What the 2026-27 Federal Budget means for you

The 2026 Federal Budget includes a number of proposed changes that affect self-funded retirees, professionals and successful business owners. We’ve produced a summary of the measures that matter most to our clients — and as always, we’ll guide you through any decisions once the detail is clearer.

The 2026 Australian Federal Budget was handed down on 12 May 2026. Some of the proposals are significant and complex.

Significantly, the superannuation system was not directly impacted and the changes may have the impact of superannuation receiving renewed interest as a savings vehicle towards retirement (despite other changes such as the Division 296 tax commencing 1 July 2026) when compared to other arrangements.

As always, we will review each client’s situation and guide any decisions, particularly once final legislation is clarified.

The items of most relevance for our clients include:

Self-Funded Retirees

For our self-funded retirees and individuals, the most relevant proposals are the changes affecting investments held outside super and the cost of later-life care. From 1 July 2027, the Government proposes replacing the 50% capital gains tax discount with CPI indexation and a 30% minimum tax on capital gains for individuals, trusts and partnerships, although the family home and superannuation are not directly affected. Importantly, the proposal applies to any capital growth that occurs on or after 1 July 2027. It is also noted that recipients of any means-tested income support payments such as the Age Pension in the year of realising the gain will be exempt.

There are also measures that may affect retirement cashflow and care planning. Support at Home personal care is proposed to be fully funded from 1 October 2026 for approved participants within their care plan. Furthermore, the additional funding for residential aged care beds and provider support is likely to improve system capacity, access and potentially an indirect financial benefit if the cost of care is reduced or at least maintained as a result. From 1 April 2027, the removal of the higher private health insurance rebate for older Australians is proposed, which may increase premiums for some.

Separately, already legislated changes from 1 July 2026 remain important, including the increase in the superannuation General Transfer Balance Cap to $2.1 million, the concessional contribution cap to $32,500, the non-concessional contribution cap to $130,000 and the commencement of the new Div296 legislation. As always, the new caps and legislation will be considered as part of our End of Financial Year planning for you and we will contact you with tailored advice where relevant.

If you hold assets through a family trust, negatively gear, support adult children financially or have more complex wealth structures, it is also worth reading the Professional Families and Successful Business Owners sections as well.

Professional Families

For our professional families, typically successful households earning $350,000 or more, carrying a mortgage, funding private school fees and still having capacity to save, the main Budget benefits are on the personal tax side. From 1 July 2026, the tax rate for income between $18,201 and $45,000 reduces from 16% to 15%, and from 1 July 2027 it reduces again to 14%. In addition, from 1 July 2026 eligible taxpayers will be able to claim a standard deduction of up to $1,000 for work-related expenses without keeping receipts, and from 1 July 2027 the proposed Working Australians Tax Offset of up to $250 will apply to earned income.

However, the Government’s proposed changes to capital gains tax (see self-funded retirees section) and negative gearing could affect future decisions around gearing into residential investment properties.

From 1 July 2027, negative gearing losses (where the level of deductible expenses exceeds the assessable rental income) from residential investment properties purchased after budget night will no longer be able to be used to offset assessable income from other sources (such as wages). Instead, any loss will be quarantined and carried forward to future income years and offset against any net positive tax position on those investment returns in future years. In this way the negative gearing loss is not lost, but the timing of its utilisation deferred to future income years. The negative gearing changes do not apply to commercial property investments, residential property regarded as a new build or other asset classes, such as shares. Importantly, this change applies only to residential investment properties acquired from 7:30pm on 12 May 2026 (Budget night) by individuals, trusts, companies and partnerships. Negative gearing deductions will still be able to offset other income for residential investment properties acquired before that time.

If you use trusts, it is worth reading the Successful Business Owners section. It is also worth reading the Self-Funded Retirees section on capital gains tax proposed and already legislated super changes as well.

Successful Business Owners

For successful business owners, particularly those with complex structures, profits of $350,000 or more and further growth potential, the standout measures are the same as outlined for professional families and similar to those outlined for self-funded retirees, so be sure to have a read of these.

The additional standout measures are the proposed 30% minimum tax on discretionary trusts from 1 July 2028, the permanent extension of the $20,000 instant asset write-off for small businesses with turnover under $10 million from 1 July 2026, and new company loss relief measures. These include a two-year loss carry back for companies with turnover under $1 billion from 1 July 2026, and loss refundability for eligible start-ups from 1 July 2028.

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). Currently trustees do not pay tax on the discretionary trust’s taxable income, except in certain circumstances. Distributions from the discretionary trust to beneficiaries (other than a company beneficiary) will carry the value of the 30% tax paid in the form of a non-refundable tax credit. As a non-refundable tax credit, it means that taxable distributions made to beneficiaries whose average tax rate is less than the 30% trust tax will not be entitled to a refund for any excess tax withheld. Beneficiaries whose average tax rate is higher than the amount withheld will be required to pay additional tax to the ensure the distribution is taxed at their average tax rate after taking into account the amount already withheld. Company beneficiaries will not be entitled to the non-refundable tax credit, and will be taxed on the full entitlement of the trust distribution received (net of the tax already deducted). There will be some exclusions from the new taxation arrangements, including fixed trusts, superannuation funds, special disability trusts, and deceased estates. Some types of income such as primary production income and income from assets of testamentary trusts existing on Budget night will also be excluded. Clients using family trusts may need to revisit the appropriateness of this tax vehicle going forward. However, the proposed three-year rollover relief from 1 July 2027 may  create an opportunity for some to restructure out of discretionary trusts into other entity types with less tax friction.

An important positive regarding the capital gains tax measures is that small business CGT concessions remain unchanged.

Concluding thoughts

In practical terms, this Budget reinforces the importance of a regular review and a flexible plan. Our approach remains the same as always: stay informed, don’t overreact and wait for the detail. We are here to help and will work through each client’s position carefully as the legislation develops.

This information has been prepared and issued by ITL Financial Planning and is current as at 12 May 2026. Material contained in this publication is an overview or summary only and it should not be considered a comprehensive statement on any matter or relied upon as such. The information in this document regarding taxation and legislative change is based on policy announcements which are yet to be passed as legislation and may be subject to future change.  This information contains material provided directly by third parties). It is given in good faith and has been derived from sources believed to be accurate at its issue date. It should not be considered a comprehensive statement on any matter nor relied upon as such. ITL Financial Planning does not accept responsibility for the accuracy or completeness of, or endorses any such material. Except where contrary to law, we intend by this notice to exclude liability for this material. 

Written by Shereen Churchill (Financial Adviser)