The 2026 Federal Budget, handed down earlier this month, has dominated generated significant discussion, with a strong focus on cost-of-living relief, housing affordability, taxation, and ongoing pressure on government spending.

For many financially established Australians, business owners and investors, however, the bigger conversation is around several significant proposed tax reforms and what they may mean over the coming years.

According to this year’s Budget contains some of the most substantial tax policy shifts discussed in recent years.

“There’s naturally been a lot of focus on cost-of-living measures and immediate relief,” Michael Hart, Joint Managing Partner says.

“However, for many of our clients, the more important consideration is understanding how these proposed changes could impact long-term wealth creation, investment strategies and financial planning.”

Changes to negative gearing

One of the biggest announcements was the proposed overhaul of negative gearing rules.

From 1 July 2027, investors purchasing established residential properties after Budget night would no longer be able to offset rental losses against other income. Instead, those losses could only be offset against future residential property income or capital gains.

Importantly, existing investment properties owned before 7:30pm AEST on 12 May 2026 would be grandfathered under the current rules.

New builds would remain eligible for negative gearing concessions.

Michael says many property investors are now reviewing how future acquisitions may be structured.

“For existing investors, there may be limited immediate impact,” he says.

“However, for people considering future property purchases, particularly established residential property, these changes could materially alter the after-tax returns and investment appeal.”

Capital gains tax reforms

The Government also announced plans to replace the current 50 per cent capital gains tax discount from 1 July 2027.

Under the proposal, capital gains would instead be adjusted for inflation using CPI indexation, alongside the introduction of a minimum 30 per cent tax rate on gains.

The reforms would apply not only to investment properties, but also to shares and managed funds.

Importantly, only gains accrued after 1 July 2027 would be impacted.

“For many higher-net-worth clients, this is probably one of the most significant announcements in the Budget,” Michael says.

“It reinforces the importance of reviewing investment structures, timing considerations and long-term asset planning.”

Discretionary trusts under scrutiny

The Budget also proposed a new minimum 30 per cent tax on discretionary trusts from 1 July 2028.

Discretionary trusts are commonly used by business owners, professionals and families for asset protection and tax planning purposes.

The Government says the reform is designed to reduce income splitting and align trust taxation more closely with ordinary wage earners.

Some exclusions would apply, including for charitable trusts, deceased estates and some primary production income.

Michael says the proposal is likely to trigger significant discussion among advisers, accountants and business owners over the next two years.

“For many families and businesses, discretionary trusts are deeply embedded within their broader financial structures,” he says.

“While there is still a legislative process ahead, it’s certainly something people should be paying close attention to.”

$1,000 instant tax deduction

The Government also announced a new $1,000 instant tax deduction for work-related expenses from the 2026–27 financial year.

Under the proposal, taxpayers claiming deductions at or below that threshold would no longer need to keep receipts or substantiate individual expenses.

Combined with the previously legislated tax cuts and the proposed Working Australians Tax Offset, the Government says some workers could receive total tax relief of up to $2,816 annually.

Support for small business

Several measures were also announced for small businesses.

The $20,000 instant asset write-off would be permanently extended from 1 July 2026 for businesses with turnover under $10 million.

The Government also announced the return of loss carry-back rules, allowing eligible companies to offset current-year losses against taxes paid in previous years.

“These measures are designed to improve cash flow and encourage investment,” Michael says.

“For business owners navigating expansion or uncertain trading conditions, they may provide some meaningful flexibility.”

While many of these measures still need to pass Parliament, the Budget has clearly signalled the Government’s broader direction on taxation, housing and wealth policy.

At Halpin Wealth, we are continuing to review the proposed changes and helping clients understand how they may impact their financial position and long-term strategy.

If you would like to discuss how the budget may affect your financial position and the achievement of your goals, our team is here to help. Contact us today.

Sources:

• Advisely: Federal Budget 2026–27: What you need to know – May 12, 2026
• Australian Federal Budget 2026–27 Tax Reform – May 15, 2026

This information provided in this article is general advice only and has been prepared without taking into account your own objectives, financial situation or needs. Before making a financial decision based on this advice, you must consider whether it is appropriate in light of your own needs, objectives, and financial circumstances, and where relevant, obtain personal financial, taxation or legal advice. Where a financial product has been mentioned, you should obtain and read a copy of the Product Disclosure Statement (PDS) prior to making any decisions about whether to acquire a product.