posted in: Building Wealth

The 2026 Federal Budget: New rules, same fundamentals

The release of the 2026-27 Federal Budget has been described as “the most important and ambitious budget in decades.” In the face of challenging economic conditions, the government has attempted to balance immediate cost-of-living relief with significant structural reforms.

Despite the significant amount of media noise surrounding the announcements, at Montara Wealth, we view this budget not as a reason for apprehension, but as a vital prompt to review your financial roadmap. While the headlines focus on the immediate “winners and losers,” our perspective remains consistent: governments have been tinkering with taxes, concessions, and incentives for decades, and they will likely continue to do so for the next hundred years. 

The fundamental principles of wealth creation – investing in growth assets, maintaining a robust structure, and taking decisive action – remain unchanged by any single budget cycle. The key to financial freedom is having a strategy that is resilient enough to thrive regardless of which way the political wind blows.

The 2026 budget landscape: The key reforms

To navigate this new environment, let’s first look at where the 2026-27 Federal Budget is directing its support, and where it is pulling back.

Individual taxpayers and cost of living relief

The budget provides several layers of relief for individual taxpayers.

• Tax offsets: The new Working Australians Tax Offset (WATO) will provide up to an additional $250 a year for over 13 million workers, available for income earned starting 1 July 2027.
• Marginal tax cuts: The lowest tax bracket (income between $18,201 and $45,000) will drop from 16% to 15%, saving those on a $45,000 salary roughly $268 per year.
• Medicare levy: The threshold will be retrospectively adjusted to ensure low-income earners aren’t unfairly penalised.
• Fuel and transport: Motorists receive a temporary halving of the fuel excise to combat oil spikes, while $10 billion is allocated to fuel security and onshore reserves.

Housing and construction

The government is making a significant play to increase housing supply, which has direct implications for property valuations and infrastructure.

• Infrastructure support: $2 billion has been allocated for critical infrastructure – roads, water, and sewerage – to support the construction of up to 65,000 homes over the next decade.
• Planning reform: An additional $500 million will be spent on speeding up housing and energy approvals, including $105.9 million to implement AI-driven information access for faster project turnarounds.

Health and social support

Healthcare remains a flagship priority, with substantial funding aimed at reducing out-of-pocket costs. NDIS reform is expected to provide the biggest budget savings.

• Medicare and PBS: $1.8 billion is being poured into Medicare Urgent Care Clinics to provide bulk-billed, walk-in care. Furthermore, $5.9 billion over five years will make medicines cheaper for those with cystic fibrosis, chronic kidney disease, and various cancers.
• Dental care: For the first time, the government will permanently fund the Public Dental Services for Adults agreement with $431 million to support eligible patients.
• Youth homelessness: $59.4 million will be provided to community housing providers to support over 4,000 young people at risk of homelessness.
• NDIS reform: The biggest budget saving comes from a $37.8 billion cut to the NDIS over four years, targeting “scheme inflation” and removing approximately 160,000 people from the scheme by the end of the decade.
• Private health: Older Australians (65+) will see a reduction in their private health insurance rebates, effectively increasing annual premiums by around $240.

Small business

The $20,000 instant asset write-off has been made permanent, allowing small businesses to deduct the full cost of eligible assets immediately. Additionally, a permanent two-year “loss carry back” for companies with up to $1 billion in turnover provides a vital cash flow safety net.

Defence

Defence spending will increase by more than $53 billion over the next decade, focusing on drone technology and the acquisition of nuclear-powered submarines under the AUKUS pact.

Investors and wealth vehicles

The budget has sought to fund it’s initiatives by targeting specific tax perks and high-wealth structures. The government is also moving to tilt the property market toward first-home buyers by removing incentives for established property investors.

• Trusts: A new 30% minimum tax rate will be introduced for discretionary trust distributions, effective from 1 July 2028, replacing the previous system where they were taxed at the recipient’s marginal rate.
• Negative gearing: From July next year, negative gearing will be restricted solely to newly built homes. If you purchase an existing property after the deadline, you will no longer be able to deduct rental losses from your taxable income. Current arrangements will be grandfathered, meaning these changes won’t apply to properties you already own or have under contract.
• Capital gains tax (CGT): The 50% CGT discount is being replaced by a return to the Keating-era system of inflation-adjusted indexation for most assets from 1 July 2027. While this sounds daunting, it represents an opportunity for those with a long-term horizon. Indexation protects you from paying tax on gains that are simply the result of inflation. However, the 50% discount will remain a choice for investors in new residential properties.

What this means for investors

While the 2026 Budget introduces some of the most substantial structural shifts in recent memory – particularly the restricted access to negative gearing and the pivot away from the 50% CGT discount – it’s important to distinguish between the noise and the reality.

For those focused on long-term wealth, these changes are not a reason to retreat, but a signal to refine your strategy. As we have seen for decades, governments will continue to adjust the levers of the economy, but the core drivers of success remain remarkably consistent.

Crucially, because current arrangements will be grandfathered, there is a powerful window to position yourself within the existing rules. This is about acting decisively today to secure benefits for the next 30 years, much like those who capitalised on the last major structural change in the late nineties.

Our core advice remains to transition your wealth into the “Income Zone.” Because Capital Gains Tax (CGT) is only triggered upon disposal, a strategy built on acquiring high-quality, inflation-proof assets and holding them into retirement allows you to live off dividends and net rental income while remaining outside the “CGT Zone” entirely. When your lifestyle is funded by asset yield rather than asset sales, the government’s tinkering with tax rates becomes a secondary concern.

Finally, this budget strengthens the case for a truly diversified portfolio. With negative gearing rules for shares and commercial property remaining largely untouched, the ability to fully deduct interest costs against your ordinary income remains a potent wealth-building tool. When you combine the liquidity and lower entry costs of shares with the stability of property, you create a balanced allocation that is flexible enough to pivot as future government policies inevitably evolve.

Your roadmap for 2026 and beyond

The 2026 Federal Budget is ambitious and involves significant structural changes, particularly regarding property and trusts. However, for the investor with a clear strategy, these changes represent a new set of variables to navigate, not a reason to stop.

At the heart of the Montara Wealth philosophy is a simple truth: the biggest risk you can take is doing nothing. While it is tempting to use budget uncertainty as a reason to “wait and see,” history shows that inertia is the greatest obstacle to financial freedom. By the time many people feel the conditions are “perfect,” asset prices have often surged, leaving them to play an expensive game of catch-up.

As you look toward the next financial year, remember that the fundamentals of success remain unchanged:

• Prioritise growth assets: Property and shares remain your primary hedge against inflation and the most reliable path to building wealth.
• Focus on quality: Regardless of “New Build” incentives, always prioritise owner-occupier appeal and limited supply. Don’t let a tax break lead you into a secondary asset.
• Stay in the income zone: Structure your wealth to live off dividends and net rent. If you don’t dispose of the asset, the government’s CGT changes becomes a secondary concern.
• Take action: Small, strategic steps taken today create the massive wealth of tomorrow.

Governments will continue to play around with the edges of the financial system for the next century. Our job is to ensure your financial foundation is so strong that these changes become opportunities for growth rather than obstacles to your freedom.

Are you ready to see how the 2026 Budget changes impact your personal wealth trajectory? Contact the team at Montara Wealth for an obligation-free discovery call.