For tax managers and clients, this article explores the major tax changes likely in the 2026 Federal Budget, with a deep dive into potential reforms being suggested to the CGT discount and negative gearing, and what these could mean for property investors and individuals.
It is less than two weeks away, and the 2026 Federal Budget is shaping up as a pivotal moment for Australia’s tax landscape. For the first time in recent memory, Budget night promises to be a must watch event. With the government under pressure to address housing affordability, the rising cost-of-living, and at the same time balance fiscal sustainability and reducing inflationary impacts, significant changes to tax concessions are firmly on the agenda.
Here’s what you should expect to see Budget night.
Key Government Priorities
- Cost-of-Living Relief: Ongoing support for households, including new personal income tax cuts and targeted assistance for low- and middle-income earners.
- Housing Affordability: Policy focus on making housing more accessible, with changes to tax settings for property under discussion.
- Fiscal Responsibility: Balancing new spending with the need to manage debt and deficits, including seeking long term budget savings.
- Tax Integrity: Expanding compliance programs to address tax avoidance and ensure fairness.
Major Tax Changes to Watch
1. Capital Gains Tax (CGT) Discount Reform
Current Setting: At present, individuals and trusts can claim a 50% CGT discount on assets (including property and shares) held for more than 12 months.
Potential Changes: There is strong pre-budget speculation that the government may reduce the CGT discount, particularly for property investors. Proposals include lowering the discount to 25% – 33% or introducing a tiered system based on asset type or holding period. It is now appearing as though this will apply to all assets, not just property, which may impact investment share portfolios and other assets.
Rationale: Reducing the CGT discount is seen as a way to address housing affordability and rebalance incentives between property investment and owner occupier home buyers.
Implications: A lower CGT discount would increase the tax payable on the sale of investment properties, potentially cooling investor demand and impacting after-tax returns. Transitional rules and grandfathering provisions may apply, but details will depend on the final Budget announcement.
Action Point: Investors should review their portfolios and consider the timing of asset sales in light of possible changes to come on Budget night.
2. Negative Gearing Reform
Current Setting: “Negative gearing” allows investors to deduct losses from investment properties (or other assets) against their other income, reducing their overall tax bill.
Potential Changes: The government is considering limiting negative gearing to new properties only, capping the amount that can be deducted in terms of the number of properties (possible allowing not more than 2 per taxpayer), or phasing out the concession over time.
Rationale: Reforming negative gearing is intended to improve housing affordability by reducing speculative demand and redirecting investment towards new housing supply.
Implications: Limiting or removing negative gearing would increase the after-tax cost of holding investment properties, particularly for those with highly leveraged portfolios. This could affect property prices, rental supply, and investor behaviour, thus helping the governments stated goal of closing the intergenerational wealth gap.
Action Point: Investors should model the impact of potential changes on their cash flow and tax position, and seek advice on restructuring their investments if needed.
Other Possible Tax Measures
1. Personal Income Tax Changes
Whilst the later phases of previously legislated personal income tax cuts will roll out in the upcoming 2026-27 tax year, keep a watch on whether there are further adjustments to tax brackets or certain thresholds to ensure relief is distributed across income levels.
2. Instant Asset Write-Off for Small Business
Exposure draft legislation is currently open for consultation on extending or modifying the instant asset write-off threshold for small businesses. The Budget may confirm a new threshold or further extensions, supporting business investment and cash flow.
3. Fringe Benefits Tax (FBT) and Electric Vehicles (EVs)
The FBT exemption for electric vehicles is likely to continue in some fashion, even though it is currently under statutory review, with the final report due mid‑2027. Given the uptake on this concession has far exceeded the Budget estimates, including an estimated cost of well over $1b in 2025-26, there is the potential for changes to be made in the Budget to tighten eligibility rules.
4. Expansion of ATO Compliance Programs
The Budget is expected to provide additional funding for the ATO to expand its compliance programs, including:
- The Personal Income Tax Compliance Program (increased data-matching and audit activity).
- The Shadow Economy Compliance Program (targeting cash economy and undeclared income).
- The Tax Avoidance Taskforce (focusing on large corporates and multinationals).
5. Other Business tax changes
One of the main Budget wildcards is whether there will be other tax reforms for business. Speculation has included the potential for an Allowance for Corporate Equity (ACE) to be considered as a measure to stimulate investment. There is also ongoing commentary on the potential for a gas windfall profit tax though this may be less likely to occur in the current energy shock environment.
With the Treasurers stated aim of providing meaningful productivity improvements, you cannot rule out further tax reform.
What This Means for You
Taxpayers of all types should prepare for the likelihood of significant tax changes, particularly to property-related tax concessions, and be aware of the potential impact on current investment strategies.
Now is a good time to review your portfolio, consider the timing of asset sales, and model the impact of possible CGT and negative gearing reforms.
Important: This analysis is based on current signals from Government, modelling leaks, and commentary as at April 2026. Budget outcomes may differ materially, and changes are typically prospective with grandfathering but this is not always the case.
Andersen Perspective
The 2026 Federal Budget is expected to deliver the most significant suite of tax reforms in years, especially for those utilising on negative gearing and holding assets which will be impacted by any possible change to the current 50% CGT discount.
Andersen Australia will provide detailed analysis and practical guidance as soon as the Budget is released. Subscribe to our Andersen Budget analysis to receive timely updates, expert insights, and actionable advice tailored for you.
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