By Radz Je CFP, Joel & Team — Forward Path Advisory

On 12 May 2026, the Treasurer handed down the 2026–27 Federal Budget. The most significant overhaul of Australia’s tax system in more than a quarter of a century. Forward Path Advisory has broken down exactly what it means for you. Furthermore, our comprehensive client advisory document, including worked examples for every scenario, is available to download below.

 

# 1 — Personal income tax: up to $2,816 more in your pocket

The Government is delivering five rounds of income tax cuts, stacked year on year. Specifically, the tax rate on your first $45,000 of income drops from 16% to 15% in July 2026, then falls further to 14% in July 2027. In addition, from 2027–28, a $250 Working Australians Tax Offset comes straight off your tax bill — not a deduction, but a direct reduction. On top of this, you can claim a $1,000 work expense deduction right now without keeping any receipts.

As a result, by 2027–28, a working Australian earning average wages could keep up to $2,816 more per year compared to current settings.

# 2 — Capital gains tax: a fundamental change from 1 July 2027

The Government is replacing the 50% CGT discount with cost-base indexation and a 30% minimum tax on real gains. This change affects investment properties, shares, and other assets.

However, there is a critical protection: the old rules fully grandfather gains already built up before 1 July 2027. But to access this protection, you must obtain a formal market valuation of your investment assets as at 30 June 2027. This step is not optional — it is the essential compliance step that separates your old-rules gain from your new-rules gain.

Additionally, the new rules will subject pre-CGT assets held since before September 1985 — previously fully exempt — to the 30% minimum tax on any gains accruing from 1 July 2027 onwards.

# 3 — Negative gearing: restricted from tonight

From budget night, 12 May 2026, the Government restricts negative gearing on residential property to new builds only. Therefore, any new purchase of an established property falls under the new rules immediately.

If you already hold investment properties, however, grandfathering provisions fully protect you. Nothing changes for your existing portfolio.

In contrast, if you buy an established property from tonight, your rental losses can only offset rental income — not your wages or salary. New builds remain exempt and retain full negative gearing benefits.

# 4 — Discretionary trusts: 30% minimum tax from 1 July 2028

This is the most significant structural change for many of our clients. From 1 July 2028, the Government will levy a 30% minimum tax at the trustee level on all discretionary trust income. Consequently, the ability to split income among lower-taxed family members — a cornerstone of trust planning for decades — will be materially curtailed. In total, over 840,000 Australian trusts are affected.

Furthermore, a three-year rollover relief window opens from 1 July 2027 for those wishing to restructure out of discretionary trusts. Given the complexity involved, you must begin planning now. The time between today and commencement is shorter than it appears.

# 5 — Business measures: meaningful support for SMEs

The Government restores loss carry-back from 1 July 2026 and makes the $20,000 instant asset write-off permanent — therefore removing the annual Budget uncertainty that has frustrated business planning for years. Moreover, the R&D Tax Incentive SME threshold rises from $20M to $50M, bringing significantly more businesses into the concessional R&D regime. Together, these measures improve cash flow, reduce compliance burden and support capital investment confidence.

 

 

Download the full advisory →

 

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#FederalBuget2026

#AustralianTax

#CGT

#NegativeGearing

#TrustReform

#FinancialPlanning

#WealthManagement

#ForwardPathAdvisory

#FinancialAdviser

#CFP#TaxPlanning

#SME

#AusFinance

 

General Advice Warning: This article has been prepared for general information purposes only and is current as at 13 May 2026. It does not constitute financial, taxation, legal or investment advice. Measures are subject to legislative enactment. Forward Path Advisory Pty Ltd is a Corporate Authorised Representative of Synchronised Business Services Pty Ltd, AFS Licence no 243313.