The Budget is out… but one thing surprised me

Every Federal Budget, people wait for the same thing.

“What changed?”

“What did they tax?”

“Did they touch super again?”

And honestly… this year surprised me.

Because while there were some new tax and structural changes announced, the biggest thing for many Australians was actually what didn’t change.

They largely left superannuation alone.

And that matters more than most people realise.

Over the last week, I’ve had a few conversations with clients asking:

“Where should we even build wealth now?”

Property has become harder.

Interest rates are still high.

Shares feel volatile.

Business costs keep rising.

But quietly sitting in the background is still one of the best long-term wealth environments Australia has.

Superannuation.

Not because it’s exciting.

Because the rules are incredibly powerful when you understand them properly.

Here’s the part most people miss.

As a couple, you could potentially have up to $6 million combined sitting inside superannuation and still receive major tax advantages.

During accumulation phase (while building wealth), earnings inside super are generally taxed at only 15%.

Then from age 60, once moved into pension phase?

Investment earnings can become completely tax free.

And if investments are sold inside pension phase after retirement, capital gains can also be received tax free.

That’s one of the reasons super has become such a powerful long-term wealth tool in Australia.

Now yes, there some important Budget changes announced.

A few key ones included:

Capital Gains Tax (CGT) Changes

Replacement of the 50% CGT discount

From 1 July 2027, the current 50% CGT discount will be replaced with a new indexation model.

Under this approach, tax will only apply to real capital gains (i.e. gains above inflation) rather than nominal gains.

However, regardless of how low inflation-adjusted gains are, a minimum tax rate of 30% will apply to those real gains.

Example (assuming 3% inflation over time):

If an investment increases by $100,000 and around $30,000 of that is attributable to inflation, only the remaining $70,000 real gain is taxable.

How this compares to the current system:

Current rules:

The full $100,000 gain is reduced by the 50% CGT discount, meaning only $50,000 is taxed at your marginal tax rate.

Proposed rules:

Only the real gain ($70,000) is taxed but with a minimum 30% tax applied, regardless of your marginal tax rate.

In many cases, this may result in higher tax outcomes than the current system particularly for long-term growth assets.

These changes apply broadly to individuals, trusts and partnerships and across all major asset classes (including property and shares).

Pre-1985 assets lose full exemption

Assets acquired before September 1985 will no longer retain their full CGT exemption. Instead:

• The cost base will be reset to market value as at 1 July 2027

• Any gains accruing after that date will be subject to the new CGT rules

New builds retain flexibility

For eligible new build investments, investors will have the option at the time of sale to choose between:

• The existing 50% CGT discount, or

• The new indexation method

This allows selection of the more favourable outcome.

Negative Gearing Changes

Restrictions on established residential property (new purchases)

From 1 July 2027, negative gearing will no longer be available on established residential properties purchased after 7:30pm on 12 May 2026.

This means rental losses from these properties cannot be offset against salary or other income.

Grandfathering for existing investors

If you owned the property or had exchanged contracts prior to 7:30pm on 12 May 2026, your negative gearing arrangements remain unchanged for the life of the asset.

New builds remain supported

Negative gearing remains fully available for new residential construction, continuing to favour supply-side investment.

Commercial property unaffected

Negative gearing rules do not change for commercial property:

• Losses remain fully deductible against all income

• However, CGT changes will still apply from 1 July 2027

Impact on owner-occupiers considering future rental

Any property already owned prior to 12 May 2026 will retain its eligibility for negative gearing in the future, even if it is currently your principal residence and not producing income.

The key date is ownership status before the cut-off, not current use.

Other Notable Measures

Discretionary trust tax changes

A proposed 30% minimum tax on discretionary (family) trusts from 1 July 2028, which may significantly impact income distribution strategies.

Working Australians Tax Offset (WATO)

A $250 offset aimed at increasing the effective tax-free threshold on employment income:

• Up to approximately $19,985, or

• Up to $24,985 when combined with the Low Income Tax Offset

$1,000 instant deduction for work-related expenses

Proposed simplified deduction to reduce compliance and record-keeping requirements.

Small business support

The $20,000 instant asset write-off is proposed to become permanent for eligible small businesses.

Deeming rates and social security

Adjustments proposed, which may impact Centrelink assessments and retirement income strategies.

New Division 296 Tax

There was confirmation that the new Division 296 tax will apply to super balances above $3 million from 1 July 2026.

Now importantly, many of these measures are still proposals and subject to legislation.

But it does reinforce something we’ve spoken about for years:

The rules around wealth creation can change quickly.

Which is exactly why having a strategy matters more than chasing headlines.

When you compare the proposed changes around property, trusts and capital gains tax… it’s easy to see why superannuation is becoming even more attractive as a long-term wealth vehicle.

Think of super like a greenhouse.

Outside the greenhouse, investments get hit harder by tax and weather.

Inside the greenhouse, the environment helps things grow faster and more efficiently over time.

That doesn’t mean super is the only answer.

But it does mean ignoring it completely can become very expensive over 10, 20 or 30 years.

One quote I always come back to is:

“Most people underestimate what consistency does over decades.”

That’s exactly what super is designed for.

Quiet consistency.

Not hype.

Not headlines.

Just long-term compounding.

For the clients we work with each year, this is exactly why we review contribution strategies, structures and long-term retirement plans regularly.

We’re already across these changes and how they may impact your plan moving forward.

And if we haven’t worked together before, but you’re unsure whether you’re making the most of the rules available to you then reach out. Contact us or SMS 0483 937 777 "PLAN”.

Sometimes one conversation can save years of guessing.

Next week, I’ll share where we see the biggest opportunities within these changes and how you can take advantage of them moving forward.

Talk soon

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