The 2026 Federal Budget has introduced some of the most significant proposed tax and investment reforms Australia has seen in decades. While many of the measures are not yet law, the Government has indicated it intends to move quickly to introduce legislation.
For investors, business owners, families and retirees, these changes could reshape how wealth is built, structured and passed on in the future.
At Fowler’s Group, we believe it’s important to focus not only on the headlines, but on the practical implications for long-term financial planning.
Capital Gains Tax (CGT) Changes
One of the most talked-about proposals is the introduction of a new Capital Gains Tax indexation regime from 1 July 2027.
Under the proposed system:
- The current 50% CGT discount would effectively end for most investments acquired after 1 July 2027.
- Instead, the cost base of assets would be indexed for inflation.
- A minimum 30% tax rate would apply to capital gains after indexation.
The changes are expected to apply to:
- Shares
- Investment properties
- Trust-held assets
- Business assets
- Pre-CGT assets acquired before 20 September 1985
Importantly, the family home and superannuation funds are excluded.
Why This Matters
The current CGT discount has long encouraged Australians to:
- Invest for the long term
- Build wealth through shares and businesses
- Take entrepreneurial risk
- Delay selling assets until lower-income years
The proposed reforms may reduce some of these incentives, particularly for higher-growth investments and start-up businesses.
Investors may also place even greater value on the tax-free status of the family home, potentially impacting downsizing decisions later in life.
How the New CGT Rules Could Work
Assets Sold Before 1 July 2027
No changes are proposed. Existing CGT discount rules would continue to apply.
Assets Purchased After 1 July 2027
The new indexation method and minimum 30% tax rate would apply.
Assets Purchased Before 1 July 2027 and Sold Later
A transitional approach is expected:
- Growth up to 1 July 2027 may still qualify for the 50% discount.
- Growth after 1 July 2027 would fall under the new indexed system.
This means valuations as at 1 July 2027 could become extremely important.
Property Investors and Negative Gearing
The Government has also proposed major changes to negative gearing.
From 1 July 2027:
- Negative gearing on established residential properties would no longer be available for newly purchased properties.
- Existing investment properties purchased before Budget night would be grandfathered.
- New residential builds would still qualify.
What This Could Mean
The Government’s stated aim is to direct investment toward increasing housing supply rather than existing dwellings.
For investors, this could make:
- New developments more attractive
- Established residential property less tax-effective
- Commercial property and share investing comparatively more appealing
Losses on established residential properties purchased after the cut-off would only be able to offset:
- Residential rental income, or
- Future residential property capital gains
They could no longer reduce salary or business income.
New Builds Remain Favoured
To encourage housing supply, eligible new builds would continue receiving more favourable tax treatment.
Examples may include:
- Newly built apartments
- Off-the-plan purchases
- Knock-down rebuild developments
- Construction on vacant land
Investors in qualifying new builds may still have access to the existing 50% CGT discount as an alternative option.
Impact on Start-Up and Business Investment
One area attracting concern is the potential impact on start-up businesses and entrepreneurial investment.
Many early-stage business investments have minimal cost bases. Under the proposed rules:
- There may be little inflation adjustment available
- Most of the eventual gain could become taxable
- A minimum 30% tax rate may apply
This could reduce the after-tax reward for founders, angel investors and private business backers taking significant risk.
Discretionary Family Trust Changes
From 1 July 2028, the Government also plans to introduce a 30% minimum tax rate on discretionary trusts.
Currently, trust income can generally be distributed to beneficiaries taxed at their own marginal tax rates.
Under the proposed changes:
- Trustees would pay a minimum 30% tax on trust income
- Beneficiaries would receive a non-refundable tax credit
- Beneficiaries on lower tax rates may lose unused credits
What Could Change?
These reforms may reduce the tax advantages traditionally associated with family trusts, particularly where income splitting has been used as part of a broader tax strategy.
However, discretionary trusts may still remain valuable for:
- Asset protection
- Estate planning
- Succession planning
- Family control structures
What About Superannuation?
Superannuation remains one of the biggest relative winners from the Budget.
Importantly:
- Super funds are excluded from the proposed CGT changes
- SMSFs remain exempt
- Contribution caps will increase from 1 July 2026
The proposed increases include:
- Concessional contributions rising from $30,000 to $32,500
- Non-concessional contributions increasing from $120,000 to $130,000
- The bring-forward cap increasing to $390,000
For many Australians, superannuation may become an even more attractive long-term investment environment.
Tax Changes for Individuals
The Budget also includes several proposed measures aimed at cost-of-living relief.
Working Australian Tax Offset (WATO)
From 1 July 2027, eligible workers may receive a permanent $250 tax offset.
$1,000 Instant Deduction
From 1 July 2026:
- Workers earning employment income may automatically claim a $1,000 deduction without itemising expenses.
- Larger work-related expense claims could still be claimed normally.
Personal Income Tax Cuts
The 16% tax bracket is proposed to reduce:
- To 15% from 1 July 2026
- To 14% from 1 July 2027
Small Business Measures
The Budget also includes several positive measures for small business owners.
Instant Asset Write-Off
The $20,000 instant asset write-off is proposed to become permanent for eligible businesses with turnover under $10 million.
Loss Carry Back
Companies under $1 billion turnover may be able to carry losses back up to two years to offset previously paid tax.
Start-Up Support
Refundable offsets for eligible start-up losses are also proposed from 2028.
Electric Vehicle FBT Changes
The Government also plans to gradually reduce Fringe Benefits Tax concessions for higher-value electric vehicles.
However:
- Existing arrangements are expected to remain protected initially
- EVs under $75,000 would continue receiving strong concessions for several years
What Does This Mean for Investors?
While many of the measures are still proposals, the overall direction of travel is becoming clearer.
The tax system appears to be moving toward:
- Higher minimum taxation on investment income
- Reduced effectiveness of traditional tax planning strategies
- Greater emphasis on investment substance rather than tax outcomes
That does not mean long-term investing principles have changed.
Successful investing still relies on:
- Diversification
- Appropriate risk management
- Long-term discipline
- Structuring investments correctly
- Focusing on after-tax outcomes
The Importance of Reviewing Your Strategy
Periods of policy change often create uncertainty, but they also create opportunities to review and strengthen financial structures.
For many Australians, key questions may now include:
- Is my investment structure still appropriate?
- Should I reconsider how I hold assets?
- How exposed am I to proposed CGT changes?
- Is my retirement strategy still tax-effective?
- Am I making the most of superannuation opportunities?
At Fowler’s Group Cairns, we help individuals, families and business owners navigate changing legislation with practical, evidence-based financial advice tailored to their goals.
Important Disclaimer
The measures discussed above are proposals only and may change before becoming law. This article contains general information only and does not take into account your personal objectives, financial situation or needs.
Before making financial decisions, consider seeking professional financial advice tailored to your circumstances.
