Treasurer Jim Chalmers handed down the 2026–27 Federal Budget on Tuesday this week with a focus on tax reform, housing affordability, cost of living relief and small business support.

While the budget will touch everyone in some way or another, if you hold any kind of investments (property, crypto, shares etc), you’re going to be impacted and we’ll help you navigate the path forward.

Below I’ve offered an overview of the key points from this budget. We’ll go through the changes to the CGT 50% discount, to negative gearing, impacts for individuals and small business and a brief mention on superannuation (which was untouched in this budget). Keep in mind too, these points are yet to be legislated and budget’s can change or be amended. 

MAJOR CHANGES

1. Negative gearing will now only be available to new properties. However,  for existing residential properties as at 12th May 2026, these will be fully grandfathered. This means if you currently hold an investment property and it is negatively geared, you will be able to continue using those tax losses to offset your wider income to receive back some level of income tax subsidy.

For some context: Negative gearing is the common practice where the income derived from an investment (usually a rental property) is less than the various deductible outgoings – principally interest, but also council rates, land tax, real estate agent fees and repair costs. It is not only property that can be a negatively geared investment,  any range of investments can be negatively geared ie. shares etc. The resulting net loss can be claimed against other income, for example, against your salary and wages or your business income. This strategy has become attractive to property investors – as they can deduct the tax loss against other income while holding the investment.

For properties purchased between the 12th of May 2026 budget announcement and 30 June 2027, if they may be negatively geared during this period you can still access the negative gearing benefits, but not from 1 July 2027.

For established (ie. not new) investment properties purchased in the future, from 1 July 2027 onwards, and it happens to be negatively geared, then you will still be able to utilise those rental property losses. However, these rental property losses will effectively be ring fenced, meaning those losses can only offset rental income. You will be able to carry forward and use those ring fenced rental property losses against future rental income when it swings into being positively geared, or if you may hold another property that is positively geared.

With rental properties, they work in cycles, so if your rental property is currently negatively geared and you hold it for a financial and/or property cycle or several, there may come a time when the property becomes positively geared (depends on situation as to whether this will apply to you). And in this scenario, then you’ll be able to draw upon those prior year rental losses to help offset the positive gearing in the current year.

2. Capital gains 50% discount gone from 1 July 2027. From that point, indexation method to apply and minimum 30% tax on real gains. This applies to all assets and investments owned by individuals not just property.

Although, to maintain incentives for new housing supply, investors in new residential properties will be able to choose either the 50% CGT discount, or cost base indexation and the minimum tax.

For context: When a person may hold an income generating asset, typically property or shares are the more common examples, they will pay tax on the capital gain made at the time of that asset sale. For example, let’s say Bob owns a regional rental property and he originally bought that back in 2010 for $400k. Over the past 16 years, Bob has seen considerable capital growth and that property in 2026 is now worth $1.1 million. Given this incredible capital growth, Bob is considering selling to free up his funds to use elsewhere. In the current tax rules, before these major CGT changes are to be applied, Bob would see a capital gain of $700k (this is a simplified example, so for brevity here we are not considering other amounts included within Bob’s cost base). As Bob held that property for longer than 12 months, he is eligible to use the 50% CGT discount, which would mean that $700k capital gain is immediately discounted by 50% so Bob is only taxed on $350k. 

As of 1 July 2027, that 50% discount will no longer apply and will be replaced by cost base indexation, with a 30% minimum tax on net capital gains. These changes will apply to all CGT assets, including pre-CGT assets. Pre CGT assets ie. assets purchased before 20th September 1985 were fully CGT exempt, under these changes that is no longer the case. The 50% CGT discount will still be available on assets until 30 June 2027, then indexation will apply from 1 July 2027. 

The indexation method is reverting back to the old method that was used up until 1999. Indexation is effectively accounting for inflation that occurs while Bob holds the property. So if we go back to Bob’s example above, the $700k capital gain would use the indexation method calculation to account for the inflation that has occurred on the cost base of the property since 2010, and that portion of inflation would help to reduce the $700k capital gain, and Bob would be taxed on the remainder (real gain) at his applicable marginal tax rate.

3. A minimum 30% CGT tax rate – A common strategy adopted would be to realise capital gains in lower income years (timing is everything with asset sales) to allow those capital gains to be taxed at lower marginal tax rates. Now, with the minimum 30% CGT application, this means that anyone in the lower tax brackets from 0% to 16% with realised capital gains will need to pay a minimum of 30% tax on those gains.

Recipients of means-tested income support payments, such as the Age Pension or JobSeeker, will be exempted from the minimum tax if they receive any payment in the financial year in which they realise the capital gain.

For eligible CGT assets other than new residential properties:

• Assets purchased and sold prior to 1 July 2027 – no changes in arrangements.
• Assets purchased after 1 July 2027 – will be treated wholly under the new arrangements.
• Assets owned prior to 1 July 2027 and sold after 1 July 2027 – will be treated under current arrangements on gains made prior to this date, and under the new arrangements for gains made after this date (with no impact until gains are realised).

For our clients who may hold an investment property, and regarding the change to CGT discount: it will be worth getting a property valuation as at 1 July 2027. Oceans Accounting works with a wonderful property valuation firm that can assist, reach out and we’ll put you in touch. The ATO are also expected to be releasing a free valuation tool to help tax payers with this process too.

INDIVIDUALS

1. Tax cuts to personal tax rates – From 1 July 2026, the 16% tax rate, which applies to taxable income between $18,201 and $45,000, will be reduced to 15%. From 1 July 2027, the 15% rate will be reduced further to 14%.

2. Working Australians $250 tax offset (WATO) to be applied from 2028 FY. This effectively increases the tax free threshold by nearly $1,800 to $19,985 (or up to $24,985 for those eligible for LITO). This tax offset is not refundable, so if you don’t have any tax to pay in 2028 FY and that offset is applied, it will not then push you into a $250 refund position. 

The WATO will also be available to sole traders running their own business. In addition to the current $1k small business tax offset, this is a nice little additional bonus.

3. $1,000 instant tax deduction. No need to itemise work related expenses if you choose to use this option. Note: this is not an immediate refund of $1k rather it’s a reduction of $1k from your taxable income, which your income tax is calculated off. 

For majority of our clients who have deductions against their employment that exceed $1k, this will not impact or really provide benefit to you. You will continue to be required to store all receipts for your work related purchases, and we will continue to calculate your claims to the amount they are actually incurred. 

For context, an employee who is working full time from home will be able to claim more than this immediate $1k by using the fixed rate method. So it’s not going to benefit everyone, but it will certainly simplify tax time for self lodgers with minimal work related deductions.

If you choose to utilise this $1k instant tax deduction, that caps what you can claim. Although, charitable donations, union and professional association membership fees and other non‑work‑related deductions can still be itemised separately and claimed on top of the instant tax deduction.

BUSINESS

1.  Instant asset write off now permanent at $20k. This has already been in place for many years now, with the odd change each budget time, but it’s great to know it’s now permanent. 

2. Company loss carry back will allow (some) companies to carry back current year losses (for tax losses in 2027 FY onwards) to offset against tax paid in the two years prior. This is quite a good incentive for eligible companies. Eligible companies are those with aggregated annual global turnover of less than $1 billion. The loss carry-back will allow revenue losses for tax years commencing 1 July 2026 to be carried back and offset against tax paid up to two years earlier, subject to a limit equal to the company’s franking account balance. If you are operating a company, and you do encounter a tax loss in 2027 FY onwards, we will let you know if this provision will apply.

A practical example is offered below. Source: Budget 2026–27 Fact Sheet: Tax reform for workers, businesses and future generations

Dining Co runs a local restaurant with $1million in turnover. It generated $50,000 in taxable profits and paid $12,500 tax in 2025–26 (at the 25% tax rate).

In 2026–27, Dining Co decides to supply ready‑cooked meals to local supermarkets. It purchases new equipment for a total of $65,000, with each piece costing less than

$20,000. Due to the instant asset write‑off, these items can be immediately deducted. Without these new investments, Dining Co would have reported a $50,000 profit in 2026–27.

However, with the instant asset write‑off deductions, it reports a $15,000 tax loss and pays no tax.

Further, Dining Co will now be able to carry back that tax loss to the previous year’s tax paid, generating a $3,750 tax refund ($15,000 × 25% tax rate). This provides timely cash flow to the company as it seeks to expand.

3. PAYG instalments – From 1 July 2027, small and medium businesses will be able to opt in to:

• reporting and paying PAYG instalments monthly, and
• using an ATO-approved calculation embedded in accounting software to calculate and
• vary their instalments.

It’s expected that monthly PAYG instalments will remain optional for businesses that are compliant and keep up with quarterly instalments amounts and lodgement due dates. However, for repeatedly late payers, the monthly instalment may become mandatory.

4. Electric car full FBT exemption gone from 2029, replaced with lesser 25% discount. Over the past few years, the ATO have allowed FBT exempt private use of company vehicles if they were electric vehicles. We always expected this exemption to finish up soon enough, now we know it’s 2029. Although, the complete exemption is not wiped out, just reducing to a 25% FBT exempt. 

SUPERANNUATION

In this budget, superannuation remained untouched (for now). SMSF can be brilliant vehicles for property investment (this is not advice, rather an invitation & consideration to investigate further as to what may be appropriate for your circumstances). SMSF’s come with significant rules, regulations, compliance burden & related cost, so it’s not something to go into without quality advice and a proper strategy mapped out first. 

For both SMSF and corporate super funds, especially if you are nearing retirement and/or if you are selling an asset, concessional contributions and utilising the carry forward provisions, and small business concessions (if applicable) can offer immense tax savings, while also keeping funds in your own “circle of wealth”.

We hope this summary may provide a bit more insight of Tuesday’s budget announcement. If you have any questions, concerns or would like to discuss how this might impact you and/or your family, please reach out to Holly.