Super retains CGT discount as 2026-27 Federal Budget targets investment tax

Super will be exempt from changes to the Capital Gains Tax (CGT) discount announced in the Federal Budget on Tuesday.

Tax reform relating to family trusts and investments, and restricting negative gearing to new-build properties, headlined the changes announced in the Budget by the Federal Government on Tuesday night.

The measures aim to ‘rebalance’ the tax system and the housing market in favour of working and younger Australians, and make housing more affordable over time.

The changes also underline the importance of super to long-term wealth creation for Australians by retaining existing CGT discounts on investments held for more than 12 months in super. 

Under current rules, earnings in super are generally taxed at 15% rather than an individual’s marginal tax rate, which is effectively reduced to 10% when the existing 33% CGT discount on long-term investments inside super is applied.

Tax reform to make the system fairer for younger Australians and tax relief for working Australians were key areas of focus of the 2026-27 Federal Budget. Our highlights from the night are outlined below, as well as what they may mean for you. 

The 50% discount on CGT on investments held for more than 12 months will be replaced from 1 July 2027 with CPI indexation.  Under the new rules, a minimum 30% tax on realised capital gains will also apply.

The new rules aim to ensure investors pay tax on their real (inflation adjusted) capital gains that accrued from 1 July 2027.

Transitional rules will apply for assets purchased prior to 1 July 2027, with the existing 50% individual CGT discount applying to capital gains that accrued up until 30 June 2027. The changes will apply to all CGT assets outside super, including property and shares. 

Investors in new-build residences will be able to choose either the 50% CGT discount or the new arrangements. 

Individuals receiving income support payments, including Age Pension recipients, will be exempt from the minimum 30% tax.

From 1 July 2027, negative gearing into residential property will be restricted.

Investing in new houses will continue to be eligible for negative gearing, whether it was purchased before or after 1 July 2027.  However, investments in established properties will have some restrictions, with individuals purchasing existing residential properties after Budget night (12 May 2026) no longer being eligible to offset any excess interest deductions against their other income from 1 July 2027. 

Existing arrangements where an established property was purchased prior to Budget night will remain unchanged.  Transitional arrangements also apply to established properties purchased between budget night and 1 July 2027. 

This measure is intended to reward investors for helping to build new homes and increase housing supply over time. 

A minimum 30% tax on the taxable income of discretionary trusts will be introduced from 1 July 2028.  

It will not apply to other types of trusts including fixed and widely held trusts (such as fixed testamentary trusts); complying superannuation funds; special disability trusts; deceased estates; and charitable trusts.

A $250 permanent Working Australians Tax Offset will be applied to wage and salary earners as well as sole traders from 2027-28. 

It effectively increases the tax‑free threshold by nearly $1,800 to $19,985 (or up to $24,985 for workers eligible for the Low Income Tax Offset). 

It will also increase the effective tax-free thresholds for those eligible for both the Seniors and Pensioners Tax Offset (SAPTO) and Low Income Tax Offset.

An instant tax deduction of up to $1,000 will be available on work-related expense expenses from 2026-27, which may be claimed without receipts.

The Government will provide additional funding to boost the number of Aged Care beds by 5,000 a year, aimed mainly at residents on lower incomes.

Personal care services (including showering, dressing and incontinence aids) for all care recipients in the Support at Home program will be fully funded in a similar manner to clinical care services.  

The Government will increase the Medicare levy low‑income thresholds for singles, families, and seniors and pensioners by 2.9% from 1 July 2025, meaning fewer low-income earners will pay it. 

The new thresholds are $28,011 for singles, $47,238 for families, $44,268 for single seniors and pensioners, and $61,623 for senior and pensioner families. 

Age based increases to the Private Health Insurance Rebate will be removed. This means policyholders aged 65 and above will not receive a higher rebate from 1 April 2027.

The Government has allocated $17.8 million over four years to strengthen governance requirements and enforcement related to managed investment schemes.

The tax rate for taxable income between $18,201 and $45,000 will reduce from 16% to 15% on 1 July 2026, and further to 14% from 1 July 2027, giving taxpayers up to $268 in 2026-27 and up to $536 in 2027-28 in their pocket. 

From 1 July 2026, employers will generally be required to pay employees Super Guarantee contributions at the same time as salary and wages, instead of quarterly, making it easier for employees to track their super, and harder for some employers to avoid paying it.

The two-tiered Division 296 tax on individuals with super balances above $3 million will take effect from 1 July 2026.

An extra 15% tax will be applied to the portion of a member’s earnings attributable to their Total Super Balance (TSB) over $3 million, and a further 10% – bringing the total additional tax on earnings to 25% – will be applied to the portion attributable to their TSB over $10 million.