Australian Federal Budget 2026-27 – What You Should Know

The 2026–27 Federal Budget represents one of the most consequential shifts in Australia’s tax and investment framework in more than two decades. While the public debate has largely focused on housing affordability and cost‑of‑living relief, the deeper story is about budget repair, economic resilience, and a re‑shaping of how investment income is taxed over the long term.

For Australian expats and high‑income professionals, this Budget matters not because of one single policy, but because it changes the balance between property, trusts, companies and superannuation at a time of heightened global uncertainty.

The Economic Backdrop: Why This Budget Looks the Way It Does

This Budget has been delivered against a far more fragile global and domestic economic environment than in recent years.

Treasury forecasts show:

• Australia’s underlying cash deficit is expected to be $31.5 billion in 2026–27, an improvement on earlier forecasts but still firmly in deficit
• Gross government debt is forecast to reach approximately $1.05 trillion by June 2027, albeit lower than previously expected
• Economic growth is forecast to slow to 1.75% in 2026–27, down from 2.25% the year prior
• Inflation is expected to peak around 5% in mid‑2026, driven largely by higher global energy prices following the conflict in the Middle East and disruption to oil supply routes

Treasury modelling also includes downside scenarios where oil prices spike significantly higher, pushing inflation above target for longer and placing renewed pressure on household budgets.

This context is critical. The Government is attempting to balance near‑term cost‑of‑living relief with long‑term revenue repair, and much of that repair is being funded through changes to how investment income is taxed.

The Big Picture: What This Budget Is Trying to Achieve

Treasurer Jim Chalmers described this Budget as “ambitious” and focused on intergenerational equity. In practical terms, it:

• Reduces tax incentives for leveraged investment in existing housing
• Narrows income‑splitting opportunities through discretionary trusts
• Preserves superannuation as the most stable long‑term tax environment
• Introduces modest income tax relief while raising significant revenue elsewhere

For expats, this signals a clear policy direction: future wealth strategies must be more deliberate, better structured, and less reliant on legacy concessions.

Capital Gains Tax: The End of the 50% Discount

From 1 July 2027, the long‑standing 50% capital gains tax discount for individuals, trusts and partnerships will be replaced with:

• Inflation‑adjusted cost base indexation, and
• A minimum 30% tax on real capital gains

Key points for expats:

• Capital gains accrued before 1 July 2027 retain current treatment under transitional rules
• Gains accrued after that date are taxed under the new regime
• The changes apply to property, shares and other CGT assets held outside super
• Superannuation is explicitly excluded from these reforms

This makes the timing of asset sales materially more important, particularly for long‑held Australian property and share portfolios.

Negative Gearing: More Targeted, Not Eliminated

From 1 July 2027, negative gearing for residential property will be:

• Limited to new builds, and
• Fully grandfathered for properties held as at 12 May 2026

For established properties purchased after Budget night, rental losses can no longer be offset against PAYG salary or other income.

Rental Losses Can Still Be Carried Forward

A critical nuance often overlooked is that rental losses do not disappear.

Under the new rules:

• Rental losses may still be deducted against residential property income, and
• Unused losses can be carried forward to offset future rental profits

For example, an expat who purchases an established property that runs at a loss in early years can still bank those losses and apply them when the property later becomes positively geared.

This shifts negative gearing from a short‑term tax reduction strategy into a long‑term cash flow and capital growth strategy, where debt management and rent growth assumptions matter far more.

Discretionary Trusts: A 30% Minimum Tax

From 1 July 2028, discretionary trusts will face a 30% minimum tax, payable by trustees.

Important details include:

• Beneficiaries still declare income
• Non‑corporate beneficiaries receive non‑refundable tax credits
• Fixed trusts, superannuation funds, charitable trusts, deceased estates and certain other trusts are excluded
• Three years of rollover relief from 1 July 2027 allows restructuring without immediate CGT

For many expat families, this significantly reduces the effectiveness of discretionary trusts as income‑splitting tools.

Why Company Ownership Is Being Re‑Examined

As individual and trust concessions tighten, company ownership of investments is back on the table.

Companies may offer:

• Tax rates of 25% or 30%, depending on eligibility
• A more stable environment for retaining and reinvesting profits, particularly for high‑income earners

However, company ownership also involves trade‑offs:

• No CGT discount under current rules
• Potential additional tax when extracting funds
• Different lending, land tax and estate planning considerations

The key is not whether companies are “better”, but whether they are more appropriate for a given strategy and time horizon.

Superannuation: The Quiet Winner

Despite widespread speculation ahead of Budget night, superannuation tax settings were left unchanged.

This leaves super as:

• One of Australia’s most predictable tax environments
• Taxed at 15% on earnings
• Effectively taxed at 10% on capital gains
• Completely insulated from the new CGT and negative gearing reforms

For expats, super continues to play a central role in long‑term wealth accumulation.

Other Key Budget Measures Expats Should Be Aware Of

• A new Working Australians Tax Offset of up to $250 from the 2027–28 income year
• A $1,000 instant tax deduction from 2026–27 for work‑related expenses without receipts
• Changes to migration settings aimed at lifting productivity
• Increased regulatory oversight of managed investment schemes
• Ongoing consultation on strengthening the superannuation performance test

While these measures are modest individually, together they shape the broader investment and employment landscape.

Final Thoughts

This Budget doesn’t remove opportunity, but it raises the cost of inaction.

For Australians at home and across the globe, the next 12 to 24 months represent a critical planning window. Reviewing asset sale timing, ownership structures and the role of superannuation now can materially improve long‑term after‑tax outcomes.

If you’d like help assessing how these changes affect your personal situation, we’re here to support you.

Ally Wealth Management is the trusted ally in finance for Australians at home and across the globe. As both Australian expats and residents, the founders of Ally have a unique understanding of the common personal financial challenges faced.

Book your complimentary appointment with our team at Ally Wealth Management to discuss how we can help you to achieve your financial goals.

Ally Wealth Management Pty Ltd is a Corporate Authorised Representative of Sentry Advice Pty Ltd ABN 77 103 642 888. Sentry Advice holds an Australian Financial Services Licence (AFSL) No. 227 748.

General Advice Warning: The information contained herein is of a general nature only and does not constitute personal advice. You should not act on any recommendation without considering your personal needs, circumstances, and objectives. We recommend you obtain professional financial advice specific to your circumstances.