Key takeaways
• Income tax cuts begin from 1 July 2026, with further changes from 2027
• Negative gearing and capital gains tax changes may affect some property investors
• First home buyers may benefit from new housing supply and 5% deposit support measures
• Cost of living support, including lower fuel excise, may help ease household budget pressure
The 2026 Federal Budget includes tax cuts, housing changes and cost of living support that may affect borrowers, investors and first home buyers.
Some of the biggest updates relate to take-home pay, property investing, and housing supply. There are also several measures aimed at easing cost of living pressure for households.
Treasurer Jim Chalmers said the budget was designed to respond to ongoing cost pressures, housing affordability challenges, and global economic uncertainty.
Here are some of the key changes borrowers, investors and first home buyers should know about.
Budget highlights at a glance
Measure | Who it affects | When it starts |
Income tax rate cut from 16% to 15% | All taxpayers | 1 July 2026 |
Income tax rate cut from 15% to 14% | All taxpayers | 1 July 2027 |
Working Australians Tax Offset (WATO) up to $250 | Eligible workers | 2027–28 income year |
$1,000 instant tax deduction | Workers | 2026–27 income year |
Fuel excise reduced for three months | Drivers | Already in effect from 1 April 2026 |
Negative gearing restricted on established homes | Some investors | From budget night, with full changes from 1 July 2027 |
Capital gains tax (CGT) changes | Investors | Applies to gains accruing from 1 July 2027 |
Foreign buyer ban on existing homes extended | Foreign investors | Until mid-2029 |
$2 billion Local Infrastructure Fund | New housing supply | Over four years |
5% deposit support for first home buyers | Eligible first home buyers | Subject to legislation |
Sources: Australian Government Budget 2026–27 - Cost of living and Tax reform | 2026–27 Budget Speech
Tax cuts: what’s changing from 2026?
The budget includes several tax changes that may leave more money in some Australians’ pockets over the next few years.
From 1 July 2026, the income tax rate on earnings between $18,201 and $45,000 will reduce from 16% to 15%. From 1 July 2027, that rate will reduce again to 14%.
The government is also introducing a permanent Working Australians Tax Offset (WATO) of up to $250 annually from the 2027–28 income year, alongside a $1,000 instant tax deduction from the 2026–27 income year.
According to Treasurer Jim Chalmers’ budget speech, the combined measures could provide “up to $54 back in the average earner’s pocket each week” by 2028 for some workers, depending on their income and circumstances.
The government’s budget calculator estimates the maximum combined benefit could total up to $2,816 for some average earners, depending on individual circumstances.
For borrowers, extra take-home pay may help with repayments, savings goals, or growing an offset account balance over time. How much difference this makes will depend on your income, expenses and loan setup.
Cost of living support: what else is included?
The budget also includes several measures aimed at helping households manage everyday costs.
Fuel excise reduction
The government confirmed a temporary reduction in fuel excise for three months from 1 April 2026, reducing excise on petrol and diesel from 52.6 cents to 20.6 cents per litre.
According to the government, the measure is expected to cost $2.9 billion. While temporary, lower fuel costs may help ease pressure on household budgets for some borrowers.
Health and medicine spending
The budget includes:
$5.9 billion for new and expanded Pharmaceutical Benefits Scheme (PBS) listings
$25 billion in additional public hospital funding
$1.8 billion to permanently fund 137 Medicare Urgent Care Clinics
These measures do not directly affect home loans, but they may help reduce some everyday expenses for households.
“The major problem has been that we simply have not been building enough homes relative to the number of people in Australia, and that’s led to an undersupply of housing.” - Shane Oliver, AMP chief economist
You might also be interested in: Rates are back near pre-cut levels: How Australians are adapting
Property investors: what’s changing with negative gearing?
One of the biggest property-related updates in the budget is the change to negative gearing rules for established homes.
What is negative gearing?
Negative gearing happens when the costs of owning an investment property are higher than the rental income it earns. Under current rules, eligible investors can generally use those losses to reduce their taxable income.
The budget changes who can continue to claim those deductions against wages and salary income in future.
What changes from 2026 and 2027?
According to the government’s CGT and negative gearing factsheet:
Purchase timing | Treatment |
Before 7:30pm AEST on 12 May 2026 | Existing rules remain unchanged |
Between 12 May 2026 and 30 June 2027 | Negative gearing remains available during the transition period |
From 1 July 2027 on established homes | Losses can no longer be offset against wages or salary |
New builds | Full negative gearing retained |
Source: budget.gov.au
Investors purchasing established homes after 1 July 2027 may still be able to offset losses against other investment income and carry losses forward, but not against salary or wage income.
The government says the changes are intended to encourage more investment into new housing supply and support housing affordability.
“If you’re considering becoming a property investor and you were going to rely on negative gearing in particular, then you might have to rethink that strategy.” - Shane Oliver, AMP chief economist
If you already own an investment property purchased before budget night, the current rules remain unchanged according to the budget papers.
Because everyone’s situation is different, it may help to speak with a qualified tax adviser before making any investment decisions.
What investors should know about the CGT changes
There are also changes coming to capital gains tax (CGT) that property investors should know about.
Currently, many Australians who hold an investment asset for more than 12 months may be eligible for a 50% CGT discount.
From 1 July 2027, the government plans to replace the 50% discount on future gains with a CPI-linked inflation discount.
According to the budget papers:
Gains accrued before 1 July 2027 will still qualify for the current 50% discount
A minimum 30% tax rate on capital gains will apply from 1 July 2027
Pensioners and income support recipients are exempt from the minimum rate
Investors buying eligible new builds may choose the more favourable outcome between the old and new systems when they sell
How these changes affect you will depend on your circumstances, income, and property plans.
If you are thinking about selling an investment property in the next few years, it may be worth speaking with a qualified tax adviser about timing and potential tax implications.
You might also be interested in: How the Federal Budget is influencing property investment decisions
Buying your first home? Here’s what’s changing
Housing affordability was one of the biggest focus areas in this year’s budget.
In his budget speech, Treasurer Jim Chalmers said the reforms were intended to help address Australia’s housing shortage and support more Australians into home ownership.
The government estimates the negative gearing and CGT changes could support around 75,000 additional Australians into home ownership over the next decade.
5% deposit support
The government confirmed support for first home buyers purchasing with a 5% deposit, subject to legislation.
Eligibility rules and implementation details are still to be confirmed.
Housing supply measures
Other housing-related announcements include:
A $2 billion Local Infrastructure Fund to support infrastructure for new housing developments
Funding intended to support up to 65,000 additional homes over the next decade
Extension of the foreign buyer ban on existing homes until mid-2029
Funding to help streamline planning and environmental approvals
These measures are aimed at increasing housing supply over time.
If you are planning to buy your first home, reviewing your borrowing capacity and savings plan early may help you understand what options are available to you.
“My advice to investors is to stay open-minded and curious about other asset classes. A balanced portfolio should contain investments with different return profiles, structures, time frames and liquidity profiles.” - Rachel Hind, alternative markets advisor and investor
Renting right now? Here’s what to know
The budget confirmed continued support for Commonwealth Rent Assistance (CRA), following previous increases in 2023 and 2024.
The government is also continuing to work with states and territories on national renter reform initiatives through A Better Deal for Renters.
For renters hoping to buy in future, the staged tax cuts from 2026 may help support savings goals over time, depending on individual circumstances.
Thinking about refinancing?
The budget does not directly change interest rates or lender policies.
However, changes to household income and living costs may affect how comfortably some borrowers manage repayments over time.
If you have not reviewed your home loan recently, now could be a good time to compare your options and check whether your current loan still suits your needs.
An Aussie Broker can help you compare loans from a panel of lenders and explain what refinancing could look like for your situation.
Key dates to know
Date | Measure | Source |
1 April 2026 | Fuel excise reduction began | |
12 May 2026 | Negative gearing transition rules announced | |
1 July 2026 | Income tax rate reduces from 16% to 15% | |
2026–27 income year | $1,000 instant tax deduction begins | |
30 June 2027 | Transition period for some negative gearing arrangements ends | |
1 July 2027 | New negative gearing and CGT rules begin | |
2027–28 income year | Working Australians Tax Offset begins | |
1 July 2028 | Minimum 30% tax on discretionary trusts begins | |
Mid-2029 | Foreign buyer ban scheduled to end |
Speak with an Aussie Broker about your next move
Whether you are buying your first home, reviewing your investment plans or thinking about refinancing, the 2026 Federal Budget includes changes that may affect your finances and future property plans.
An Aussie Broker can help you understand your home loan options, check your borrowing capacity and compare loans from a range of lenders.
Book a free^ appointment with an Aussie Broker online or in store.