What we knew before the speech

Faced with persistent structural deficits, increased spending, and a generation of voters are struggling to enter the housing market, the Albanese government and Treasurer Jim Chalmers appear willing to absorb political risk in pursuit of sweeping reform with the 2026-27 Federal Budget. Treasury and market modelling suggests potentially $35bn in revenue and savings over the forward estimates.

At the centre of the package are changes to the capital gains tax (CGT) discount, negative gearing, and discretionary trusts. Rounded out with cuts to the NDIS, electric vehicle tax discounts, and private health rebates, this tax reform trio signals a broad shift for the Albanese government and a structural rebalancing of taxable income, away from labour and toward assets.

The CGT overhaul is the most substantial change since 1999, when the Howard government replaced inflation indexation with a flat 50% discount. Assets acquired after 1 July 2027 would return to the pre-1999 framework, where only true gains are taxed at a marginal rate. Assets purchased between budget night and 30 June 2027 will temporarily retain the discount before shifting to a hybrid arrangement. Pre-budget assets will be grandfathered indefinitely, with carve-outs for new builds. Negative gearing will be restricted to newly constructed dwellings for future purchases, with a similar transition window and grandfathering arrangement.

Treasury modelling estimates the reforms raising $25bn to $30bn over the next decade, and approximately $2bn across the forward estimates. The revenue is expected to be redirected into federally funded housing initiatives, including new supply and affordability measures. 

Discretionary trusts will also face tighter treatment. The government will implement a 30% tax rate on trust distributions to adult beneficiaries, alongside a withholding regime requiring trustees to remit tax directly to the ATO. Primary producers, charitable trusts, deceased estates, testamentary trusts, and hardship cases will be exempt. ATO data shows discretionary trusts have grown from 328,000 in 1990-91 to over one million in 2025-26, with existing arrangements costing the budget roughly $1bn each year. The change is projected to raise $4bn to $5bn across the forward estimates, or $3bn per year once operational.

The Fringe Benefits Tax (FBT) exemption for EVs will be wound back. EVs below the luxury car tax threshold are free from the FBT. From 1 April onwards, however, electric vehicles priced above $75,000 will lose the exemption, with all eligible EVs shifting to a flat 25% FBT discount after 1 April 2029. The wind-back is expected to save $1.7bn over four years.

NDIS reforms, announced by Health Minister Mark Butler, are projected to save up to $35bn over four years by slowing annual growth to 2%. The scheme, previously projected to reach $128bn by 2032, will see 160,000 participants disqualified by 2030 and a $7,000 cut per participant in social and community participation funding.

Private health changes are expected to save $3bn over four years through a reduction of the over-65 rebate to 24%. The savings are earmarked for aged care: showering, dressing, and continence care, 5,000 additional beds by 2029, and 20 new dementia care units. The gains come at a cost. Treasury modelling predicts an exodus of 44,000 older Australians from private cover, with premium increases of $226 to $255 falling hardest on retirees, pensioners on fixed incomes, and regional hospitals.

The $20,000 instant asset write-off, introduced by the Abbott government in 2015 and extended year by year ever since, will become a permanent feature of the tax system. Small businesses with annual turnover below $10m will be able to deduct the full cost of equipment, vehicles, tools, and technology under $20,000, with the measure projected to save 376,000 hours a year in compliance. It forms part of a wider productivity package aimed at cutting business compliance costs by $10bn annually.

Wage and salary earners will receive two forms of relief at tax time in 2027: a one-off “earned income offset” of $200 to $300, excluding income from assets; and a $1,000 instant tax deduction for work-related expenses, claimable without receipts at the worker’s marginal rate. The one-year delay is designed to limit short-term inflationary pressures.

Announced recently by Energy Minister Chris Bowen in response to the US-Iran war, the Australian Fuel Security and Resilience package commits $10.7bn to fund a government-owned Fuel Security Reserve of one billion litres of diesel and aviation fuel, off-budget support for a Fuel and Fertiliser Security Facility, and feasibility studies into refining capabilities. Additionally, the Minimum Stockholding Obligation will be lifted by ten days for every fuel type.