The 2026 Federal Budget: Three Tax Changes That Punish Saving, Investing and Building

The 2026–27 Federal Budget was sold as a fairness reset for housing. In practice it is the biggest re-write of Australia’s investment tax framework since the 1999 Howard-Costello capital gains reforms – and it reaches well beyond property.

Three changes matter most:

Negative gearing is being abolished on established residential property (from 1 July 2027).
The 50% CGT discount is being replaced with CPI indexation, plus a 30% minimum tax on capital gains – applied to every CGT asset (from 1 July 2027).
Discretionary trusts will face a 30% minimum tax at the trustee level, and bucket companies have been deliberately broken (from 1 July 2028).

Each is defended as targeting “the wealthy.” Each will hit middle-income savers, founders and renters in ways the Treasury modelling appears to ignore.

1. Negative gearing: a supply problem they refused to fix

What actually changed

See the Treasury factsheet for the full mechanics.

Anyone who owned an investment property at 7:30pm on 12 May 2026 – or was already under contract – is grandfathered under the existing rules. You can keep negatively gearing until you sell.
Any established property purchased after that date can no longer have rental losses offset against salary or other personal income from 1 July 2027. Losses can only be carried against rental income or future capital gains.
New builds get a carve-out – negative gearing is fully preserved for eligible new builds, and the first investor purchaser can elect to keep the 50% CGT discount at sale (or use the new indexation regime, whichever is better). Two important caveats: the CGT election is first-investor only – once on-sold, subsequent buyers can’t access the 50% discount – and “new build” is tightly defined: a dwelling on vacant land, off-the-plan, or built where an existing property has been demolished and replaced with more dwellings than before.
Applies to individuals, partnerships, companies and most trusts. Super funds and widely-held managed investment trusts are excluded.

Why this will make rentals more expensive, not less

Once investors are pushed exclusively into new stock, three things happen in sequence:

Investor demand for established property collapses – first-home buyers do get a small reprieve here.
Investor demand concentrates on new builds, pushing the price of new construction up.
Investors need higher rents on those more expensive new builds to make the numbers work. They get them, because the supply of rental stock to market is now almost entirely new-build supply.

The supply problem they refused to touch

Australian housing is expensive because we have a chronic supply shortage, not because of negative gearing. Five things drive that shortage and none of them were in this Budget:

Almost everyone wants to live in a handful of coastal capital cities.
We don’t have an abundance of cheap labour to build at scale.
Construction unions – too many of which behave like organised crime fronts – push the cost of building higher every year.
NIMBY councils in blue-chip suburbs block density and make development slow and expensive.
State governments are addicted to stamp duty and have no incentive to lower the cost of a transaction.

Until those five are addressed, capital city housing will remain out of reach for young Australians – with or without negative gearing.

2. Capital gains tax: a housing policy that hit shares, crypto and founders

What actually changed

The 50% CGT discount is being replaced with CPI indexation of the cost base – a return to the pre-1999 Howard-era model.
A 30% minimum tax rate on capital gains will apply regardless of the taxpayer’s marginal rate, from 1 July 2027 (Baker McKenzie summary).
Crucially, this applies to every CGT asset – listed shares, crypto, private company stakes, business sales. Not just property.
Superannuation funds (including SMSFs) are excluded – they keep their existing 33.33% (one-third) CGT discount unchanged. Super was never on the 50% discount, but the new indexation + 30% minimum regime doesn’t reach inside super either.
The transition is a split-gain mechanism, not a hard line. For an asset bought before 1 July 2027 and sold later, the gain from original cost base to its value on 1 July 2027 keeps the 50% discount; the gain from 1 July 2027 to sale price falls under the new regime. Valuation can be done formally or via an ATO-provided formula. Pre-1985 assets remain exempt as before. Anyone holding long-term positions has a real incentive to either crystallise before the deadline or lock in a high cost base via valuation.

Why this is defensible for property and indefensible for everything else

The whole political case for CGT reform was housing affordability. Extending it across every asset class doesn’t fix housing – it punishes the very behaviour young people need to engage in before they can buy a house.

Three groups get hit hardest:

Young investors building a deposit. Most young people who want to own a home start in shares, ETFs or crypto. Those are the asset classes where modest amounts of capital can compound into a deposit over five to ten years. Indexation barely keeps pace with reported inflation, let alone real asset inflation. The government is now taking a 30% minimum cut of those gains.

Founders and small business owners. This is the most punitive change. Consider the realistic founder economics:

Initial cash investment: $1,000.
Personal time and risk: years of below-market salary.
Exit value after 10 years: $1,000,000.
Indexation on $1,000 over 10 years: maybe $2,000.

Under the old rules: gain of ~$999,000, 50% discount, taxed at 45% on $499,500 ≈ $225,000 tax.

Under the new rules: gain of ~$998,000, no discount, taxed at minimum 30% (or up to 45% marginal) ≈ $300,000–$450,000 tax.

The risk-taker built the company. The government takes more of the upside than ever – for assuming none of the risk.

Long-term equity holders. CPI indexation systematically understates real asset inflation. A 30% floor on the marginal rate removes the incentive to hold quality assets for the long term.

3. The war on trusts: a fee bonanza for accountants & lawyers, no real revenue

What actually changed

Full mechanics in the Treasury factsheet.

From 1 July 2028, discretionary trusts face a 30% minimum tax at the trustee level on trust income.
Individual beneficiaries get a non-refundable credit for that tax. If their marginal rate is above 30% they pay top-up tax. If below, the excess credit is lost.
Corporate beneficiaries (bucket companies) get no credit at all. That’s deliberate – designed to make the bucket-company strategy unworkable through effective double taxation.
Trustees holding franked dividends must use franking credits to pay the minimum tax first.
Treasury projects $4.5 billion of additional revenue over five years.

The numbers don’t actually move much for wealthy families

The honest reality is that a well-advised top-1% family using a trust today is already paying close to 30% effectively:

Adult beneficiaries typically receive around $135,000 each – taxed at an effective rate near 30%.
Surplus income is distributed to a bucket company – taxed at 30%.

A 30% minimum at the trustee level doesn’t generate meaningful new revenue from these families. It only bites where families don’t distribute enough to push individual beneficiaries above the $45,000 threshold into the 30% bracket. Treasury’s $4.5bn assumption is heroic.

Where it actually hurts: small business owners

The people who will really wear this change aren’t billionaires – they’re the hundreds of thousands of small business owners who run their trades, cafés, consultancies, professional practices and family farms through a discretionary trust. They use the trust for two completely legitimate reasons: asset protection, and the ability to distribute profits to family members who genuinely contribute (the spouse who does the books, the adult kids who work weekends).

Small business profits are cyclical. They move with the economy, with one big contract won or lost, with weather, with interest rates, with consumer confidence. The whole point of the trust structure is that distributions can flex with reality.

The 30% trustee tax breaks that:

In a good year the trustee pays 30% upfront on the whole profit pool. Distributions to a low-income spouse or studying child – who under current rules might pay 19% or 0% – still get hit with the 30% rate at the trust level. The non-refundable credit design means they cannot recover the difference.
In a bad year there’s not enough profit to make the structure work; the credits earned in the good year are simply gone.
Over a full business cycle, a tradie or café owner with a typical “good year / bad year / OK year” pattern ends up paying materially more tax than a salaried employee on the same average income – the opposite of the fairness the policy claims to deliver.

That’s not closing a loophole used by the rich. That’s penalising the small business engine of the economy for the crime of having lumpy income.

Bucket companies just got effectively taxed at 60%

Refusing to pass tax credits through to a Pty corporate beneficiary means the same dollar is taxed at 30% in the trust and 30% (or 25%) again in the company. That’s not closing a loophole – that’s penal double taxation.

The work-around is obvious

Sophisticated families will simply invert their structure:

Income-producing assets will move into an operating company, where profits and capital gains are trapped.
That company will be owned by the family trust, which now distributes only to individual beneficiaries – no bucket company in the chain.
Distributions get spread across years to keep individuals near the 30% effective rate.

Net result: same outcome, same effective tax rate, just a different diagram. The only real winners are the lawyers and accountants who’ll bill heavily for the restructure.

Closing

These three measures share a common flaw: they target the symptoms of policy failures – unaffordable housing, weak productivity, an over-leveraged budget – while making the underlying problems worse. Renters will pay more. Founders will take less risk. Small business owners will pay disproportionately. Families will restructure into the same outcome with higher fees attached.

If the goal was a fairer tax system, the answer was always supply-side reform on housing, not punishing the people trying to build a deposit, a business, or a balance sheet.