Budget 2026-27

https://budget.gov.au/content/04-tax-reform.htm

Notes:

==> Investors who buy established housing after Budget night will still be able to deduct losses against residential property income. They will be able to carry forward unused losses to future years but won’t be able to deduct them against other income like wages.

• Even with this policy in place, the financial impact on anyone would be negligible.

==> The Government will introduce a minimum tax of 30 per cent on discretionary trusts from 1 July 2028 with some exceptions.

• Current system: No fixed rate — taxed to beneficiaries at their marginal rates.

• From 1 July 2028: A 30% minimum tax will apply to discretionary trusts (subject to exceptions), paid by the trustee.

==> The Government will replace the 50 per cent Capital Gains Tax (CGT) discount with a discount based on inflation and introduce a minimum 30 per cent tax on gains from 1 July 2027.

This reform means that investors will only pay tax on their real capital gain, restoring the original intent of the CGT arrangements. The CGT reforms will only apply to gains arising after 1 July 2027. Investors in new builds will be able to choose the 50 per cent CGT discount or the new.

AI Prompt: Please provide me with an example based on the following details. Let’s assume 100K investment and growth is 10%.

1. Capital Gain

• Opening value: 100,000

• Closing value: 110,000

• Nominal gain: 10,000

2. OLD SYSTEM (50% CGT Discount)

You pay tax on 50% of the gain.

Step / Calculation / Result

Discounted gain / 10,000 × 50% / 5,000

Tax payable (assume 30% MTR) / 5,000 × 30% / 1,500

Tax = 1,500

After‑tax gain = 8,500

3. NEW SYSTEM (Inflation‑Adjusted + Minimum 30% Tax)

Government replaces the 50% discount with:

• Tax only on real gain (inflation‑adjusted)

• Minimum 30% tax on the gain

Assume inflation = 3%.

Real Gain Calculation

Step / Calculation / Result

Inflation component / 100,000 × 3% / 3,000

Real gain / 10,000 − 3,000 / 7,000

Tax Under New Rules

Minimum tax = 30% of the real gain.

Step / Calculation / Result

Tax payable / 7,000 × 30% / 2,100

Tax = 2,100

After‑tax gain = 7,900

4. Side‑by‑Side Comparison

System / Taxable Amount / Tax Rate / Tax Payable / After‑Tax Gain

Old (50% discount) / 5,000 / 30% / 1,500 / 8,500

New (inflation‑based) / 7,000 / 30% / 2,100 / 7,900

5. Interpretation

• Under the old system, the 50% discount is extremely generous.

• Under the new system, tax is based on real gain, but the minimum 30% tax means you still pay more than before unless inflation is very high.

• In this example, tax increases by 600.

6. Optional: New Builds Rule

Investors in new builds can choose:

• Old 50% discount, or

• New inflation‑based system

In this example, the old system is clearly better.