The 2026–27 Federal Budget could push more investors toward superannuation as looming tax changes force households, advisers and asset owners to reassess how they structure long-term wealth.
Treasurer Jim Chalmers will hand down the Budget at 7:30pm AEST on Tuesday, 12 May, with the government’s fifth budget set to combine cost-of-living relief, tax reform, productivity measures, fuel security, defence spending and savings across major programs.
While the broader Budget is shaping as a test of the government’s reform agenda, the implications for superannuation could be significant if changes to trusts, capital gains tax and negative gearing make other investment structures less attractive.
Michael Horan, partner and financial planner at CA Financial Services Group, said a proposed minimum 30 per cent tax rate on trust distributions would mark a material change, but advised clients are likely to respond quickly.
“Most people using trusts have already got advisers in their corner – whether that’s financial, tax or legal. And research from Russell Investments shows that having a financial adviser delivers around a 5.6 per cent benefit, with about 1.2 per cent of that coming from tax strategies alone,” Horan said.
“So while a proposed minimum 30 per cent tax rate on trust distributions would represent a real shift, it’s unlikely to be a great impact on advised clients. Their advisers will get to work restructuring arrangements to minimise the impact.”
Horan said tax-effective structures, including superannuation, could become more attractive as investors look to preserve after-tax returns.
“What we’d expect to see is a shift toward tax-effective strategies – increased superannuation contributions, investment bonds, and gearing – to offset the effect of the new rate,” Horan said.
“And depending on what assets someone holds, running them through a company structure could open up some more tax-friendly options too.”
Investors most exposed to trust changes are likely to be those who have not reviewed older arrangements.
“The change is more likely to affect people who’ve been using trusts without ongoing professional advice – those who set up a structure years ago and haven’t revisited it since,” Horan said.
Budget test looms for reform agenda
AMP chief economist Shane Oliver said the Budget should be used to reset the economy’s trajectory rather than repeat the short-term fiscal support that contributed to Australia’s inflation problem after the pandemic.
“The upcoming Budget is an ideal opportunity to reframe government policy to put the economy onto a stronger path. The latest global crisis adds to the case for this,” Oliver said.
According to Oliver, the five key priorities should be limiting cost-of-living relief, cutting government spending over four years, undertaking serious tax reform rather than simply raising taxes, delivering major productivity reforms and reforming the Charter of Budget Honesty.
Public reporting points to a smaller deficit than previously forecast, helped by stronger revenue from commodity prices and inflation. Reuters reported analysts have tipped the 2025–26 deficit to come in between $23.8 billion and $29 billion, below the earlier $36.8 billion forecast.
Stronger fiscal conditions have created room for a reform-heavy Budget, but Oliver warned any household support should be tightly limited, particularly with oil prices and energy costs already complicating the inflation outlook.
“Some sort of cost-of-living relief to deal with the impact of the War looks likely and direct transfers to households and key impacted businesses are preferrable to an extension to fuel tax cuts as the latter just blunt the price signal to cut back on fuel use,” Oliver said.
“The bottom line is that any cost-of-living relief/economic stimulus should be modest and very well targeted to those who really need it.”
Spending restraint remains central
Fuel security is also set to feature prominently, with the government having already confirmed a package worth more than $10 billion, including a permanent government-owned Australian fuel security reserve of around one billion litres and higher minimum stockholding obligations.
Defence spending will also sit near the centre of the Budget, with Reuters reporting an additional $53 billion over the decade, including $14 billion over the budget forecast period, as Australia responds to a more volatile security environment.
Spending restraint will be just as important as new commitments, with NDIS reform tipped to do much of the savings work. Reuters reported changes to the disability program could save more than $35 billion over four years.
Oliver said public spending has risen too far as a share of the economy and needs to be brought back toward longer-term norms to ease capacity pressures and reduce inflation risk.
“Our assessment is that it needs to be brought back to around 25 per cent of GDP which is in line with the longer-term norm,” Oliver said.
“If this were to occur over the four years to 2029-30 it would entail cutting roughly $102bn out of Federal spending over four years and constraining spending growth to 3 per cent pa.”
Tax changes put investors on notice
Tax reform is likely to carry the biggest implications for investors and advisers, with public reporting pointing to changes to capital gains tax, negative gearing and trust structures. The CGT discount may be linked to inflation rather than the existing 50 per cent discount, while negative gearing changes have been linked to newly built homes.
Oliver said changes to capital gains tax concessions, negative gearing, trusts, gas taxation and road user charges for electric vehicles all have merit, but warned the Budget risks becoming a tax grab unless the package goes much further.
“But if this is all the Budget has on tax, it will be a tax hike and not real tax reform,” Oliver said.
Australia’s tax system remains too reliant on income tax, too exposed to bracket creep and too burdened by inefficient state taxes such as stamp duty, according to Oliver.
“What is needed is simple: much lower personal tax rates with higher thresholds; a lower corporate tax rate; a higher and more comprehensive GST; compensation of low-income earners and welfare recipients for increasing the GST; the indexation of tax brackets to inflation; and the removal of stamp duty and its replacement with land tax,” Oliver said.
“The shift in reliance from income tax to GST is the best way to improve intergenerational equity.”
Negative gearing rethink could shift behaviour
Negative gearing changes could also shift investors away from strategies built around tax losses rather than the quality of the underlying asset.
“Nobody should be investing purely for tax reasons – but our system has encouraged exactly that, negative gearing being the obvious example,” Horan said.
“People have been holding loss-making assets just to get the tax break, which is distorted behaviour. In that sense, scaling it back could nudge people toward investments that actually stack up on their own merits.”
While that shift may improve capital allocation over time, Horan warned the transition could be disruptive.
“So a change to negative gearing will likely have a positive impact on investment behaviour in the long run, getting people investing for the right reasons rather than the tax outcome,” Horan said.
“But in the short term you’re going to see asset value fluctuations, people selling up, and lower investment amounts.”
Generational divide widens
Generational effects are likely to be uneven. Boomers may face larger tax bills if they sell assets, though many hold wealth in superannuation and the family home, which remain largely tax-sheltered. Gen X investors could delay investment and focus on mortgages, while older members of that cohort may bear a larger tax burden as they sell assets to fund retirement.
Millennials may not pay as much tax directly at first, but higher tax on returns and reduced access to gearing strategies could delay wealth accumulation. Gen Z investors risk losing another pathway used by previous generations to build wealth.
“Anyone with money invested – or who wants to invest – is going to feel this. In dollar terms, it’s the wealthy, the unencumbered, probably the retired, who’ll pay the most,” Horan said.
“But honestly, the real issue is that every Australian pays the price through less investment and less opportunity.”
Productivity question remains unresolved
Productivity reform will need to go beyond slogans, Oliver said, with the Budget needing to reduce red tape, improve flexibility across product and labour markets, and strengthen incentives for companies to invest.
Commonwealth Bank has similarly argued that changes to CGT and negative gearing may lift revenue but will not materially improve productivity or housing affordability without broader reform.
Oliver also called for reform of the Charter of Budget Honesty, arguing the growth in “off budget” spending has blurred the true fiscal position because projects classified as investments still add to public debt.
Investor confidence may ultimately hinge on whether the Budget is seen as genuine reform or another layer of tax and spending intervention.
