News & Blogs

The 2026–27 Federal Budget, handed down on 12 May 2026, marks one of the most significant overhauls to Australia's personal tax settings in a generation. From capital gains tax to negative gearing and discretionary trusts, the Government has taken aim at long standing concessions that have underpinned wealth building strategies for decades.

Capital Gains Tax: The End of the 50% Discount

Effective 1 July 2027

The cornerstone 50% CGT discount, in place since 1999, will be scrapped and replaced with CPI cost base indexation for assets held longer than 12 months. On top of that, a minimum 30% tax rate will apply to net capital gains, regardless of a taxpayer's marginal rate. These changes will apply to gains arising after 1 July 2027, including shares and property, and extend to assets originally acquired pre-1985 held by individuals, trusts and partnerships.

Transitional rules provide some relief. Assets bought and sold before 1 July 2027 are unaffected. For assets held across the transition date, the 50% discount applies to gains accrued up to 1 July 2027, with the new indexation method applying from that date forward. Taxpayers will need to determine their asset's value as at 1 July 2027, either through a formal valuation or an ATO apportionment formula.

Notably, superannuation funds are not impacted and will retain the existing one-third CGT discount. Investors in new build residential properties will also retain the option of using the 50% discount, and income support recipients (including part Age Pensioners) will be exempt from the minimum tax.

Negative Gearing: Restricted to New Builds

Effective from Budget night (12 May 2026) for new purchases; full restriction from 1 July 2027

Negative gearing on established residential property is being wound back. From 1 July 2027, losses on established residential investment properties can only be offset against rental income or capital gains from residential property. Excess losses can be carried forward but will no longer reduce taxable income from other sources such as salary.

Properties held at announcement are grandfathered. New builds, including dwellings constructed on vacant land or knock-down rebuilds that increase the number of dwellings, remain fully eligible. SMSFs and widely held trusts (including most managed investment trusts) are also excluded from the changes.

Discretionary Trusts: 30% Minimum Tax

Effective 1 July 2028

A 30% minimum tax will apply to the taxable income of discretionary trusts, paid by the trustee. Beneficiaries (other than corporate beneficiaries) will receive a non-refundable tax credit for the tax paid. Franking credits received by the trust must be used to pay the minimum tax, closing off a potential workaround.

Exempt trusts include fixed trusts, widely held trusts (including fixed testamentary trusts), superannuation funds, special disability trusts, deceased estates and charitable trusts. Existing discretionary testamentary trusts at the date of announcement are also excluded. Expanded rollover relief will be available for three years from 1 July 2027 for small businesses wishing to restructure out of discretionary trusts.

Tax Cuts and Offsets for Workers

Personal income tax cuts (already legislated, from 1 July 2026): The lowest marginal rate drops from 16% to 15% in 2026–27, and further to 14% in 2027–28, delivering savings of up to $536 per year.

$1,000 Instant Tax Deduction (from 2026–27): Workers can claim up to $1,000 in work-related expenses without receipts or itemisation. Those with expenses above $1,000 can still claim under the existing rules.  

$250 Working Australians Tax Offset (from 2027–28): A new permanent, non-refundable offset for income derived from work. This lifts the effective tax-free threshold by nearly $1,800 to $19,985 for eligible workers.

Electric Vehicle FBT: Concession Begins to Taper

The Government is winding back the electric vehicle FBT exemption in stages, with the full exemption eventually replaced by a permanent 25% discount. Existing arrangements are grandfathered, meaning vehicles already under a novated lease retain their current FBT treatment. Here's how the transition works: 

Before 1 April 2027: No change. All eligible electric cars up to the fuel-efficient luxury car tax threshold (currently ~$91,387) continue to receive the full FBT exemption.  

1 April 2027 to 31 March 2029: The concession splits based on vehicle value:

• EVs valued at $75,000 or below continue to receive the full FBT exemption.

• EVs valued between $75,001 and ~$91,387 will only receive a 25% FBT discount (via a reduced 15% statutory rate).  

From 1 April 2029: All eligible electric cars receive only the 25% FBT discount, regardless of value. The full exemption is no longer available for new arrangements.

What this means in practice: Clients considering a higher value EV (above $75,000) should be aware that settling after 1 April 2027 will result in a materially higher FBT cost compared to acting before that date. For a $50,000 EV, the difference is less urgent as the full exemption remains until April 2029. Timing matters.

Private Health Insurance: Age Uplift Removed

From 1 April 2027

The Government will remove the age-based uplift on the Private Health Insurance Rebate. Currently, policyholders aged 65+ receive a higher rebate than younger Australians at the same income level. This change will save the Government $3.0 billion over four years, with savings redirected to aged care.

What Was Not Changed

Importantly, no major changes were announced for superannuation, beyond the already legislated Payday Super (from 1 July 2026) and Division 296 tax on balances above $3 million (also from 1 July 2026).  

Division 296: Know Where You Stand

Division 296 is now law and takes effect from the 2026–27 financial year. Members with a total superannuation balance above $3 million will face additional tax on their fund earnings, with rates increasing at higher thresholds. First assessments will be issued after 30 June 2027.

The tax is assessed to the individual, not the fund. Members can choose to pay personally or elect to have the liability released from their super balance.

If your superannuation balance is approaching or exceeds $3 million, we encourage you to reach out to the Vista team. Understanding how Division 296 applies to your circumstances, including how earnings are calculated and your options for managing the liability, will be important in keeping your retirement strategy on track.

This article is general in nature and does not constitute personal financial advice. Please contact the Vista team to discuss how these changes may affect your individual circumstances.