Reframing Australian Investment Taxation: 2026 Budget Measures on Negative Gearing, Capital Gains Tax Discount and Trusts

Australia’s Federal Budget 2026/27, delivered on 12 May 2026, proposes major changes to the taxation of individual investment income. This reflects a major shift away from the existing tax framework through which Australian investors have been able to employ strategies involving income tax deductible leverage to acquire residential property, enjoy preferential tax rates on capital gains and achieve asset protection and tax preferred income splitting outcomes using discretionary trust structures. This article will discuss the three key changes proposed to taxation of individual investment income: the limiting of negative gearing for established residential property, replacing the capital gains tax discount with indexation, and a 30% minimum tax on real capital gains and the introduction of a 30% minimum tax on discretionary trust income, as well as the combined effect of these changes to the traditional private wealth planning model in Australia.