Government intends to replace the current 50% CGT discount for assets held longer than 12 months with a cost-based indexation model and a minimum 30% tax on net capital gains.

These proposed changes would apply across a broad range of investments, including:

• Investment properties
• Shares
• Trusts
• Partnerships

Importantly, transitional provisions have been proposed to protect existing investments.

Capital gains accrued before 1 July 2027 are expected to retain access to the current 50% CGT discount, while pre-CGT assets are proposed to remain exempt for gains generated before that date. For many investors, obtaining accurate asset valuations before 1 July 2027 could become extremely important.

The Government has also signalled a desire to encourage housing construction by maintaining existing CGT concessions for eligible new residential properties. This further reinforces the broader policy direction of supporting new housing supply rather than speculative investment in established dwellings.

For investors, these changes could significantly alter after-tax investment returns and may require a review of:

• Investment structures
• Asset ownership strategies
• Long-term wealth planning
• Timing considerations for future asset sales

As anticipated, the Budget also proposes major changes to negative gearing. From 1 July 2027, losses on established residential investment properties purchased after 7:30 pm (AEST) on 12 May 2026 would no longer be deductible against personal income.

Instead, those losses could only be offset against future rental income or future capital gains from residential property investments. Existing property owners are largely protected under grandfathering provisions, which provide certainty for current investors.

However, the Government is clearly redirecting tax incentives towards new housing construction. For future investors, this may substantially change the attractiveness of established residential property as a tax-effective investment strategy, particularly for higher-income earners who have historically benefited from negative gearing.

As a result, we may see increased interest in:

• Newly constructed property
• Infrastructure-related investments
• Concessionally taxed investment environments, such as superannuation

The Budget outlines significant reforms to discretionary trusts. From 1 July 2028, discretionary trusts are proposed to face a minimum 30% tax rate on trust income. Beneficiaries would still declare income personally, and the trustee would pay the tax as a credit. According to the Government, the aim is to reduce income-splitting arrangements and simplify tax integrity rules.

Importantly, several structures are expected to remain exempt from the proposed minimum tax regime, including:

• Fixed trusts
• Widely held trusts
• Charitable trusts
• Complying superannuation funds

For many Australian families and small business owners, discretionary trusts have long been used as flexible wealth management structures. If these changes proceed, some Australians may need to reconsider whether their current structures remain the most effective option moving forward.

Potential alternatives may include:

• Company structures
• Fixed trusts
• Greater use of superannuation strategies

The Government has also proposed expanded rollover relief for those looking to restructure from discretionary trusts into alternative entities.

One of the most notable aspects of this Budget is that superannuation remains relatively stable. There were no major changes announced to:

• Contribution caps
• Preservation rules
• The broader concessional tax framework for most Australians

This matters because, as taxation potentially tightens outside the superannuation system through changes to CGT, negative gearing, and discretionary trusts, the relative value of superannuation becomes increasingly attractive. For many Australians, superannuation may now represent one of the few remaining investment environments offering:

• Concessional tax treatment
• Long-term compounding benefits
• Greater structural certainty

That does not mean investors should abandon diversified investment strategies outside superannuation. Accessibility, liquidity and estate planning considerations still play an important role. However, this Budget reinforces the importance of maximising concessional and non-concessional contribution opportunities where appropriate.

For business owners, professionals and Australians approaching retirement, now may be the right time to review how wealth is accumulated and whether future investment strategies remain aligned with long-term goals.

The Government is clearly moving away from tax incentives tied to established property and discretionary trust structures, while placing greater emphasis on housing supply, productive investment and long-term savings. For Australians, the key message is simple: don’t panic, but don’t ignore these proposed changes either.

Many existing arrangements remain protected through grandfathering provisions, and there will still be opportunities to build wealth successfully under the new framework. But with the rules around investing becoming more complex, the value of personalised financial advice has never been more important.

If you are unsure how these proposed Budget changes may impact your investment strategy, superannuation, trust structure or long-term financial goals, our experienced team can help you understand your options and create a strategy tailored to your circumstances.

AFPG has the expertise to guide you in wealth accumulation and protection. We’ve helped hundreds of Australians, singles, couples and families make informed decisions that enable them to live a lifestyle of their choosing.

Contact us today for experienced, compassionate, and professional financial advice.