The 2026 Federal Budget – insights for investors
The 2026 Federal Budget has landed with some significant implications for investors.
I discuss the key economic indicators and the tax changes that are set to reshape the investment landscape.
Economy
The starting point is to expect higher global inflation and lower growth with the scale of impact dependent on the length and severity of the U.S./Iran war.
Growth in Australia is expected to slow to 1.75 per cent in 2026/2027.
Real wages are expected to go backwards again, which means living standards are expected to decline.
Headline inflation hit 4.6 per cent in the year to March 2026 and is expected to hit 5 per cent in the foreseeable future as fuel prices flow through to other goods and services.
Gross debt will hit $1 trillion in 2026/27 with a 1 per cent deficit to Gross Domestic Product (GDP) ratio, excluding ‘off budget’ expenditure – and this is not coming down this decade.
Keep in mind it’s the young who pay a disproportionately larger share of increases in government debt.
Capital Gains Tax reforms
From 1 July 2027 the 50 per cent capital gains tax discount on assets held for more than one year will be scrapped. There will be a return to the pre-1999 policy of taxing inflation – indexed gains with a 30 per cent minimum tax on net capital gains.
These changes will apply to all Capital Gains Tax (CGT) assets, held by individuals, trusts and partnerships. The 50 per cent CGT discount will continue to apply to gains realised up to 30 June 2027.
Importantly, all pre-CGT assets (acquired before 20 September 1985) will be brought into the tax net for disposals occurring from 1 July 2027. In other words pre-CGT status will be scrapped.
Negative gearing
From today, purchasers of “established” investment properties will not be able to offset rental losses against personal income.
From 1 July 2027, investors buying existing (established) residential properties cannot deduct rental losses against other income (such as salary).
Losses from established properties can only be offset against income from residential property (rental income or capital gains), with excess losses carried forward.
Negative gearing remains available for newly built residential properties, allowing losses to be offset against other income.
Properties acquired before 7:30 PM AEST on 12 May 2026 are exempt from these changes for the life of their ownership.
Who loses
The young, for whom building wealth has been made much harder; new investors in established homes; beneficiaries of trusts; National Disability Insurance Scheme (NDIS) rorters; risk-takers in high-growth opportunities; the Jim Chalmers ideology – not bold, brave, courageous or visionary.
With these changes now in motion, investors should review their portfolios and seek professional financial advice to understand how the new capital gains tax rules and negative gearing restrictions may affect their individual circumstances.
Contact Montgomery
If you would like to discuss your investments, please contact David Buckland, Chief Executive Officer or Rhodri Taylor, Account Manager on (02) 8046 5000 or investor@montinvest.com
Chief Executive Officer of Montgomery Investment Management, David Buckland has over 40 years of industry experience.
David is a deeply knowledgeable and highly experienced financial services executive. Prior to joining Montgomery in 2012, David was CEO and Executive Director of Hunter Hall for 11 years, as well as a Director at JP Morgan in Sydney and London for eight years.
This post was contributed by a representative of Montgomery Investment Management Pty Limited (AFSL No. 354564). The principal purpose of this post is to provide factual information and not provide financial product advice. Additionally, the information provided is not intended to provide any recommendation or opinion about any financial product. Any commentary and statements of opinion however may contain general advice only that is prepared without taking into account your personal objectives, financial circumstances or needs. Because of this, before acting on any of the information provided, you should always consider its appropriateness in light of your personal objectives, financial circumstances and needs and should consider seeking independent advice from a financial advisor if necessary before making any decisions. This post specifically excludes personal advice.
