Budget Reform Insights
As we’re currently building our framework for our Dashboard, we’ve asked AI to confirm the Budget Reform details and how it would impact our investments (taxable investment account only). Based on our conversation going back and forth regarding different case scenarios on capital gains on old law and budget reform, and how dividends and franking credits would be impacted, we would need to restructure our portfolio to account for the tax implications in our taxable investment account. The new budget reform rules forces the 30% CGT. Since 50% reduction for long term holding doesn’t apply, and now indexed to inflation, bottom line is all the investors are screwed using the drawdown method. However, we will now shift our focus toward franking credits since the budget reform hasn’t impacted on this section yet, and still allow for tax credit refunds. No drawdown would be needed since dividends and franking credits are positive cash flow. ETFs will remain in our Super and taxed accordingly at 15%.
Budget Reform (CGT)(DFC) [2 tables, so can’t copy and paste details from AI]
📌 Summary — What Happens When an Investor Draws Down Their Portfolio After the Reform
Capital gains after 1‑Jul‑2027 are taxed under the new system, not the old one.
The 50% CGT discount is permanently unavailable for assets acquired after Budget Night (12‑May‑2026).
Drawing down a portfolio and selling assets triggers a CGT event — and the new rules apply automatically.
Marginal tax rate no longer matters for CGT after 1‑Jul‑2027.
A minimum 30% tax applies to the real (inflation‑adjusted) gain, even if the investor’s MTR = 0%.
This means retirees, low‑income investors, and early retirees still pay 30% CGT on gains realised after 1‑Jul‑2027.
Dividends and franking credits are unaffected — they remain assessable income with refundable franking credits.
The reform creates a sharp timing cliff: selling before 1‑Jul‑2027 → tax can be $0 selling after 1‑Jul‑2027 → tax becomes 30% of the real gain.
Investors who regularly sell assets to fund living expenses will face ongoing 30% CGT on each realised gain.
The reform effectively removes tax‑free capital gains for low‑income investors and replaces them with a flat 30% CGT.
