As you've no doubt heard about by now, last night saw the 2026 budget handed down.
Most Federal Budgets are blockbuster events, particularly for those interested in politics, economics, or both. But the one handed down last night was something special. Regardless of how one views the policy changes that Treasurer Jim Chalmers unveiled, it cannot be denied that this is one of the most ambitious and consequential budgets Australians have seen in years.
Today, let's break down three major tax changes that will affect ASX investors.
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3 budget changes that investors need to know about
Capital gains tax (CGT) reform
One of the biggest changes coming to ASX investors is the reform of the capital gains tax (CGT). As we've already discussed today, CGT is the tax that most ASX investors would already be intimately familiar with, given it is applied to the sale of investable assets like shares. Since changes were made to the CGT in 1999, all gains on assets held for longer than 12 months were eligible for a 50% discount.
However, from 1 July 2027, CGT will revert to its pre-1999 structure of using inflation indexing rather than a flat discount rate. This means that capital gains will be liable on all proceeds from selling investable assets. Investors will only be able to deduct inflation from assets owned longer than 12 months.
A 30% minimum rate will also apply. Plus, any assets owned prior to 1985 will also become taxable for the first time.
Negative gearing abolished
Another big change announced in last night's budget was the abolition of negative gearing. This controversial policy has had its critics for years. It mostly applies to property investing, though. Negative gearing refers to the practise of being able to deduct a net loss from an investment property against other sources of income. It is beloved by many investors, particularly those in high-income tax brackets.
However, this policy has effectively been abolished for most investors. Any property purchased after last night will not be able to be negatively geared going forward, with investors only able to use net losses to offset against future income earned from the property itself.
There are exceptions for new builds and for properties that have already been purchased. Investors also have a grace period before the changes kick in on 1 July 2027. Even so, this is a major change to the Australian investing landscape.
A minimum 30% tax rate for trusts
Our final policy change that will impact investors is a new minimum tax rate for trust distributions. Until now, trusts have functioned as pass-through vehicles for income. The practice of 'income splitting', where income is funnelled from the earner to other people (often family members) through a trust, has long been controversial.
This has been addressed in the budget, with a new minimum tax rate of 30% to apply to all discretionary trust distributions. These changes will kick in on 1 July 2028, giving investors a couple of years to get their affairs in order.
Again, there are exceptions. Farmers will be exempt. As will charitable, superannuation, and testamentary trusts. But this is still a change that will affect many investors.
