Federal Budget 2026: Finance expert Nick Bruining explains how tax changes will affect investment property

Accountants, financial planners and property valuers will have been popping the Champaign corks on Tuesday. The Treasurer announced a raft of changes guaranteed to keep these financial professions fully occupied for the foreseeable future.

But Tuesday night’s budget speech contains a hidden and very real warning. With the stroke of a pen, the government can change expected outcomes dramatically.

Tuesday night was a lesson in a form of risk that can be far more damaging than a share market correction or an oil-supply side shock. The risk that the buggers can change the rules whenever they feel like it.

The technical term is legislative risk.

Forget election promises and long established norms and practices. A change in negative gearing and capital gains tax rules could just as easily have been a rule that restricts how much of your super you can access as a lump sum in retirement, or the imposition of a superannuation withdrawal tax for the over 60’s.

But those with one eye on retirement over the next few years should take note.

Accountants will be flat out doing the calculations that mix the old Capital Gains Tax rules with the new Capital Gains tax rules.

Let’s take someone that bought an investment property a couple of years ago for $400,000. The 50 percent discount rule will apply from the purchase date to July 1 2027. That means half of the gain over that period is taxable.

You’ll be able to verify that gain by getting a formal valuation at the time or by using a yet to be released apportionment tool that will calculate a July 2027 valuation. We’ll say your investment property in July next year is valued at $600,000.

Kirching! Half of the $200,000 gain is $100,000 of taxable income.

From there, the new CPI calculation rules kick in until you sell the asset. Our $600,000 asset grows by a further $200,000 over a 3 year period from July 2027 and you sell in 2030 for $800,000. Using CPI values issued on a quarterly basis, inflation on our $600,000 over the period based on about 3 percent lifts the value to $640,000. The taxable profit under the new rules however, is the $800,000 less the $640,000 or $160,000.

That gets added to the $100,000 so your total taxable income from the sale is now $260,000.

Were the rules not changing, the taxable income from the sale would have been half the profit of $400,000 or $200,000.

But thanks to last night’s budget after July next year, other changes apply.

One of the more popular tricks currently used, is to time the sale of assets to coincide with an individual’s retirement.

It works like this:

You plan on ceasing work on June 30, the end of the financial year. With no employment income in the next financial year, the taxation benefits of negative gearing drop away.

With minimal taxable income in the new financial year, interest paid to the lender is dead money and so the decision is made to sell the geared asset.

By deferring that sale into the new financial year when total income is less, the effects of the capital gain is reduced because the tax you pay is based on your marginal tax rates. You know, the first $18,200 is tax free, from $18,200 to $45,000 will be taxed at 14 percent and so on.

If however, the sale occurs after July 1 2027, you’ll be slugged with the new 30 percent minimum tax on the gain made since that date. In our example, that would be 30 percent on $160,000 or $48,000 plus the gain attributable to the pre 2027 period.

But wait there’s more!

Receive any form of means tested income support payment from Centrelink in the year you realise the capital gain, like a part age pension or Jobseeker payment?

You avoid the 30 percent minimum tax.

Standby for renewed interest in strategies to get you a part age pension.