Budget 2026: How will it hit your hip pocket?
Key takeaways
- The federal government released its 2026 budget tonight, with a focus on cost of living, tax reform and housing affordability.
- Budget measures include a $250 tax offset for workers, replacing the capital gains tax discount and limiting negative gearing.
- What's next: The budget measures will have to pass through parliament before coming into effect.
The federal government has released its 2026 budget. Here are the main announcements you need to know, and how they'll affect your hip pocket.
Tax offsets and deductions
The Working Australian Tax Offset will save works $250, and workers will also be able to claim $1,000 in instant tax deductions without needing to provide receipts, which the treasurer suggests will save the average worker around $205 come tax time.
The $250 Working Australian Tax Offset comes into effect in 2027, so it won't hit workers' pockets until 2028. This is to avoid increasing inflation. This offset is a permanent annual offset.
The Capital Gains Tax Discount scrapped
The capital gains tax discount is being replaced with an inflation-adjusted, cost base indexation and a minimum 30% tax rate.
Currently, investors get a 50% discount on the tax they pay on their investment profits. This is a major tax saving for investors, particularly property investors. This will now be replaced with a new taxation method.
The government has said there will be "transitional arrangements" for existing investors. People investing in newly-built properties will be able to choose to stick with the 50% CGT discount.
The new taxation method will see investors taxed on their capital gains minus their indexed cost base (the amount they paid to acquire the investment, adjusted for inflation), with a minimum tax rate of 30%.
The changes don't affect the CGT exemptions on your home, or investments held in super funds.
Negative gearing
From 1 July 2027, negative gearing will be limited to newly built residential investment properties. If you own an investment property right now you're exempt. But that exemption literally expired at 7:30pm tonight.
Negative gearing is the tax rule that allows investors to offset investment losses against their taxable income.
It's become controversial in the housing affordability debate because it allows property investors to get a discount on their tax even when their investment property costs money to hold and maintain.
The government estimates the changes to the CGT discount and negative gearing will help 75,000 first home buyers over the next decade.
Other housing affordability initiatives
There's also a new $2 billion Local Infrastructure Fund, which will help local governments and state utilities to build roads, water, power, sewage and other utilities needed to support more housing construction.
The ban on foreign investors purchasing established homes has been extended to mid-2029.
The government will invest an additional $59.4 million in social housing support for 4,000 people aged 16-24 who are at risk of homelessness.
NDIS cuts
Health Minister Mark Butler has already announced a reduction in National Disability Insurance Scheme (NDIS) funding of $20 billion by 2030.
The stated aim of the funding reduction is to "restore the NDIS to its original intent" and stop "shonks and fraudsters".
But it will also make funding for participants harder to access. The government estimates these cuts will reduce the number of participants in the scheme from around 760,000 people to 600,000 by 2030.
Fuel security measures
The government will increase minimum fuel storage requirements and other measures to boost Australia's fuel security.
While this doesn't directly affect petrol prices, it adds further stability and reassurance to motorists.
Health and medicine
There's $5.9 billion more funding to add new medicines to the Pharmaceutical Benefits Scheme. This includes medicines for cancer, cystic fibrosis and chronic kidney disease.
The private health insurance rebate is being simplified regardless of age, which means Australians over 65 may have to pay higher health insurance premiums.
Electric vehicle tax benefits
From 1 April 2027 there will be a permanent 25% fringe benefits tax (FBT) discount for electric cars that cost over $75,000. Electric vehicles that cost less than $75,000 already get a full FBT exemption, which will continue for any fringe benefit arrangements made before 1 April 2029.
There's also $40 million over the next 4 years to support more EV chargers in regional blackspots and more kerbside charging support.
Sources
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