The Federal Budget for 2026 has been creating a lot of headlines, concerns and speculation. I can understand why! The proposed changes to the current tax regulations, specifically around negative gearing and Capital Gains Tax, are the most significant I have seen since I began advising clients in 1999.
I have added a link below to a two page summary of the main changes which I feel will impact my clients – but rather than re-hash the same talking points everyone is discussing, I want to share a few very brief bullet points on what I feel the likely impact of the proposed changes (assuming they are passed) may be.
My initial take on the potential impact of the proposed changes is as follows:
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Superannuation just became a whole lot more attractive as a long term wealth creation vehicle, particularly given its tax advantages compared to other investment structures.
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Principal residences continue to be exempt from tax and, as such, may become even more popular as a tax free wealth creation strategy for many Australians.
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Negative gearing into established residential property will still work, just not as well, while negative gearing into new properties or shares may actually look comparatively better, as there were no changes in those areas.
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From 1 July 2027, when you sell a property or shares (aside from your principal residence) you are going to pay more tax (potentially a lot more), and previous strategies to reduce that tax may not work as effectively. This will likely require some re-thinking in terms of future tax planning strategies.
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Property growth rates, particularly for established investment properties, may be more subdued in the future depending on how investors respond.
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If there is a rush to sell investment properties prior to 1 July 2027, we may see a short term drop in some property prices, simply due to supply and demand pressures.
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New build property prices may become inflated if people decide they still want to negative gear like the old days and increasingly favour new builds over established properties.
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There may also be broader flow on effects to investment markets as people reassess where they invest, how they structure assets, and whether property remains their preferred long term strategy.
All in all, it’s important to resign ourselves to the fact that legislative and policy shifts are inevitable. However, adjusting previous financial strategies, deciding the best future path, and gauging potential impacts now and into the future is exactly why you have an adviser!
Information provided in this newsletter is general in nature and does not constitute financial advice. Please review our General Advice Disclaimer here: https://bpmfinancial.com.au/general-advice-disclaimer/
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