How The 2026 Budget Affects Your Super and Retirement
Budget night always generates more noise than signal. Tax cuts, housing announcements, NDIS headlines. And while many of the proposed measures are still subject to legislation being drafted and passed through Parliament, understanding the proposed measures, and the potential implications, still matters.
If you are in your 50s or 60s and focused on retirement, most of the conversation is not aimed at you, but this article is. Justin Medcalf, Co-Founder of UNLESS Financial, has been across the detail, commenting, “There are genuine wins in here, but there are also real costs coming for older Australians that deserve honest attention.”
Capital gains tax: the 50% discount may change
One of the most widely discussed budget proposals is the planned overhaul of capital gains tax treatment. Under the proposal, the current 50% CGT discount for assets held longer than 12 months would be replaced from 1 July 2027 with an inflation indexation model. Rather than automatically discounting half the gain, the cost base of the asset would instead be adjusted for inflation before tax is applied.
Whether this works out better or worse will depend heavily on the asset, the holding period and the inflation environment over time. For investors with assets held over long periods and strong real capital growth, inflation indexation may provide meaningful relief. For others, particularly where inflation remains elevated or holding periods are shorter, the effective tax outcome could be higher than under the current system.
Before making any decisions about selling assets or restructuring investments, it will be important to model the implications carefully with your accountant or adviser.
Family trusts: income splitting may become less effective
Another proposed change with significant implications for some families is the introduction of a 30% minimum tax on discretionary trust distributions from July 2028. Like many budget measures, this is still subject to legislation being drafted and passed through Parliament. But for families using trusts as part of long-term wealth planning, it is an important proposal to watch.
Under the current system, discretionary trusts can distribute income to lower-income family members to reduce the household’s overall tax bill. The proposed 30% minimum tax would reduce much of that flexibility. Several structures, including fixed trusts, super funds, deceased estates and charitable trusts, are expected to be exempt. Existing discretionary family trusts that do not fall into those categories may be affected.
The government has also proposed a rollover relief period between 1 July 2027 and 30 June 2030, giving families time to review and potentially restructure arrangements if required.
Negative gearing: what may change for property investors
The proposed changes to negative gearing has also been one of the most discussed measures from budget night. Under the proposal, from 1 July 2027 negative gearing concessions would apply only to new housing supply, including new builds, off-the-plan apartments and knock-down rebuilds.
For established properties purchased after budget night, investors would no longer be able to offset rental losses against wage income. Losses could instead only be carried forward against future rental income or capital gains.
The government says the goal is to direct investor demand toward new housing supply rather than established homes. Whether it materially shifts the market remains to be seen. What is clear is that, if implemented, the tax treatment of new versus established property would become a far more important consideration for long-term investors.
Aged care and NDIS: more funding, but also reform
The budget includes a significant increase in aged care funding, with $3.7 billion allocated toward new residential care beds, Support at Home packages and the return of personal care subsidies from October 2026. For retirees and pre-retirees, this matters because aged care is often one of the least-modelled costs in retirement planning.
The NDIS reforms are more complex. The government is attempting to slow long-term spending growth while redirecting some funding toward aged care and broader community support. There will likely be difficult individual stories as these changes play out. But the stated goal is to improve the long-term sustainability of both systems.
For retirement planning, the key takeaway is understanding future aged care costs is becoming increasingly important alongside superannuation and investment planning.
Your super gets a boost
From 1 July 2026, the Super Guarantee (SG) reaches 12%, completing a 30-year phase-in. On an $85,000 salary, that equates to around $425 in additional annual contributions. Modest in isolation, but meaningful when compounded across the remaining years of your working life.
Another significant reform is payday super. Until now, employers have paid contributions quarterly, meaning super balances could sit uninvested for months before reaching a fund. From July, employers will be required to pay super alongside every pay cycle, with contributions needing to arrive within seven business days. The change is designed to reduce unpaid and delayed super, an issue that has disproportionately affected casual and part-time workers over time.
One measure that has already passed Parliament is Division 296. Following Royal Assent in March 2026, an additional 15% tax will apply to earnings attributable to super balances above $3 million, increasing the effective rate on those earnings from 15% to 30%. A second tier applies at balances above $10 million. The measure takes effect from 1 July 2026, with first assessments based on balances at 30 June 2027.
A tax break you can use right now
One of the more practical wins is a new automatic $1,000 tax deduction for workers. Rather than tracking and substantiating smaller work-related expenses individually, eligible taxpayers will be able to claim a standard deduction covering items such as tools, uniforms, subscriptions and other day-to-day work costs. If you are still working, it reduces your taxable income immediately.
There is also a legislated income tax cut for people earning between $18,201 and $45,000. The marginal tax 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. The reduction flows through PAYG withholding automatically.
On top of that, the government has proposed a $250 Working Australians Tax Offset from the 2027 financial year, paid via tax returns lodged in 2028. Combined with energy rebates and other cost-of-living support, the government has framed the package as providing up to $2,816 in total benefits for eligible Australians earning under $182,000. One important note is that the proposed offset applies to wage and salary income only. Australians already retired and living primarily from superannuation drawdowns or investment income are unlikely to benefit directly.
Private health insurance: higher costs ahead for retirees
One confirmed change from the budget is the reduction in private health insurance rebates for older Australians from April 2027. Australians aged 65–69 will see their rebate fall from 28% to 24%, while those aged 70+ will move from 32% to 24%. For many retirees, that means higher out-of-pocket healthcare costs at a time when budgets are already under pressure. Depending on the level of cover, couples could face premium increases of more than $1,000 per year.
The government says the savings will help fund aged care reforms, making it a broader system trade-off. But for retirees managing fixed drawdown strategies, it is still a meaningful cost increase to plan for. If private health cover forms part of your retirement healthcare strategy, reviewing your policy settings before April 2027 may be worthwhile.
Housing, pensions and cost-of-living support
The budget includes funding for 65,000 new social and affordable homes, alongside the proposed changes to CGT and negative gearing. Together, they represent one of the more coordinated housing policy shifts Australia has seen in years.
For pensioners, payments will increase by $22.20 per week for singles, while Pharmaceutical Benefits Scheme (PBS) co-payments for concession cardholders remain frozen at $7.70 until 2029. These are meaningful supports, although inflation is still expected to absorb much of the increase over time.
The budget also expands low-cost energy subsidies and includes targeted investment in First Nations housing, safety and community support initiatives.
The ripple effects
For Australians in their 50s and 60s, the biggest potential impacts from this budget are likely to come from the proposed changes to capital gains tax, discretionary trusts and negative gearing. Together, these measures could materially affect how wealth is structured, invested and drawn down into retirement, particularly for households with investment properties, family trusts or significant unrealised capital gains. Importantly, these proposals are still subject to legislation being drafted and passed through Parliament. Existing arrangements remain in place for now, and no immediate action is required.
At a broader level, the budget signals a gradual reshaping of Australia’s wealth and retirement system. Some of the long-standing tax advantages tied to property investment, capital gains and income distribution are being wound back, while more funding is being directed toward aged care, housing and community support. At the same time, retirement itself is becoming more complex to model. Healthcare costs, aged care needs, tax settings and investment structures are all shifting at once for the same generation of Australians approaching retirement.
The most useful response is not rushing into changes. It is understanding which measures may eventually apply to your situation and making thoughtful decisions as the policy detail becomes clearer. If you would like to work through what these proposed changes could mean for your retirement plan, the UNLESS Financial team is here to help. Book a free initial consultation here.
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
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
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
