The Australian government has unveiled the 2026 federal budget, featuring significant changes to capital gains tax, negative gearing, and personal income tax, alongside increased defence spending and reforms to the National Disability Insurance Scheme (NDIS).
Capital Gains Tax Overhaul
From 1 July 2027, the 50% capital gains tax (CGT) discount will be replaced by a cost-base indexation system for assets held over 12 months. A new 30% minimum tax on net capital gains will apply to all assets, including those dating back to 1985. This change aims to help more Australians enter the housing market by reducing speculative investment.
Negative Gearing Changes
Negative gearing for residential property will be limited to new builds from 1 July 2026. Losses from established properties will only be deductible against rental income or capital gains from residential property sales, directing benefits toward new housing construction.
Personal Tax Cuts and Offsets
From the 2027-28 income year, all working Australian taxpayers will receive a $250 tax offset. Additionally, an instant tax deduction of up to $1,000 will be introduced. The Medicare levy low-income thresholds will increase by 2.9% from 1 July 2025.
NDIS Reforms and Thriving Kids Program
To curb NDIS growth, about 160,000 participants will be removed, reducing annual growth from over 10% to around 2%. The government will invest $2 billion over five years in the Thriving Kids program, providing national services and support for children with disabilities.
Defence and Security
Defence spending will increase by $6.8 billion over four years and $35.6 billion over the decade to enhance capability and resilience. In response to the Bondi attack, $604.2 million will be allocated over five years, including $102 million for Jewish community security and $207.4 million to combat antisemitism.
Housing and Infrastructure
An additional $2 billion will fund infrastructure for housing developments, aiming to deliver 65,000 new homes over ten years. The temporary ban on foreign purchases of established homes will be extended to June 2029.
Health and Aged Care
Private health insurance subsidies for over-65s will be redirected to aged care, with $1.4 billion for home care. Medicare urgent care clinics will receive $1.8 billion over five years. Public hospitals will get $220.3 billion over five years. The RSV vaccine Arexvy will be added to the national immunisation program for at-risk groups.
Fuel and Energy
Fuel excise and heavy road user charges will be cut for three months at a cost of $2.9 billion. A $14.8 billion fuel security package will increase national stockpiles to 50 days and expand refinery capability.
Transport and Rail
Melbourne's Suburban Rail Loop will receive an extra $3.8 billion, while the inland rail project will be curtailed at Parkes, saving $4.4 billion. Other rail projects include Melton line electrification, Canberra-Sydney corridor upgrade, and Newcastle-Sydney high-speed development.
Small Business and Industry
The $20,000 instant asset write-off for small businesses with turnover up to $10 million will be made permanent from 1 July. Venture capital tax incentives will be expanded, increasing the investee business asset size limit from $250 million to $420 million.
Other Measures
The passenger movement charge will rise from $70 to $80 from 1 January 2027. Nuisance tariffs on 497 items will be abolished from 1 July 2026. The government will spend $112.7 million over five years on addressing online gambling harms. Australian Associated Press will receive $15 million, and the commercial broadcasting tax will be suspended for two years.
