FEDERAL BUDGET 2026-27

Federal Budget 2026–27: Reform and Resilience… But Questions Remain

The Federal Government has positioned this year’s Budget as one of the most significant in decades, focused on navigating the current global uncertainty—particularly higher oil prices—and strengthening the economy over time.

From our perspective, while there are some sensible initiatives, we are generally underwhelmed by the overall package. In our view, it is unlikely to fully achieve its stated objectives of materially improving affordability, boosting productivity, and rebalancing the tax system in a meaningful way. The main concern for us is that Government over-spending requires more taxation.

That said, there are several important measures worth understanding, particularly in relation to tax, investment structures, and long-term planning.

The Big Picture

The economy is still growing, although at a slower pace, and inflation is expected to increase in the short term due to rising fuel and transport costs.

The Budget projects:

• A $31.5 billion deficit in 2026–27

• Slower economic growth (down to 1.75% next year)

• A temporary lift in inflation to around 5%

The Government continues to aim for a return to surplus in the mid‑2030s.

Our view:While the fiscal position is relatively stable, the pathway back to surplus is long and hinges on optimistic assumptions around growth and productivity improvements.

Cost of Living – Some Relief, But Limited Impact

The Government has introduced a number of targeted measures:

• A $250 tax offset from 2027–28

• A $1,000 instant deduction for work expenses (no receipts required)

• A reduction in the 16% tax rate to 15%, then 14%

• Increased Medicare levy thresholds for lower-income earners

What this means for you:These measures will provide some assistance, but they are relatively modest. For most households, they are unlikely to significantly offset rising living costs—particularly if energy and fuel prices remain elevated.

Tax Reform – The Most Significant Changes

The major structural changes are directed at investors and wealth structures.

Property Investment

From 1 July 2027:

• Negative gearing restricted to new properties only

• Existing investments are grandfathered

Capital Gains Tax (CGT)

• The 50% CGT discount removed

• Replaced with indexation of cost base

• Introduction of a minimum 30% tax rate on capital gains

Superannuation

• No change to CGT concessions inside super

Discretionary Trusts

From 1 July 2028:

• Introduction of a minimum 30% tax rate on distributions

What this means for you:

• Existing investments remain protected

• Future investment decisions will need to be considered more carefully

• The attractiveness of different strategies (property, trusts, super) will shift

Our view:While the intent is to improve fairness, these changes risk adding complexity without necessarily delivering the intended housing or revenue outcomes. There is also a risk of unintended consequences for investment behaviour.

Housing – Focus on Supply

The Government is aiming to address housing affordability by increasing supply:

• Funding to support ~65,000 additional homes

• A $2 billion infrastructure fund

• Measures to boost construction capacity

• Extension of the foreign buyer ban on established homes

What this means for you:These measures may help over time, but the impact is likely to be slow.

Our view: We think the scale of the response is unlikely to materially shift affordability in the near to medium term.

Productivity and Infrastructure

There is a stronger focus on long-term economic capability:

• Reductions in regulatory burden

• Faster approvals

• $8.6 billion in infrastructure spending

• Measures to support labour supply

Our view :This is an important area to focus on, however the benefits will take time to flow through, and execution will be key.

Health, Aged Care and NDIS

The Budget includes significant funding increases:

• $25 billion for hospitals

• Cheaper medicines via the PBS

• Expanded aged care capacity

• Ongoing reforms to the NDIS

What this means for you:This should improve access and affordability of healthcare over time, particularly for retirees.

Energy, Defence and Risk Management

Given global instability, the Government is prioritising resilience:

• Fuel security initiatives

• Domestic gas supply commitments

• $53 billion increase in defence spending

Key Takeaways

From a planning perspective:

• Tax changes are the most relevant development and will shape future strategy

• Existing structures are largely protected, giving time to adapt

• Cost-of-living support is modest

• Housing measures are unlikely to deliver near-term relief

• Superannuation remains an attractive structure

Final Thoughts

This Budget attempts to balance short-term pressures with long-term reform. However, in our view, it falls short of being truly transformative.

While there are some positive steps, we do not believe the measures announced will be sufficient to:

• materially improve housing affordability

• significantly lift productivity

• or meaningfully reduce cost-of-living pressures

As always, many of these proposals are not yet legislated and may change.

If you would like to discuss how these changes may impact your personal situation—particularly around investment structures, tax planning or property—please feel free to get in touch.