The 2026 Federal Budget was handed down on 12 May 2026.
This is likely the most consequential Budget in decades due to the many taxation changes. Fortunately superannuation was largely left alone.
This Budget Summary is not designed to cover all aspects of the Federal Budget. It is solely focused on the key financial planning areas which relate to our clients – superannuation, taxation and social security.
Key proposals of relevance include:
- Capital Gains Tax changes
- Negative Gearing changes
- Taxation of trusts
Full Budget papers can be found here.
It is important to note that at this time these proposed measures are not yet law and could change.
Superannuation & Pensions
There were no relevant announcements on superannuation.
Superannuation will be exempt from the new negative gearing restrictions and capital gains tax changes.
Superannuation Caps and Thresholds
Whilst not mentioned in this Budget, the following alerts you to the superannuation caps and thresholds which will be increasing from 1 July 2026.
| Contribution Caps and Thresholds | ||
| Contribution Type | 2025/26 | 2026/27 |
| Concessional contributions cap | $30,000 | $32,500 |
| Non-concessional contributions cap | $120,000 | $130,000 |
| Non-concessional 3 year bring forward | $360,000 | $390,000 |
Concessional and non-concessional contributions are explained in detail here – https://perthfinancialplanning.com.au/superannuation-contributions
| Superannuation Guarantee (SG) Rate | |
| Effective tax-free threshold | 2026/27 |
| SG percentage | Remains at 12% |
The general Transfer Balance Cap (the maximum a person can transfer to a tax-free pension product) will increase from $2 million to $2.1 million.
Division 296 Tax
Whilst not mentioned in this Budget, the following alerts you to the new superannuation tax on high balances. This will commence from 1 July 2026.
| Division 296 Tax | |
| Rate | |
| Earnings on balances above $3 million | Additional 15% tax |
| Earnings on balances above $10 million | Additional 10% tax (25% additional tax in total) |
Taxation
Instant tax deduction of $1,000
From 1 July 2026, a new instant tax deduction of up to $1,000 will be introduced that can be claimed on work related expenses without the need to keep records of receipts. If total work-related expenses exceed $1,000, normal rules apply for the full amount being claimed.
Working Australians Tax Offset (WATO)
From 1 July 2027, a new permanent tax offset of up to $250 per financial year will be available for income earned from work such as wages, salaries and the business income of sole traders.
WATO will be applied automatically on assessment after the tax return for the relevant financial year is lodged.
Please note: Tax offsets directly reduce the tax payable, deductions reduce the amount of assessable income and hence benefit those in higher tax brackets the most.
Changes to Negative Gearing
Please note: Superannuation funds, including SMSF’s, are excluded from these changes. As too is negative gearing for other asset classes such as commercial property and shares.
From 1 July 2027, negative gearing for residential property will be limited to new builds. Properties owned on before 7.30pm AEST on 12 May 2026 will be exempt, so existing investors won’t be affected.
Losses related to existing residential investment properties purchased from 7:30pm AEST 12 May 2026 will only be deductible against other income from residential properties, including capital gains. An investor who has excess losses will be able to carry forward those losses to offset residential property income in future years.
An exception is if a property is purchased between 7:30pm AEST 12 May 2026 and 30 June 2027 it may be negatively geared during this period but not from 1 July 2027.
Changes to CGT
Please note: Superannuation funds are not impacted by these changes
From 1 July 2027, the Government will replace the 50% CGT discount for individuals, trusts and partnerships with cost base indexation and a 30% minimum tax rate on all capital gains. The CGT reforms will only apply to gains accruing from 1 July 2027 and will apply to all CGT assets (including property and shares) held by individuals, partnerships and trusts for at least 12 months.
Indexation will be calculated using CPI in a similar manner to arrangements previously in place between 1985 and 1999. This is where an asset which has been held for at least 12 months will have its cost base increased by CPI before calculating the capital gain, so that only real gains are taxed.
The ATO will provide guidance and tools to support calculation of this adjustment.
Minimum tax on capital gains
A minimum tax rate of 30% will apply to real capital gains accruing from 1 July 2027.
Of note, recipients of means-tested income support payments, such as the Age Pension or JobSeeker, will be exempt from the minimum tax if they receive any payment in the financial year in which they realise the capital gain.
COMMENT: This reduces the benefits from the strategy of deferring asset sales to years when income may be lower. It may also tilt investors to preference higher income producing assets rather than higher growth assets.
Transitional CGT arrangements
There are transitional arrangements for the implementation of these changes.
| Asset acquired | Asset sold | CGT implications |
| Pre-1985 | Before 1 July 2027 | CGT free |
| On or after 1 July 2027 | No CGT on gain accrued up to 1 July 2027; Indexation method for future gains. | |
| Post-1985 – Pre-21/9/1999 | Before 1 July 2027 | Current rules – choice of 50% discount or indexation |
| Sold on or after 1 July 2027 | Current rules for gain accrued up to 1 July 2027; Indexation method for future gains. | |
| Post-21/9/1999 – 30 June 2026 | Before 1 July 2027 | 50% discount (if held for at least 12 months) |
| Sold on or after 1 July 2027 | 50% discount for gain accrued up to 1 July 2027; Indexation method for future gains. | |
| On or after 1 July 2027 | Anytime | Indexation method used |
Exemptions to CGT changes
- Investors who buy new builds, which genuinely add to housing supply, will be able to choose the 50% CGT discount or the indexation method.
- The existing 60% CGT discount applying to qualifying affordable housing will be fully retained.
- The existing main residence exemption from CGT will continue.
- Small business CGT concessions will continue as is.
Discretionary Trusts
From 1 July 2028, the trustee of a discretionary trust (such as a family trust) will be liable to pay tax at the rate of 30% on the taxable income of the trust, unless a higher tax rate applies (such as for undistributed income).
This tax will not apply to certain trusts such as:
- Complying superannuation funds
- Special disability trusts
- Deceased estates
- Charitable trusts
And some types of income, such as primary production income, will also be excluded.
COMMENT: Due to the turmoil this will cause many small businesses which operate with trusts, rollover relief (including capital gains tax) is available to assist with restructuring to a different structure.
In addition, there is great uncertainty over whether testamentary trusts (an estate planning structure) will be caught up in these changes. The Australian has an article covering this topic here.
Medicare Levy – Low-Income Thresholds
Income limits when the Medicare Levy applies for singles and families and for seniors and pensioners will be increased for the financial year 2025-26.
| Medicare levy low-income thresholds | ||
| 2024/25 | 2025/26 | |
| Singles | $27,222 | $28,011 |
| Families* | $45,907 | $47,238 |
| Single seniors and pensioners | $43,020 | $44,268 |
| Family seniors and pensioners* | $59,886 | $61,623 |
* The family income thresholds will increase to $4,338 in 2025/26 per dependent child.
Personal Income Tax Cuts (previously announced)
From 1 July 2026, the 16 per cent rate will be reduced to 15 per cent.
From 1 July 2027, the 15 per cent rate will be reduced further to 14 per cent.
This will provide a tax cut of up to $268 in 2026–27 and up to $536 in 2027-28, relative to current tax settings.
| Tax Rates | |||
| 2025/26 | From 1 July 2026 | From 1 July 2027 | |
| Income | Tax rate | Tax rate | Tax rate |
| Up to $18,200 | Nil | Nil | Nil |
| $18,201 – $45,000 | 16% | 15% | 14% |
| $45,001 to $135,000 | 30% | 30% | 30% |
| $135,001 to $190,000 | 37% | 37% | 37% |
| Above $190,000 | 45% | 45% | 45% |
If you are eligible for the Low Income Tax Offset (LITO) and/or eligible for the Seniors and Pensioners Tax Offset (SAPTO) the tax free amount you can earn is:
| Tax Free Rates with LITO and/or SAPTO | |||
| Effective tax-free threshold | 2024/25 | 2026/27 | 2027/28 |
| Not eligible for LITO or SAPTO | $18,200 | $18,200 | $18,200 |
| Eligible for LITO only | $22,575 | $22,867 | $23,200 |
| Eligible for LITO and SAPTO (single) | $35,813 | $36,960 | $38,147 |
| Eligible for LITO and SAPTO (couple) | $31,888 | $32,773 | $33,783 |
Small Business
$20,000 instant asset write-off
From 1 July 2026, the Government will permanently extend the $20,000 instant asset write-off for small businesses.
Small businesses with turnover of under $10 million will be able to immediately deduct eligible assets costing less than $20,000.
The $20,000 limit applies on a per asset basis, so small businesses can instantly write off multiple assets.
Assets valued at $20,000 or more can continue to be placed into the small business simplified depreciation pool and depreciated over several years.
Two-year loss carry back
From 1 July 2026, companies with aggregated annual global turnover of less than $1 billion will be able to carry back a tax loss and offset it against tax paid from up to two years earlier.
Social Security & Welfare
There were no significant changes announced.
Current Centrelink aged pension rates are available here: https://perthfinancialplanning.com.au/centrelink-aged-pension-details
WA Seniors Card benefits are available here:
Pension supplement changes for overseas recipients
From 20 September 2026, recipients of the Pension Supplement who travel overseas for longer than 6 weeks but shorter than 12 weeks may now receive the full rate of the Pension Supplement. However, recipients who travel overseas for more than 12 weeks will not receive any Pension Supplement after 12 weeks.
Private health insurance rebate change
From 1 April 2027, older Australians will no longer receive a higher private health insurance rebate purely because of age. Instead, the same base rebate scale will apply across age groups, with income tiers still determining how much rebate is available.
Personal care services
From 1 October 2026, personal care services will be reclassified as ‘clinical supports’ under the Support at Home program.
These services generally relate to assistance with self-care and activities of daily living (eg help with showering, dressing and eating). Support at Home participants will not be asked to pay an individual contribution for this type of service that are within their allocated budget.
At present participants may contribute up to 50% of the costs of these services.
Federal Budget analysis from previous years
We hope you enjoyed, or at least found benefit, in our 2026-27 Federal Budget analysis. Previous years can be found here:
2025-26 Federal Budget
2024-25 Federal Budget
2023-24 Federal Budget
2022-23 Federal Budget
