Federal Budget May 2026

Key proposals and how they might impact you.

The 2026 Federal Budget focuses heavily on housing affordability, cost-of-living pressures, and aged care support, while making significant changes to how investments are taxed.

Importantly, many proposed changes are not yet law and require legislation before they take effect.

Key Takeaways

• Major tax changes for investors – less favourable treatment for property and capital gains from 2027

• Some cost-of-living relief – through tax cuts, offsets, and lower medicine costs

• More support for aged care and at-home services

• Changes to private health rebates for older Australians

• Minimal changes to superannuation

• Housing reforms aimed at helping younger Australians enter the market

• Ongoing support for small businesses through tax incentives

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Cost of Living & Everyday Relief

Tax relief (for working Australians)

• New $1,000 standard tax deduction from 1 July 2026

• A new Working Australians Tax Offset from 1 July 2027

• Additional legislated tax cuts over the next two years

What this means: If you (or your adult children) are still working, you may benefit from modest tax savings and simpler tax returns.

Healthcare and medicines

• PBS medicines capped at $25 per prescription

• Concessional prescriptions frozen at $7.70 until 2030

What this means: Lower ongoing healthcare costs, particularly helpful for retirees and those on fixed incomes.

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Changes to Investments & Property

Capital Gains Tax (CGT) changes

From 1 July 2027:

• The 50% CGT discount will be removed

• Replaced with inflation-adjusted gains plus a minimum 30% tax on capital gains

Important:

• Applies only to gains from 1 July 2027 onwards

• Existing investments receive transitional treatment

What this means:

• Investment returns may be more heavily taxed in future

• Timing of asset sales will become more important

Negative gearing (property investors)

From 1 July 2027:

• Negative gearing will be limited to newly built properties

• Existing properties are largely protected under transitional rules

What this means:

• Encourages investment into new housing supply

• Reduces long-term tax advantages for existing property investors

Discretionary trusts

From 1 July 2028:

• A minimum 30% tax rate will apply to trust income

What this means:

• Reduced flexibility in distributing income to minimise tax

• Some families and retirees may need to review structures

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Housing & the Next Generation

The Budget includes structural changes aimed at improving housing affordability, including:

• Redirecting investor incentives toward new housing

• Reducing tax benefits for established property investments

What this means for families:

• Potentially improved access for first-home buyers over time

• Relevant for those supporting adult children entering the property market

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Aged Care & Later Life Planning

More aged care support

From 2027:

• Funding for 5,000 additional aged care places per year

• Increased support for providers to expand capacity

Support at Home improvements

From 1 October 2026:

• Personal care services fully funded (no out-of-pocket costs where funding is available)

What this means:

• Improved access to aged care services

• Reduced costs for those needing support at home

• Positive outcomes for families supporting ageing parents

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Centrelink & Pension Considerations

• Age Pension recipients are generally protected from the proposed minimum tax on capital gains

• Changes to Pension Supplement rules for overseas travel, with longer temporary absence allowances

What this means:

• Pension recipients are unlikely to be negatively impacted by most tax changes

• Some increased flexibility when travelling overseas

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Private Health Insurance Changes

From 1 April 2027:

• Higher rebate rates for those aged 65 and over will be removed

• Rebates will be aligned with those available to younger Australians on the same income

What this means:

• Some retirees may see higher out-of-pocket private health insurance costs over time

• Important to review cover and affordability as part of your overall retirement plan

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Business Taxation Highlights

While primarily focused on individuals and households, the Budget includes several measures supporting businesses:

• Permanent small business instant asset write-off (up to $20,000 per asset)

• Ability for eligible companies to carry back tax losses to offset prior year tax

• Introduction of loss refunds for eligible start-ups in early years

What this means:

• Improved cashflow and flexibility for business owners

• Relevant for clients who own or are involved in small businesses or family enterprises

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What Hasn’t Changed

• Superannuation remains largely unchanged in this Budget

• Existing retirement strategies remain broadly intact (for now)

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What You Should Consider

Depending on your situation, it may be worth reviewing:

• Investment strategy and timing of asset sales

• Property investment plans

• Use of trusts or family structures

• Aged care planning and funding

• Support for children entering the property market

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Final Thoughts

This year’s Budget signals a potential shift in how investment income, property and family structures are taxed, alongside continued support for cost‑of‑living pressures and ageing Australians.

While many of these measures are not yet law and may change as legislation is debated, they highlight areas where forward planning and flexibility will become increasingly important.

For you, this may mean:

• Reviewing the timing of asset sales and long-term investment strategy

• Reconsidering the role of property and gearing within portfolios

• Assessing whether existing structures (such as trusts) remain appropriate

• Factoring in future healthcare and aged care costs

• Supporting intergenerational planning, particularly around housing affordability

Importantly, these changes do not require immediate action, but they do present an opportunity to ensure your financial strategy remains aligned with both current rules and potential future changes.

Our role as your adviser is to:

• Monitor legislative developments as these proposals progress

• Help you understand how changes may impact your specific circumstances

• Identify opportunities or risks early, and adjust your strategy where needed

• Provide clear, personalised guidance so you can make confident decisions

As always, any changes we consider will be based on your individual goals, timeframe and financial position - not just Budget announcements.

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Important Note

This summary is general information only and reflects proposed measures that may change as legislation is finalised. You should seek advice specific to your personal circumstances before making any financial decisions.

References:

• 2026–27 Federal Budget Papers (Australian Government)

• Federal Budget Client Insights – Entireti Alliances (May 2026)

• Federal Budget Adviser Summary – Entireti Alliances (May 2026)