How is negative gearing changing in the 2025-26 Australian Federal Budget?

The Australian Government will restrict negative gearing exclusively to new residential builds starting 1 July 2027. This means investors will no longer be able to use rental losses from existing properties to offset their taxable personal income.

What are the changes to the Capital Gains Tax (CGT) discount for investors?

The 50% Capital Gains Tax discount is being abolished and replaced with an indexation-to-inflation model starting 1 July 2027. Under the new rules, taxable gains will be adjusted for inflation and taxed at the ordinary income rate, with a minimum 30% tax floor.

How will family trusts be taxed under the new budget reforms?

From 1 July 2028, a new 30% minimum tax floor will be introduced for taxable income distributed through family trusts. This measure is designed to improve the fairness of the tax system and reduce the use of trusts for aggressive tax minimisation.

What does the 2025-26 Budget deficit look like for Australia?

The underlying budget deficit for 2025-26 is forecast to be $28.3 billion, representing 1% of GDP. However, the headline deficit—which includes broader government investment and financing—is significantly higher at $47.9 billion (1.6% of GDP).

What cost-of-living relief is included for Australian retail workers?

The government is introducing a $250 annual "Working Australians Tax Offset" starting in the 2028-29 income year. When combined with existing tax bracket reductions and an instant $1,000 tax deduction, the Treasurer claims the average worker will be $2,816 better off by 2028.

How much revenue will the CGT and negative gearing changes generate?

The overhaul of Capital Gains Tax and negative gearing is expected to save the budget approximately $3.53 billion over the forward estimates. When combined with the $4.4 billion expected from family trust reforms, these structural changes are projected to claw back nearly $8 billion.

Economy

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Chalmers overhauls tax system as deficit hits billions

Written by Liezl GambePublished May 12, 2026, 9:47 AM

Treasurer Jim Chalmers has confirmed a sweeping overhaul of Australia’s tax landscape.

The centrepiece of the 2025-26 federal budget is the high-stakes decision to scrap negative gearing for existing investment properties and abolish the 50% capital gains tax discount.

From July 1, 2027, negative gearing will be restricted exclusively to new builds, while CGT will return to an indexation-to-inflation model with a 30% tax floor.

The measures, alongside a new 30% minimum tax on family trusts, are projected to claw back nearly $8 billion over the forward estimates to help offset a widening fiscal gap.

The reform blitz comes as the Treasurer grapples with an underlying budget deficit forecast at $28.3 billion (1% of GDP) for the upcoming financial year, ballooning to a headline deficit of $47.9 billion.

To buffer households against persistent cost-of-living pressures and a global oil shock, the government is deploying a multi-pronged relief package.

This includes a $10 billion fuel security investment and a new $250 annual "Working Australians Tax Offset" starting in 2028-29.

Chalmers framed the shift as a necessary pivot towards fairness, claiming the cumulative impact of five distinct tax cuts will leave the average worker $2,816 better off by 2028.

However, with total headline deficits expected to reach $264.53 billion by 2030, the government's path to surplus remains heavily reliant on these contentious structural shifts.