While the 2026-27 Federal Budget delivered significant personal tax changes, superannuation planning remained relatively stable with few new measures announced.
Personal tax changes take centre stage
The Budget’s headline personal tax measures will reshape financial planning strategies from 2027.
A new $250 working Australians tax offset (WATO) will apply from 1 July 2027, effectively increasing the tax-free threshold for work income to $19,985. Combined with the previously announced $1,000 standard deduction for work-related expenses, workers could see substantial tax savings. The government confirmed existing modest tax rate reductions will proceed as planned, with the 16% rate dropping to 15% in 2026-27 and 14% in 2027-28 for income between $18,201 and $45,000.
Capital gains tax overhaul impacts retirement planning
From 1 July 2027, the 50% capital gains tax discount will be replaced with inflation-adjusted indexation, accompanied by a minimum 30% tax rate on realised gains. This change affects all assets held by individuals, trusts and partnerships for more than 12 months, including pre-1985 assets. The changes include transitional arrangements ensuring only gains arising after 1 July 2027 face the new rules. However, the implications for retirement planning are significant, particularly for those considering whether to hold investments inside or outside superannuation. Superannuation funds maintain their advantage Importantly, complying superannuation funds, including self-managed superannuation funds, will continue receiving their existing one-third capital gains tax discount. This means super funds will maintain their 10% effective tax rate on capital gains for assets held longer than 12 months. This preservation of the super CGT discount makes superannuation even more attractive relative to personal investments, particularly given the new minimum 30% tax rate applying outside super.
Trust distributions face new minimum tax
From 1 July 2028, discretionary trusts will face a minimum 30% tax rate on taxable income. Beneficiaries will receive non-refundable credits for tax paid by trustees, but this could result in higher effective tax rates for lower-income beneficiaries who would normally pay less than 30%. The government will provide expanded rollover relief for three years from 1 July 2027 to help restructure discretionary trusts into companies or fixed trusts.
Negative gearing restrictions ahead
Investment property strategies will change from 1 July 2027, with negative gearing limited to newly constructed dwellings. Losses from established residential properties will only be deductible against rental income or capital gains from residential properties. Properties owned at Budget time remain exempt until sold.
Planning implications
These changes create several planning opportunities and challenges: superannuation becomes relatively more attractive for capital growth investments; timing of asset disposals before July 2027 may be beneficial for some taxpayers; discretionary trust structures require review before the 2028 changes; investment property portfolios may need restructuring; and the enhanced work-related deduction simplifies tax compliance for many employees.
What should you do?
The scale of these changes requires careful analysis of your personal circumstances. Consider reviewing your investment structure, particularly the balance between superannuation and personal investments, and whether discretionary trusts remain appropriate for your situation. Our SMSF accounting and administration team can help you assess whether holding growth assets inside your super fund remains the most tax-effective strategy under the new CGT rules. These reforms represent the most significant changes to investment taxation in decades. Professional advice is essential to navigate the transitional arrangements and optimise your financial position under the new rules.
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Frequently asked questions
Did the 2026-27 Federal Budget make significant changes to superannuation?
Not directly. Superannuation planning remained relatively stable, with few new super-specific measures announced. However, several broader tax changes introduced in the Budget have meaningful implications for how people should think about superannuation relative to other investment structures.
What is the Working Australians Tax Offset (WATO) and when does it start?
The WATO is a new $250 tax offset applying from 1 July 2027. It effectively raises the tax-free threshold for work income to $19,985. Combined with the previously announced $1,000 standard deduction for work-related expenses, many employees could see a worthwhile reduction in their overall tax bill.
How does the capital gains tax overhaul affect superannuation?
From 1 July 2027, individuals, trusts and partnerships will see the 50% CGT discount replaced by inflation-adjusted indexation, with a minimum 30% tax rate applying to realised gains. Complying superannuation funds, including SMSFs, are not affected by this change. They will continue to receive the existing one-third CGT discount, maintaining their effective 10% tax rate on gains for assets held longer than 12 months. This makes superannuation considerably more attractive for capital growth investments compared to holding assets personally.
Does the CGT change affect assets I already own?
Transitional arrangements are in place so that only gains arising after 1 July 2027 will be subject to the new rules. However, for assets with significant unrealised gains, the timing of any disposal before that date is worth considering carefully with your adviser.
How does the proposed negative gearing restriction affect investment property owners?
From 1 July 2027, negative gearing will be limited to newly constructed dwellings. Losses on established residential properties will only be deductible against rental income or capital gains from residential property. Properties owned at the time of the Budget announcement remain exempt until sold, so existing property owners are not immediately affected.
Should I be reviewing my superannuation or investment structure now?
Yes, particularly if you hold investments in a discretionary trust, own established investment properties, or have significant assets outside superannuation. The combination of the new CGT rules and the 30% minimum tax on discretionary trusts from 1 July 2028 means the balance between superannuation and other structures deserves fresh consideration. Contact our office to talk through what these changes mean for your specific situation.
