Federal Budget 2026 — what it means for your money.
Treasurer Chalmers handed down the 2026-27 Federal Budget tonight. Here's exactly what changed — and what the calculator says it means for your household.
The headline tax cut is confirmed — 15% on income $18,201–$45,000 from 1 July 2026, dropping to 14% from 1 July 2027. But the big structural changes are CGT reform and negative gearing restriction — both confirmed tonight, both applying from 1 July 2027, both simpler than the pre-budget leaks suggested. Plus two entirely new measures not flagged before the Budget: a $1,000 instant work expense deduction and a new Working Australians Tax Offset worth $250/year.
Every confirmed measure broken down below, with updated household profiles and calculator links.
In this guide
- The big one: CGT reform — confirmed: inflation indexation + 30% minimum tax
- Income tax cuts — $268/yr from 2026, $536/yr from 2027
- HECS-HELP 20% debt wipe
- Division 296 super tax ($3M+ balances)
- Negative gearing reform — confirmed
- $1,000 instant work expense deduction — NEW
- Working Australians Tax Offset ($250/yr) — NEW
- Discretionary trust distributions — 30% minimum — NEW
- Energy bill relief & cost-of-living measures
- Housing and rent assistance
- How 6 households fare
- What didn't change
Treasurer Chalmers delivered the 2026-27 Federal Budget at 7:30pm AEST. All measures below are confirmed from the official Budget papers at budget.gov.au. Items marked ✓ CONFIRMED were announced tonight. Items marked ✓ LEGISLATED were already law before tonight.
1. The big one: CGT reform — confirmed: inflation indexation + 30% minimum tax ✓ Confirmed
Source: budget.gov.au · /content/04-tax-reform.htm · Confirmed 12 May 2026
The most significant tax restructure since 1999 — but with substantial protection for existing investors. The 50% CGT discount is being replaced with inflation indexation plus a 30% minimum tax floor, but ONLY for gains arising after 1 July 2027. Existing assets keep the 50% discount. New builds get to choose between the old and new systems. Negative gearing on existing assets is fully grandfathered.
What was confirmed
The 50% CGT discount is being replaced with an inflation-indexation method PLUS a minimum 30% tax on gains, effective from 1 July 2027. The change ONLY applies to gains arising after 1 July 2027 — existing investors keep the 50% discount on all gains accrued up to that date.
The clean transition — simpler than leaked
- Assets bought before 1 July 2027 — keep the existing 50% discount. Full stop. No hybrid model.
- Assets bought from 1 July 2027 onwards — inflation indexation method, plus 30% minimum tax floor on any capital gain.
- Critical exception — new builds: Investors who buy NEW BUILDS can CHOOSE between the existing 50% discount OR the new inflation-indexation arrangements. This is a deliberate incentive for new residential construction.
The 30% minimum tax — what it means in practice
The new system has a minimum 30% tax rate on capital gains. This means very high-income earners (who face 45%+ marginal rates) may actually pay less under the new system for long-held assets, while middle-income investors who benefited most from the 50% discount will pay more. Whether you win or lose depends on your income, how long you held the asset, and the CPI rate over that period.
Counter-intuitive maths
The inflation indexation method can leave long-term holders better off than the old 50% discount — particularly when CPI was elevated. Short-term investors are the primary target. Use the calculator below to see your personal outcome.
Short-term flippers and speculators are the ones who get hit. That's likely the policy intent.
Negative gearing — confirmed separately
Negative gearing reform is confirmed — limited to new builds from 1 July 2027. Existing investors are fully grandfathered. See Section 5 for full details.
Political context
Labor did not campaign on CGT or negative gearing reform in 2025. The government's framing: housing affordability and fiscal repair, with full grandfathering of existing investors ensuring no retrospective impact. The new-build exemption is a deliberate supply incentive. The Greens have broadly welcomed the reforms; the Coalition has flagged opposition in the Senate, though the grandfathering provisions make the measures harder to characterise as a broken promise.
Model your position
Our CGT calculator has been updated tonight with the confirmed structure — inflation indexation plus 30% minimum tax, new-build option included. Model your own portfolio below.
2. Income tax cuts — $268/yr from 2026, $536/yr from 2027 ✓ Legislated
The headline confirmed change ahead of Budget 2026 is a reduction in the marginal tax rate on income between $18,201 and $45,000 — from 16% to 15%, taking effect from 1 July 2026. This 1 percentage point cut applies to income in that band, which means:
- The maximum saving is $268 per year (1% of $26,800 — the width of the band)
- Anyone earning more than $45,000 gets the full $268
- The saving phases in proportionally between $18,201 and $45,000
- People earning below $18,200 (the tax-free threshold) are unaffected
▶ Annual tax saving by income · Financial Year 2026–27
$268 per year works out to $5.15 per week — not transformational, but it's a genuine ongoing reduction for every working Australian above the minimum wage. For a couple both earning over $45,000, the combined household saving is $536 per year.
This follows the Stage 3 tax cuts already in place from 1 July 2024, which made more substantial cuts — particularly for middle incomes. The 2026 Budget cut adds to those rather than replacing them.
How it shows up in your pay packet
Your employer's payroll system should automatically update PAYG withholding from 1 July 2026. You don't need to do anything. If you're a sole trader or contractor paying PAYG instalments, the ATO will adjust your instalment amounts.
3. HECS-HELP 20% debt wipe ✓ Legislated
This is the biggest financial change for younger Australians and those still carrying study debt. Every outstanding HECS-HELP, VSL, SSL and other income-contingent loan balance will be reduced by 20% on 1 June 2025.
It's automatic — no application, no forms, no phone calls. On that date, your ATO debt records update and the new balance appears in myGov.
▶ HELP debt wiped — by starting balance
The new repayment rules for 2026–27
The debt reduction is paired with a restructure of how HECS is repaid. Key changes:
- New threshold: $67,000 — if you earn below this, no compulsory repayment
- Marginal repayment model: you pay a percentage only on income above the threshold — not on your whole income as before
- This means someone earning $70,000 pays on $3,000 of income, not $70,000
Example: Sarah earns $75,000 with a $28,000 HECS debt. Under old rules she paid 3.5% of $75,000 = $2,625/year. Under new rules: her debt drops to $22,400 (20% off), and her annual repayment is approximately 10% of ($75,000 − $67,000) = $800/year. She's $1,825 better off each year, and her debt is $5,600 lighter.
What about voluntary repayments?
The government has indicated that people who made voluntary repayments after 1 June 2023 won't be disadvantaged — a partial adjustment or compensation mechanism is being worked out. Watch the ATO's website for the exact mechanism as legislation proceeds.
4. Division 296 super tax ($3M+ balances) ✓ Legislated
From 1 July 2026, superannuation earnings on balances above $3 million will be taxed at an additional 15%, effectively doubling the tax on those earnings from 15% to 30%.
This is Division 296 of the tax law — named for the section that introduces it. It affects approximately 80,000 Australians, or about 0.5% of super fund members.
How it works
The tax isn't levied on the $3 million of the balance — it's on the earnings attributed to the portion of the balance above $3 million. "Earnings" for this purpose is calculated as the increase in fund value over the year, including unrealised gains. This is controversial — investors typically only pay CGT when they sell an asset, not when it appreciates in value.
▶ Estimated Division 296 annual tax · 7% assumed return
Who's affected?
To have $3 million in super, you would typically need decades of contributions and strong investment returns. Most people in this category are business owners, executives, or inherited substantial balances. It does not affect the majority of Australians approaching retirement with $500,000–$1.5 million balances.
Can you restructure to avoid it?
Some options exist — withdrawing super above $3M and investing personally (foregoing concessional tax treatment), or splitting contributions with a spouse. Each has trade-offs. Speak to a financial adviser if your balance is approaching the threshold.
5. Negative gearing reform — confirmed ✓ Confirmed
From 1 July 2027, negative gearing is limited to new builds only. The confirmed rules are:
- Properties held before Budget night (12 May 2026) — keep all existing arrangements. Investors can continue to deduct losses against wages and other income as before.
- New builds bought after Budget night — investors can still deduct rental losses against other income (wages). Negative gearing remains available.
- Established housing bought after Budget night — investors can only deduct losses against residential property income, NOT against wages or other income. Unused losses can be carried forward to future years when the property generates income.
The practical effect: buying an existing investment property after tonight and running it at a loss will no longer reduce your tax bill on your salary. The deduction still exists — it can only offset future property income, not wages.
Source: budget.gov.au · /content/04-tax-reform.htm · Confirmed 12 May 2026
6. $1,000 instant work expense deduction — NEW ✓ Confirmed
A new measure not flagged before Budget night: from 2026-27, workers can claim a $1,000 work-related expense deduction without needing receipts. This replaces the existing $300 no-receipt threshold.
- 6.2 million workers are expected to benefit
- Average saving: approximately $205 per year
- You can still claim more than $1,000 — but amounts above that require receipts as under current rules
- Applies from 1 July 2026 (i.e., your 2026-27 tax return)
For someone on the 32.5% marginal rate (income $45,001–$135,000), the extra $700 in deductions above the old $300 threshold saves approximately $227 in tax.
7. Working Australians Tax Offset ($250/yr) — NEW ✓ Confirmed
A second new measure not flagged before Budget night: from 2027-28, a new Working Australians Tax Offset (WATO) of $250 per year for 13 million workers.
- Applies automatically — no application required
- Raises the effective tax-free threshold to $19,985 for eligible workers
- Aimed at workers in the $18,201–$45,000 income band (combined with the 14% rate cut from 1 July 2027)
- 13 million workers benefit; average value $250/year
Note: WATO starts from 2027-28, not 2026-27. It is in addition to the tax rate cut already applying from 1 July 2026 (15%) and the further rate cut to 14% from 1 July 2027.
8. Discretionary trust distributions — 30% minimum — NEW ✓ Confirmed
From 1 July 2028, discretionary trust distributions will be subject to a minimum 30% tax rate. This prevents high-income families using trusts to distribute income to lower-income members and pay a lower effective tax rate.
- Applies from 1 July 2028 — one year after CGT and negative gearing changes
- Three-year rollover relief from 1 July 2027 for trust restructuring — trustees have until 30 June 2030 to restructure before the rules apply
- Affects discretionary (family) trusts — unit trusts and fixed trusts are not impacted
If your household uses a family trust to split income with lower-income family members, the $205–$250 annual savings above may be offset or eliminated by higher trust distribution taxes from 2028.
9. Energy bill relief & cost-of-living measures ⏳ Expected
The Budget is widely expected to extend the energy bill relief program for an additional year. Based on the existing scheme, eligible households may receive a $300 credit automatically applied to their electricity bill across four quarterly instalments — $75 per quarter. Small businesses have previously received $325.
Who is expected to get the energy rebate?
Under the previous scheme, the rebate applied to all residential electricity customers with no means-testing. If extended, the same mechanism is expected — applied directly by your electricity retailer, funded through a government subsidy scheme. Confirm on Budget night.
Other cost-of-living measures expected
- JobSeeker increase: ⏳ A modest increase widely flagged — details to be confirmed Budget night
- Rent assistance: ⏳ Maximum Commonwealth Rent Assistance rates expected to increase, following the 15% increase in the 2023 Budget
- Bulk billing incentive: ⏳ The tripling of the bulk billing incentive is expected to continue through 2026–27
- PBS medicines: ✓ The maximum co-payment is maintained at $31.60 general / $7.70 concession — already confirmed
10. Housing and rent assistance ⏳ Expected
Housing affordability remains one of the most contested policy areas in Australian politics. The 2026 Budget is expected to include several housing-related measures, though they are unlikely to materially shift the affordability dial in major cities.
Help to Buy scheme ⏳ Expected
The shared equity scheme — under which the government takes up to a 40% stake in a property to reduce the buyer's mortgage — is expected to expand. Flagged income caps of $90,000 for singles and $120,000 for couples. Property price caps vary by state. Confirm Budget night.
Social housing investment ⏳ Expected
Additional funding for the Housing Australia Future Fund is expected, targeting construction of social and affordable housing. The fund lends to community housing providers at lower rates.
Build-to-Rent tax incentives ⏳ Expected
The accelerated depreciation and reduced managed investment trust withholding tax for build-to-rent developments — introduced in the 2023 Budget — is expected to be extended and expanded to attract institutional investment into rental supply.
First Home Guarantee ⏳ Expected
First Home Guarantee place increases are expected — details Budget night.
11. How 6 households fare ✓ Confirmed figures
Using confirmed Budget night figures. All amounts are per year unless stated. Tax cut = $268 (full, income above $45K) or pro-rated. Instant deduction saving = ~$205. WATO $250 (from 2027-28).
$268 tax cut + $5,600 HECS debt wiped + ~$205 instant deduction saving + $300 energy rebate. From 2027-28 add $250 WATO. Ongoing annual benefit: ~$723/yr (rising to ~$973 from 2027-28).
$536 tax cuts + $13,400 HECS wiped (combined) + 2 × ~$205 instant deduction saving + $300 energy rebate. From 2027-28 add 2 × $250 WATO = $500. Ongoing annual benefit: ~$1,446/yr (rising to ~$1,946 from 2027-28).
$536 tax cuts + $10,600 HECS wiped + 2 × ~$205 instant deduction saving + $300 energy rebate. From 2027-28 add 2 × $250 WATO. Ongoing annual benefit: ~$1,246/yr.
$268 tax cut — but Div 296 levies ~$8,400. Investment property bought 2018: grandfathered for BOTH negative gearing (existing rules apply) AND CGT (50% discount on gains accrued to 1 July 2027). No immediate cash impact from CGT/NG reform. Net: −$8,132 annually from Div 296.
$268 tax cut + $8,400 HECS wiped + ~$205 instant deduction saving + $300 energy rebate. From 2027-28 add $250 WATO. Ongoing annual benefit: ~$723/yr.
$268 tax cut on $55K pension income + $300 energy rebate. Div 296 doesn't apply (balance $620K). Retired — instant deduction and WATO don't apply. Annual benefit: ~$568/yr.
12. What didn't change ✓ Confirmed
CGT discount and negative gearing were confirmed tonight — see Section 1 and Section 5. The following were NOT changed in tonight's Budget:
- Super tax on earnings in pension phase: ❓ The 0% earnings tax exemption in pension phase is not expected to change, though Treasury is reviewing it longer-term.
- Stage 3 tax cuts rolled back: ✓ The existing rate cuts remain in place. The 2026 Budget adds a further 1-point cut at the lower band only — already legislated.
- Fringe Benefits Tax rate: ✓ Expected to remain at 47%. The FBT year still runs April to March.
- Superannuation Guarantee rate: ✓ Remains at 12% for 2025–26. No further increase is legislated.