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What It Means for Australians
Funded Futures Financial Services | May 2026
A comparison of the key policy positions from the 2026–27 Federal Budget and the Coalition's budget reply speech by Opposition Leader Angus Taylor, delivered 16 May 2026.
Before we get into the detail, a word on context. What follows is a comparison of two political documents — a government budget and an opposition reply. The Labor measures are in various stages of legislated, proposed, or subject to consultation. The Coalition's positions are policy commitments from an opposition party, not a government, and have no legislative detail behind them. Neither set of measures should be treated as settled law. This post does not represent an endorsement of either political party or their positions.
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1. Income Tax |
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Area |
Labor — Budget 2026–27 |
Coalition — Budget Reply |
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Tax cuts |
Three rounds delivered — 16% rate on $18,201–$45,000 drops to 15% from 1 July 2026, then 14% from 1 July 2027. |
No new rate cuts announced — focus on bracket creep instead. |
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Bracket creep |
No indexation of tax thresholds announced. |
Tax Back Guarantee — index bottom two thresholds to CPI from 2028–29; top two thresholds from 2031–32. Worth ~$2.50/year initially, growing to $1,000+ by year four for a typical worker. |
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Working Australians Tax Offset (WATO) |
$250 WATO from 2027–28 for all working Australians — salary, wages and sole traders. |
Committed to repealing Labor's tax package broadly; no specific WATO position stated. |
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Instant work deduction |
$1,000 instant work-related expense deduction from 2026–27 — no receipts required under $1,000. |
No equivalent announced. |
What this means for you: Labor's approach gives you a legislated cut now with a flat offset later. The Coalition's bracket creep indexation is a more structural long-term solution but does not start until 2028–29 and only if they win government.
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2. Property Investment & Negative Gearing |
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Area |
Labor — Budget 2026–27 |
Coalition — Budget Reply |
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Negative gearing — existing properties |
Quarantined from 1 July 2027 for properties purchased after Budget night (7:30pm 12 May 2026) — losses can only offset rental income and capital gains, not salary. |
Committed to repealing — will "fight like hell" to block, and repeal if elected. |
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Negative gearing — new builds |
Fully retained — new builds exempt from all changes. |
Supports — no changes proposed to new build treatment. |
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Grandfathering |
Full grandfathering for properties purchased before 7:30pm 12 May 2026, including contracts exchanged but not yet settled. |
Moot if they repeal — existing owners protected either way. |
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Coalition housing alternative |
N/A |
$5 billion infrastructure fund to unlock 400,000 new homes; cut red tape to reduce new home cost by up to $70,000; immigration cap tied to homes built. |
What this means for you: This is the most contested policy area in the entire budget. If Labor legislates and the Coalition wins government before it takes effect, there is a genuine possibility of repeal — though timing matters enormously given the 1 July 2027 start date and an election due by May 2028.
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3. Capital Gains Tax |
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Area |
Labor — Budget 2026–27 |
Coalition — Budget Reply |
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CGT method |
Replaces 50% discount with cost base indexation (CPI) from 1 July 2027 — only real gains above inflation are taxable. |
Committed to repealing — describes it as "increasing the capital gains tax". |
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Minimum CGT rate |
30% minimum tax on real capital gains for individuals from 1 July 2027. |
No equivalent — implied repeal. |
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New build CGT |
Investors in new builds can choose either 50% discount or indexation at time of sale — whichever is more favourable. |
No specific position — general support for investment incentives. |
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Transitional arrangements |
Pre-July 2027 gains protected under old rules — no retrospective effect. |
Would restore old rules on repeal. |
What this means for you: For long-held high-growth assets the 50% discount is generally more generous — a repeal would genuinely benefit investors, particularly those planning to sell post-2027
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4. Discretionary Trusts |
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Area |
Labor — Budget 2026–27 |
Coalition — Budget Reply |
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Minimum trust tax |
30% minimum tax paid by trustee from 1 July 2028. Individual beneficiaries receive non-refundable credits. Corporate beneficiaries (bucket companies) receive no credit. |
Committed to repealing as part of broader tax package repeal. |
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Income splitting |
Effectively neutralised — 30% already paid at trustee level and credits are non-refundable for lower-income beneficiaries. |
Would restore full income splitting flexibility. |
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Rollover relief |
3 years from 1 July 2027 to restructure out of trusts into companies or fixed trusts without triggering CGT. |
No equivalent needed if repealed. |
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Franking credit treatment |
Unresolved — explicitly flagged for Government consultation. |
Moot if repealed. |
What this means for you: If you hold a discretionary trust, you are in a genuine policy wait-and-see position. Acting before the outcome is clearer — either legislatively or electorally — is premature for most clients.
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5. Small Business |
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Area |
Labor — Budget 2026–27 |
Coalition — Budget Reply |
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Instant asset write-off |
$20,000 IAWO made permanent from 1 July 2026 for businesses under $10M turnover. |
$50,000 IAWO permanent for businesses under $10M turnover — more than double Labor's threshold. |
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Loss carry back |
Permanent 2-year loss carry back for companies under $1B turnover from 1 July 2026. |
Supports — no specific position to change. |
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Regulatory burden |
$540M per year in compliance cost reductions announced. |
Rewrite of Corporations Act, Tax Act, Competition Act, National Construction Code and EPBC Act; new regulatory reform mandate requiring regulators to encourage competition and investment. |
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Carbon costs |
Safeguard mechanism retained. |
Abolish safeguard mechanism and all carbon taxes — described as reducing costs for manufacturing, construction and mining. |
What this means for you: Both sides support small business relief. The Coalition's $50,000 IAWO is materially more generous. The safeguard mechanism difference matters most to businesses in manufacturing, construction and mining.
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6. Superannuation |
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Area |
Labor — Budget 2026–27 |
Coalition — Budget Reply |
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Super tax changes |
No new super changes in this budget — $3M super tax already legislated separately. |
No specific super policy announced in reply. |
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Preservation age |
No change. |
No change announced. |
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SMSF |
No change — SMSF largely unaffected by trust and CGT changes. |
No specific position announced. |
What this means for you: Super is largely off the table in this specific budget debate. The previously legislated $3M super tax remains in place regardless of budget reply positions.
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7. Housing — Government Spending |
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Area |
Labor — Budget 2026–27 |
Coalition — Budget Reply |
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Housing investment |
$7.2B in housing and community amenities spending in 2026-27. Help to Buy shared equity scheme — Government co-purchases up to 40% of new and 30% of existing homes. |
$5B infrastructure fund for roads, water, power and sewage to unlock 400,000 new homes. Immigration cap tied to housing construction numbers. |
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Build-to-rent |
Tax concessions for build-to-rent developments retained. |
Scrap build-to-rent tax breaks — described as benefiting multinationals. |
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First home buyer scheme |
Currently open to permanent residents and Australian citizens. |
Reserve for Australian citizens only — 50,000 non-citizens have accessed the scheme under Labor. |
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Housing Australia Future Fund |
Maintained. |
Abolish — described as ineffective housing bureaucracy. |
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Immigration |
Current settings — approximately 2 million arrivals projected over Labor's two terms. |
Cap immigration to number of homes built annually. Significant reduction in first years of coalition government. One of the biggest immigration cuts in Australia's history committed. |
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8. Health & Medicare |
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Area |
Labor — Budget 2026–27 |
Coalition — Budget Reply |
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Medicare investment |
$3.5B additional Medicare spending. 137 Urgent Care Clinics made permanent ($1.8B). Bulk billing goal of 9 in 10 GP services by 2030. $25B public hospital funding over 5 years. |
No specific health policy announced in reply. |
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Private health insurance rebate |
Age-based rebate removed — saves $11B over 10 years. |
Criticised cut to private health insurance rebate for Australians over 65. |
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PBS spending |
$23.4B Pharmaceutical Benefits spending in 2026-27. |
No specific position. |
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9. Aged Care |
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Area |
Labor — Budget 2026–27 |
Coalition — Budget Reply |
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Residential aged care |
$3.7B total investment. $606.5M capital subsidies to incentivise up to 5,000 new beds per year. $1B to make personal care services free under Support at Home. $1.1B provisioned for Accommodation Supplement restructure. |
No specific aged care policy announced in reply. |
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Dementia care |
$224.3M for dementia supports. Hospital to Aged Care Dementia Support expanded to 20 locations nationally. |
No specific position announced. |
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Home care |
$389.8M over four years to improve Support at Home program including assessments and end-of-life pathway. |
No specific position announced. |
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10. NDIS |
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Area |
Labor — Budget 2026–27 |
Coalition — Budget Reply |
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Growth trajectory |
Reforms to limit NDIS growth to ~2% over forward estimates, returning to 5% from 2030-31. Projected savings of $184.9B over 12 years. $821.2M for fraud prevention and mandatory provider registration. |
Work with government to make NDIS sustainable — no specific reform detail announced. |
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Eligibility |
Current eligibility maintained with tighter plan reassessment criteria from 1 April 2027. |
Reserve NDIS for Australian citizens only — one of 17 welfare programs proposed for citizenship restriction. |
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Foundational supports |
$2B Thriving Kids program for children aged 8 and under with developmental delay or autism. $3B for Foundational Supports outside NDIS matched by states and territories. |
No equivalent announced. |
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11. Defence & National Security |
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Area |
Labor — Budget 2026–27 |
Coalition — Budget Reply |
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Defence spending |
$52B in 2026-27. Modest growth trajectory. |
Commit to minimum 3% of GDP on defence — described as needed to deter larger adversaries. |
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National security |
Existing arrangements. |
National Security Strategy. Dedicated National Security Advisor. Enhanced border screening. |
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Energy security |
$18B in clean energy and net zero programs. Renewable transition policy. |
Keep coal plants running as long as possible. 90-day minimum fuel reserves. $800M new fuel storage. Lift nuclear ban. Abolish safeguard mechanism. |
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12. Welfare & Cost of Living |
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Area |
Labor — Budget 2026–27 |
Coalition — Budget Reply |
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Cost of living relief |
Fuel excise cut 60.9% (32 cents per litre) for 3 months from April 2026. Energy bill relief programs. |
Reduce government spending to lower inflation. Abolish carbon taxes to reduce cost of living pressures. |
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JobSeeker and welfare |
Current settings maintained. $18.5B JobSeeker spending in 2026-27. |
Reserve for Australian citizens only — along with Youth Allowance, Family Tax Benefit and 14 other programs. |
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Childcare |
$17.1B childcare subsidy in 2026-27. |
Criticise 14% cost increase under Labor's childcare policy. No alternative announced. |
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Veterans |
$11.4B spending in 2026-27. |
Criticise alleged $600M veterans funding cut under Labor. |
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13. Debt & Fiscal Position |
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Area |
Labor — Budget 2026–27 |
Coalition — Budget Reply |
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Debt trajectory |
Structural savings package improves underlying cash balance by ~$77B over 10 years. Three times more savings from spending than revenue measures. |
Future Generations Fund — bank 80 cents in every dollar of resource revenue above forecast into a fund to pay down debt and fund infrastructure. 5% reserved for regions. |
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Spending approach |
$833B in total expenses in 2026-27. Social security and welfare is the largest component at over one-third of total expenses. |
Abolish climate bureaucracy, net zero agencies, Housing Australia Future Fund, build-to-rent tax breaks, EV FBT exemptions and non-citizen welfare access. |
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Revenue approach |
Higher taxes on trusts, CGT and negative gearing to fund worker tax cuts and social spending. |
Repeal Labor's tax measures. Grow revenue through investment, economic growth and resource sector returns. |
The fundamental philosophical divide in this debate is clear. Labor is redistributing tax advantages — away from investment structures and toward wages — and using the revenue to fund worker tax cuts and social spending. The Coalition's argument is that taxing investment reduces it, and that the path to better living standards is through lower taxes, less government, and stronger private enterprise.
From a financial planning perspective, the most important question is not which side is right — it's which policies actually become law. A number of Labor's key measures require legislation that is yet to be introduced, and several are flagged for consultation. The Coalition has committed to repeal if elected. With an election due no later than May 2028, the window between now and the 1 July 2027 and 1 July 2028 start dates for the major measures is narrower than it appears.
That uncertainty is itself a planning consideration. Acting on assumptions about what will or won't be repealed is a risk. Acting on what is currently in front of us — while preserving flexibility to adjust — is the more prudent approach.
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