By now you will have seen how the Federal Budget is set to affect the humble Aussie investment property. But the full Treasury Budget papers and tax explainers reveal that the 2026-27 reforms have far-reaching implications for all Australian investors. Here are the winners and losers when it comes to investing following the 2026-27 Federal Budget.
The changes are sweeping this time around. And they reach far beyond just residential property. Proposed changes would touch every share, ETF, family trust and collectible held outside super. Here who came out ahead and who is set to be behind.
The winners
Borrowers who use leverage for shares rather than property
The negative gearing changes you’ve heard so much about after Budget night will officially apply to residential property only. Treasury’s tax explainer is unambiguous on this point.
Treasury’s own explainer states:
“Commercial property and other asset classes, such as shares, will remain subject to existing arrangements.”
That means margin loans for ASX-listed shares and ETFs, geared share funds, investment loans for share portfolios, and limited recourse borrowing arrangements inside SMSFs over share assets all remain on the existing tax footing. Interest expenses on those facilities continue to be deductible against other income. The explainer also confirms that widely held trusts, including most managed investment trusts, and superannuation funds, including SMSFs, are excluded from the negative gearing changes altogether.
For investors who have been weighing residential property gearing against share gearing, the relative attractiveness of share-based strategies has likely lifted.
Australian start-ups and the venture capital sector
Two budget provisions favour the local innovation economy. The Treasurer’s speech announced expanded tax incentives for venture capital and a re-targeted Research and Development Tax Incentive within a $3.5 billion tax-reform package for businesses. And the negative gearing and CGT explainer notes that, given the unique characteristics of the tech and start-up sector, the Government will consult on the interaction of the CGT reforms and incentives for investment in early-stage and start-up businesses.
The shape of that consultation has not been released. The signalled direction is a separate, more favourable treatment for early-stage and start-up investment than the new broad CGT regime, which would protect the existing Employee Share Scheme and Early Stage Venture Capital Limited Partnership incentives.
Budget Paper No. 2 meanwhile sets out the headline change for the venture capital regime.
From 1 July 2027, the asset-size cap on businesses that an Early Stage Venture Capital Limited Partnership (ESVCLP) can invest in lifts from $50 million to $80 million. The corresponding cap for Venture Capital Limited Partnerships (VCLPs) lifts from $250 million to $480 million. Both changes materially broaden the pool of investee businesses eligible for the flow-through tax treatment and the targeted CGT incentives that ESVCLPs and VCLPs deliver to their investors.
For the sophisticated investors who participate in these vehicles, the change opens up later-stage and growth-stage opportunities that were previously outside the cap.
Accountants, financial planners and SMSF advisers
Like a duck takes to water, the financial sector will love this slew of new announcements from the government. It’s set to drum up all sorts of new business.
The reforms create a cluster of advice events over a 14-month window. For example:
- The negative gearing change takes effect from 1 July 2027.
- The CGT changes apply from the same date, with every individual, partnership and most trusts needing to either obtain a valuation of their CGT assets at 1 July 2027 or use an ATO apportionment formula.
- The discretionary trust minimum tax applies from 1 July 2028, with a three-year rollover relief window from 1 July 2027 to 30 June 2030 for trusts wanting to restructure into companies or fixed trusts without triggering CGT.
And that’s the tip of the proverbial financial iceberg. Check out the full list of key dates we have down below.
Businesses navigating a temporary downturn
The Budget reintroduces a permanent two-year loss carry-back for all companies with up to $1 billion in turnover. The measure applies to income years after 1 July 2026 and is expected to directly benefit up to 85,000 companies each year.
Where a company incurs a tax loss, the new arrangement allows it to claim a refund of tax paid in the prior two profitable years rather than waiting until it returns to profit to use the loss.
Treasury’s stated rationale is to reduce the asymmetric treatment between large incumbent firms, which can offset losses against existing profits, and smaller or newer firms that often cannot. For business owners managing a heavy investment year or a temporary downturn, the practical effect is improved cash flow.
Small business owners and sole traders
It’s a similar story for small businesses and sole traders looking to expand, too.
The $20,000 Instant Asset Write-Off (IAWO), which has been extended on a year-by-year basis through successive budgets, is being made permanent from 1 July 2026 for businesses with up to $10 million in turnover. Treasury says the change locks in access to the concession for around 4.1 million businesses.
Eligible assets bought and first used or installed ready for use can be fully written off in the year of purchase rather than depreciated, which improves cash flow for any business making capital purchases at the time of investment.
Sole traders pick up an additional benefit through the $250 Working Australians Tax Offset, which begins from 1 July 2027 and is delivered through the income tax return. For investors who run a small business alongside their share or property portfolios, this is one of the cleaner wins in the Budget.
The losers
Investors realising substantial capital gains on high-return assets
The 50 per cent CGT discount, in place since the 1999 Howard-Costello era, is being replaced from 1 July 2027 by two mechanisms working together. The first is cost-base indexation, which reduces the taxable gain by the CPI inflation accrued over the holding period. The second is a 30 per cent minimum tax on real (post-indexation) capital gains.
Treasury’s helpful ‘scenarios’ in the tax explainer show the typical effect:
An investor with $100,000 of other income who buys a $500,000 asset in July 2027 and holds it for 10 years would pay an extra $8,075 in tax under the new arrangements if the asset returns 5 per cent per year, an extra $58,851 if the asset returns 7.5 per cent per year, and $24,858 less if the asset returns 2.5 per cent per year (below the assumed 2.5 per cent inflation rate).
For listed shares specifically, Treasury’s analysis of the past 20 years shows that an investor on the top marginal rate of 47c holding ASX 200 shares for 10 years would have paid an effective tax rate of about 20.7 per cent under indexation, compared with 23.5 per cent under the current 50 per cent discount. Top-rate investors holding broad ASX 200 portfolios long-term may pay marginally less. The wider pool of investors with higher-return holdings or sub-top marginal rates will pay more.
Self-funded retirees realising gains on personally-held assets
The 30 per cent minimum tax bites hardest at investors whose effective rate would otherwise sit well below 30 per cent. Recipients of means-tested income support payments, including the Age Pension and JobSeeker, are exempted from the minimum tax if they receive any payment in the financial year of the gain. That carves out part-pensioners. Self-funded retirees who do not receive any income support are subject to the 30 per cent minimum on personally-held assets outside super.
The explainer scenario from Treasury sees “Jack”, a retiree with $25,000 of other income realising a $10,000 gain. Under the current settings, Jack would pay about $1,400 in tax on the gain. Under the new minimum tax, he pays an additional $1,600 to bring the effective rate up to 30 per cent.
Critically, however, the new CGT arrangements do not apply to capital gains realised inside a complying superannuation fund. Budget Paper No. 1, Statement 4 confirms the reforms apply to assets held by “individuals, trusts and partnerships” only. SMSFs and other complying super funds retain the existing 33.33 per cent CGT discount on assets held more than 12 months and the existing 15 per cent fund tax rate. For retirees whose investment wealth sits inside an SMSF, the new minimum tax simply does not apply.
The change bites on personally-held assets only.
The “low-income year” capital gain deferral strategy
The deliberate use of a low-income year to realise capital gains at a low marginal rate is now blunted in this Budget.
Whether the strategy involves taking a sabbatical, retiring early before pension eligibility, structuring family income through a non-working spouse, or any other approach that brings other income below the 30 per cent threshold, the minimum tax sets a floor.
The tax explainer is candid:
“The introduction of the minimum tax reduces the benefit of taxpayers deferring capital gains realisation to years where their marginal tax rates are low,” it states.
“It ensures their gains are subject to a tax rate closer to the rate they faced during their working life and is commensurate with the tax rate paid by most workers.”
Users of family discretionary trusts
The largest structural change for users of this particular mechanism for investments and income is the 30 per cent minimum tax on discretionary trusts from 1 July 2028.
The trust pays this rate on its taxable income regardless of how it is distributed. Non-corporate beneficiaries receive non-refundable credits for the trustee’s tax. Corporate beneficiaries do not receive credits, which ends the bucket-company strategy of cycling trust income through a controlled company to access the 25 or 30 per cent corporate rate. Trustees with franking credits must use them to pay the minimum tax first.
Treasury’s data on who this targets is specific. Of Australia’s more than one million trusts, around 840,000 (80 per cent) are discretionary trusts. Treasury dug into the numbers and claims that discretionary trusts distributed $142.4 billion in income to other entities in 2022-23. Additionally, around 90 per cent of total private trust wealth is held by the wealthiest 10 per cent of households, defined as those with net worth above around $2.3 million.
Further Treasury analysis shows that in 2022-23, families with discretionary trusts faced an average tax rate around four percentage points lower than similar-income families without a trust.
But as with all things, unwinding this isn’t going to be like flicking a switch. The compensation for trust-holders is a three-year window from 1 July 2027 to 30 June 2030, allowing restructuring out of a discretionary trust into a company or fixed trust without triggering CGT.
Worth noting: complying superannuation funds (including SMSFs), fixed and widely held trusts, special disability trusts, deceased estates and charitable trusts are all excluded from the minimum tax.
Investors in collectibles, art, wine and cryptocurrency
The CGT changes are written broadly. The tax explainer states they apply to all CGT assets, including property and shares, held by individuals, partnerships and trusts for at least 12 months. The exemptions named are limited: the main residence, the four small business CGT concessions, the existing 60 per cent CGT discount applying to qualifying affordable housing, and the separate consultation reserved for tech and start-up incentives.
CGT assets not named as exempt remain subject to the new indexation regime and the 30 per cent minimum tax from 1 July 2027. Under existing ATO rules, that captures collectibles held as investments (art, wine, classic cars and similar items with a cost base above $500) and holdings of cryptocurrency, which the ATO already classifies as a CGT asset.
The 1 July 2027 valuation event applies to these assets in the same way as it does to shares. Investors holding alternative-asset positions will need to determine the asset’s value at that date (by valuation or by ATO formula) to calculate the split between pre and post-reform gains.
Electric vehicle novated lease holders (and their investors)
The Electric Car Discount, which has provided a full fringe benefits tax exemption for eligible electric cars since 1 July 2022, is being scaled back. At a time when oil continues to flirt with US$100 a barrel thanks to the Iran conflict, that’s not great news for buyers or sellers. And it could get worse as the benefits start to disappear, with Treasurer Chalmers revealing in his speech that Treasury has modelled oil prices of up to US$200 a barrel that never come down.
When it comes to this wingback, from 1 April 2027, the full FBT exemption will only apply to electric cars valued up to $75,000, and only as a transitional measure until 31 March 2029. After that date, the full exemption ends entirely.
In its place, a permanent 25 per cent discount will apply to the 20 per cent FBT statutory formula rate, for electric cars valued up to the luxury car tax fuel-efficient threshold (around $91,000 in 2025-26). Electric cars valued above the luxury car tax threshold will receive no FBT discount at all from 1 April 2027.
For salary-packaged electric vehicle novated leases, the practical effect is a sharp increase in the after-tax cost of higher-value EV leases from 1 April 2027, and a smaller increase in the cost of sub-$75,000 EV leases from 1 April 2029. The reform is forecast to raise $1.74 billion in additional revenue over four years. The Government’s statutory review of the Electric Car Discount concluded the FBT exemption’s revenue cost would otherwise have grown to $2.8 billion in 2028-29.
The exposure for ASX-listed novated lease providers was actually identified before Budget night on our recent show. Speaking with Peter Switzer on Switzer TV on 29 April 2026, TenCap founder Jun Bei Liu nominated Smartgroup (SIQ) and McMillan Shakespeare (MMS) as the two listed names sitting in the path of any wind-back of the EV novated lease benefit. “Smartgroup is automotive lease,” Liu said, while noting McMillan Shakespeare carried a second layer of budget risk because “10 per cent of their business is actually to set up program for NDIS.” Both the EV FBT exemption and the NDIS spending trajectory have been tightened in this Budget.
Liu also pointed to Eagers Automotive (APE) as a beneficiary of the EV demand wave, citing the dealer group’s growing relationship with Chinese EV maker BYD. Of the Australian distributors handling BYD volume, Liu said “Eagers is the biggest one.” The FBT scale-back from 1 April 2027 may soften that novated-lease-driven demand channel, particularly for higher-priced models that lose the full exemption immediately.
Foreign investors buying Australian residential property
The ban on foreign investors buying established Australian homes is being extended by two years and three months, to 30 June 2029. The ban was originally implemented as a two-year measure running from 1 April 2025 to 31 March 2027.
Under the extension, foreign persons remain unable to purchase established dwellings until 1 July 2029, directing foreign residential capital towards new-build supply rather than existing stock.
Limited exceptions to the ban continue, including for purchases of established dwellings that demonstrably support housing supply. General exemptions from foreign investment screening also remain in place for permanent residents and New Zealand citizens.
The dates that matter
| Date | Event |
|---|---|
| 7:30pm AEST, Tuesday 12 May 2026 | Budget handed down. Grandfathering cut-off for existing residential property negative gearing. |
| 1 July 2026 | Two-year business loss carry-back commences for companies with up to $1 billion turnover. The $20,000 Instant Asset Write-Off becomes permanent for businesses with up to $10 million turnover. |
| 1 April 2027 | Electric Car Discount FBT changes begin. EVs above the luxury car tax fuel-efficient threshold lose the FBT discount. EVs between $75,000 and the LCT threshold move to a 25 per cent discount on the 20 per cent statutory rate. |
| 1 July 2027 | Residential negative gearing limited to new builds. The 50 per cent CGT discount is replaced with cost-base indexation and a 30 per cent minimum tax on real capital gains. ESVCLP and VCLP investee asset-size caps are expanded. The $250 Working Australians Tax Offset commences. |
| 1 July 2027 to 30 June 2030 | Three-year rollover relief window for restructuring out of a discretionary trust into a company or fixed trust without triggering CGT. |
| 1 July 2028 | A 30 per cent minimum tax on the taxable income of discretionary trusts takes effect. |
| 31 March 2029 | The transitional full FBT exemption for electric cars valued up to $75,000 ends. Sub-$75,000 EVs move to the 25 per cent statutory rate discount. |
| 30 June 2029 | The extended ban on foreign purchases of established Australian dwellings ends. |
This article does not take into account the investment objectives, financial situation or particular needs of any individual. It does not constitute formal advice. Readers should consult a licensed financial adviser before making investment decisions based on the information set out above.
