How The 2026 Budget Affects Your Super and Retirement
Budget night always generates more noise than signal. Tax cuts, housing announcements, NDIS headlines. If you are in your 50s or 60s and focused on retirement, most of it is not aimed at you. This article is.
Justin Medcalf, Co-Founder of UNLESS Financial, has been across the detail since the budget was released. "There are genuine wins in here," he says, "but there are also real costs coming for older Australians that deserve honest attention."
TL;DR
Super contributions reach 12% and employers must pay super every pay cycle.
A new 15% tax applies to super earnings above $3 million.
Income tax on the $18,201–$45,000 bracket drops from 16% to 15% this financial year.
Workers can claim an automatic $1,000 tax deduction this financial year.
The 50% capital gains tax discount is being replaced.
Negative gearing will only apply to new builds from July 2027.
Discretionary trust distributions will face a 30% minimum tax, removing the income-splitting benefit.
Australians over 65 on private health insurance will pay more.
Aged care receives $3.7 billion, but NDIS funding is being restructured.
Your super gets a boost
From 1 July 2026, the Super Guarantee reaches 12%, completing a 30-year phase-in. For example, on a $85,000 salary, that is an extra $425 in annual contributions. Modest in isolation, but compounded across the remaining years of your working life, it adds up.
The more meaningful change is payday super. Until now, employers have paid contributions quarterly, which means your money could sit uninvested for up to 90 days before reaching your fund. From July, employers must pay super alongside every pay cycle and contributions must reach your fund within seven business days. This closes a gap that has cost casual and part-time workers, many of whom are women, billions in delayed compounding over the decades.
Parliament has also legislated a new tax on very high super balances. Division 296, which received Royal Assent in March 2026, applies an additional 15% to the earnings attributable to super balances above $3 million, bringing the effective rate on those earnings from 15% to 30%. A second tier applies at $10 million. The measure takes effect from 1 July 2026, with first assessments based on your balance at 30 June 2027.
A tax break you can use right now
This is one of the budget's better practical wins. From this financial year, workers will automatically be able to claim $1,000 as a tax deduction without needing to produce individual receipts. It is designed for everyday work-related expenses, tools, uniforms, subscriptions, and the like. If you are still working, it reduces your taxable income immediately.
There is also a direct income tax cut for people in the $18,201 to $45,000 bracket. The rate drops from 16% to 15% from 1 July 2026, and then to 14% from 1 July 2027. For anyone earning above $45,000, the saving is around $268 per year. This cut flows through your normal PAYG withholding automatically. The Working Australians Tax Offset, discussed below, requires a tax return to claim.
On top of that, the government is introducing a $250 Working Australians Tax Offset from the 2027 financial year, paid through your tax return in 2028. The government has framed a total package of up to $2,816 in benefits for people earning under $182,000 when you add these measures together with energy relief and other cost-of-living support. One important caveat is that the $250 offset applies to wage and salary income only. If you are already retired and living primarily on super drawdowns or investment returns, it will not reach you.
Capital gains tax: the 50% discount is going
This has been one of the most discussed measures in the budget. Currently, if you sell an investment property or shares after holding them for more than 12 months, you only pay tax on half the profit. From 1 July 2027, that 50% discount is being scrapped and replaced with a new system where your cost base is indexed to inflation, so you are only taxed on the gain above what inflation would account for.
Does this work out better or worse? It depends. For people who have held an asset for many years with a large real gain, the inflation adjustment may offer meaningful relief. For others, particularly those with assets held for shorter periods or in a rising-inflation environment, the change could result in a higher tax bill. The maths are different for each person and each asset. It is worth running the numbers with your accountant before making any decisions about selling.
Negative gearing: what changes for property investors
Negative gearing has also been one of the hottest topics coming out of budget night, and for good reason. Currently, if your investment property costs more to hold each week than it earns in rent, you can deduct that loss from your wages, reducing your overall tax bill. From 1 July 2027, that benefit will only apply to new builds: vacant land construction, off-the-plan apartments and knock-down rebuilds. Anyone who buys an established residential property after budget night will only be able to offset losses against future rental income or gains, not against wages.
For example, imagine someone like Danielle, who rents out a property at $800 per week but pays $1,000 per week in mortgage repayments, rates and maintenance. That $200 weekly shortfall is currently deductible against her salary. Under the new rules, if Danielle buys a second established investment property after budget night, that deduction against wages disappears. A new build would still attract the full benefit.
Existing investors are fully grandfathered. The government's stated goal is to direct investor interest toward new housing supply rather than competing with owner-occupiers for established homes. Whether it shifts the market meaningfully is something we will watch. If you are planning to purchase an investment property as part of your retirement income strategy, the choice between established and new build now carries significant tax consequences.
Family trusts: the income-splitting benefit is going
For families who have used discretionary trusts to distribute income to lower-earning family members and reduce their overall tax bill, this budget changes the calculation. From July 2028, distributions from discretionary trusts will face a 30% minimum tax rate. The income-splitting strategy that has been a standard part of family wealth planning for decades will no longer work in the same way.
The 30% minimum applies to the taxable amount received by each beneficiary, regardless of their marginal rate. If a beneficiary currently pays less than 30% tax on distributions, the new minimum floor applies. For families where the trust was structured specifically to shift income to a spouse or adult child in a lower tax bracket, the benefit shrinks considerably.
Fixed trusts, widely-held trusts, superannuation funds, deceased estates, charitable trusts, and primary production trusts are all exempt. If you hold a discretionary family trust and it does not fall into one of those categories, this applies to you. The government has also provided a rollover relief window from 1 July 2027 to 30 June 2030, which gives families time to restructure their arrangements before the full rules take effect.
Aged care and NDIS: more money, and a restructure
Aged care is one of the least-modelled costs in Australian retirement planning, and this budget changes the landscape. The government is committing $3.7 billion, including 5,000 new residential beds per year, free Support at Home packages for eligible patients, and the reinstatement of personal care subsidies, covering help with showering, dressing and day-to-day care, which were cut in November 2025. Those subsidies return from October 2026.
The NDIS picture is more nuanced. The government is reining in NDIS expenditure growth, not because the system is overspending today, but because the current trajectory is not sustainable long-term. Billions from those savings are being redirected into aged care and community support. The goal is a more sustainable NDIS that directs funding to where it is most needed. In the short term, some individuals will be affected and there will be hard stories coming out of this. Longer term, the intent is to protect the scheme's viability.
The practical question for your retirement plan is not just how much super you will need, but what aged care might realistically cost given today's subsidy structure. Many advisers default to pre-budget assumptions. Updating your estimate now avoids a planning gap later.
Private health insurance: the direct hit
From April 2027, the government is equalising the private health insurance rebate across age groups. Australians aged 65-69 will see their rebate drop from 28% to 24%. Those 70 and over will go from 32% to 24%. More than three million Australians are affected, at an average additional cost of $230 to $255 per person per year. Couples on Gold cover can expect increases of $1,000 to $1,600 annually, depending on their fund.
The savings are being redirected into aged care, which makes it a defensible trade-off at a system level. For people managing retirement income on a fixed drawdown, it is a real and predictable cost. If private health insurance is part of your retirement healthcare plan, reviewing your cover level before April 2027 is worth doing.
Housing supply, pension, and everyday costs
The budget commits to 65,000 new social and affordable homes. It is a step in the right direction, whether it is enough to change the trajectory of housing affordability in Australia is uncertain, but the combination of new housing supply and changes to negative gearing and CGT represents the most coordinated attempt at housing policy reform in years.
For those on the age pension, payments increased by $22.20 per week for singles, and the PBS co-payment for concession cardholders stays frozen at $7.70 until 2029. Both are real benefits, though much of the pension increase will be absorbed by the 5% inflation forecast for mid-2026. Note also that deeming rates rose in March 2026 outside of this budget, increasing the deemed income applied to financial assets in the pension means test. If you hold savings above the lower deeming threshold, it is worth checking what impact this has on your entitlements.
The budget also includes targeted funding for First Nations communities, with specific investment in safety, housing quality, and reducing violence against Aboriginal women and children. The low-cost household energy subsidy is expanded. These are meaningful commitments to the communities that most need investment.
The ripple effects
At the personal level, this budget changes the numbers you are planning with. Your super contributions arrive in your fund faster and at a higher rate. Your work-related deductions are simpler to claim. If you hold an investment property or shares, the tax treatment of your gain is changing. If you hold a family trust, the income you can distribute is being taxed differently. If you are paying for private health cover in your 60s, your premium is going up. Each of these is a real change to your household cash flow and retirement timeline.
At the system level, the budget signals a rebalancing. Capital that was flowing into established investment properties through negative gearing deductions is being redirected toward new housing supply. Income that was being distributed through family trusts to reduce tax exposure is being taxed closer to its full rate. The savings from those reforms are, in part, being reinvested into aged care and the NDIS. Whether that rebalancing achieves its stated goals depends on implementation, but the direction is clear: the structural advantages built into wealth planning over the past 30 years are being wound back, gradually.
At the economic and societal level, retirement in Australia is becoming more expensive to fund and harder to predict. The private health rebate cut, the deeming rate rise, and the CGT reform all arrive in the same planning window for the same cohort of Australians. The aged care investment is welcome, but the cost of care in retirement remains one of the least-modelled variables in most retirement plans.
The most useful thing you can do with this budget is identify the two or three measures that apply to your situation and consider how they affect your wealth and retirement planning. If you would like to work through any of these changes with an adviser who understands the full retirement picture, a conversation with the UNLESS Financial team is a good place to start. Book a free initial consultation here.
Note: Measures are subject to legislation being drafted and being passed through parliament.
This article contains general information only and does not constitute personal financial advice. UNLESS Financial Pty Ltd is authorised to provide financial services. Before acting on any information in this article, consider whether it is appropriate for your personal circumstances. You should seek advice from a licensed financial adviser.
Sources and further reading
ABC News | [Federal budget 2026: winners and losers] (https://www.abc.net.au/news/2026-05-12/federal-budget-2026-winners-and-losers/106639966) | May 2026 | Winners and losers breakdown including PHI rebate figures and WATO income restriction
Australian Financial Review | [What we know about how the budget could affect your wealth] (https://www.afr.com/wealth/personal-finance/what-we-know-about-how-the-budget-could-affect-your-wealth-20260505-p5ztul) | May 2026 | Analysis of CGT, negative gearing, trust tax and SMSF exemptions
Australian Taxation Office (ATO) | [Payday superannuation] (https://www.ato.gov.au/about-ato/new-legislation/in-detail/superannuation/payday-superannuation) | 2026 | Official guidance on payday super obligations and seven-business-day receipt requirement
Money Magazine | [Budget tax changes put all investors on notice] (https://www.moneymag.com.au/budget-tax-changes-put-all-investors-on-notice) | May 2026 | CGT discount replacement, 30% minimum tax, negative gearing restriction and SMSF exemptions
National Seniors Australia | [Federal Budget 2026] (https://nationalseniors.com.au/advocacy/current/federal-budget-2026) | 2026 | PHI rebate cut modelling, pension increase, rent assistance and deeming rate analysis
Private Healthcare Australia | [Older Australians among biggest budget losers as health insurance rebate cut hits seniors] (https://privatehealthcareaustralia.org.au/older-australians-among-biggest-budget-losers-as-health-insurance-rebate-cut-hits-seniors/) | May 2026 | PHI cost increases by age group and cover tier
savings.com.au | [Few sweeteners for pensioners and seniors in federal budget] (https://www.savings.com.au/news/how-will-the-federal-budget-impact-pensioners) | May 2026 | PBS co-payment freeze, deeming rates and pension supplement changes
SuperGuide | [Federal Budget 2026 overview] (https://www.superguide.com.au/super-booster/federal-budget-2026-overview) | 2026 | Superannuation changes including payday super, 12% SG and Division 296
Treasury | [Budget 2026–27] (https://budget.gov.au/) | 2026 | Primary source for aged care, payday super, personal care subsidies, CGT and negative gearing reform, First Nations investment
