May Budget – My Budget Reply

Opinion: The Budget That Protected the Wealthy and Penalised the Aspiring

---

I want to be clear upfront. I think housing affordability is a genuine crisis. I think younger Australians have been locked out of the market in ways that are unfair and unsustainable. And I understand the political logic of a government that wants to be seen acting on it.

But I've spent the last 12 hours working through the detail of this budget, and I keep coming back to the same uncomfortable conclusion: the people who will feel this most acutely are not who the headlines suggest.

---

Who actually uses negative gearing?

The Government's narrative is that negative gearing and the CGT discount have been turbocharging investor demand at the expense of first home buyers. And on the aggregate numbers, they're not wrong. But let me tell you who I actually see using negative gearing in my practice.

It's not the already wealthy. The people I sit across from who own multiple investment properties, the ones with genuine wealth, stopped negatively gearing years ago. Their properties have appreciated, the loans are largely paid down, and they're positively geared. More importantly, the genuinely wealthy long ago moved their property holdings across multiple entities, companies, trusts, family members, specifically to manage land tax exposure. They weren't relying on the negative gearing deduction against their personal income. That ship sailed a decade ago.

The person who is negatively gearing an investment property today is typically someone in their mid-thirties, owns their own home, earns a decent income, and has made a deliberate decision to invest in property as a wealth-building strategy outside of superannuation. They're not a property mogul. They own one investment property. Maybe two. They're using the tax deductibility of the holding costs to make the cash flow work while the asset appreciates over time. They're doing exactly what the tax system was designed to encourage. And from 1 July 2027, that strategy no longer works for anyone who hasn't already pulled the trigger.

---

The super access problem nobody wants to talk about

Here's the thing that frustrates me most about this budget and the broader policy environment my clients operate in.

The Government talks constantly about superannuation as the solution to retirement income adequacy. And it's right that super is a powerful wealth-building vehicle. But every single one of my clients in their thirties and forties has the same quiet anxiety about it: what if they change the rules before I get there?

And honestly, can you blame them? The preservation age has already shifted. The $3 million super tax is already in motion. The performance test is being restructured. Every budget cycle brings another tweak to the super system, and the direction of travel is consistently toward tighter access, higher taxes, and more restrictions on what you can do with your own money. Super is a locked box with rules that change while you're waiting for the key.

So when my clients decide they want to build wealth outside of super, wealth they can actually access before they're 60, wealth they can use to pay for their kids' education, or a business opportunity, or simply to retire at 55 rather than 60-65, I can hardly tell them they're wrong. They're not being reckless. They're being rational. They're hedging against a system they don't fully trust.

Investment property, a discretionary trust holding a diversified share portfolio, a small business operated through a company structure that pays dividends, these are the building blocks of accessible pre-retirement wealth for the people I work with. And this budget has made every single one of them harder, more expensive, or more uncertain.

---

The grandfathering illusion

The Government has been keen to emphasise the grandfathering arrangements in this budget. Existing negatively geared properties are protected forever. Existing trusts have until 2028. Existing CGT positions are carved off at June 2027.

But grandfathering only protects the wealth you've already built. It does nothing for the person who is just starting.

The 34-year-old who owns their home and is ready to take the next step, buy an investment property, set up a family trust, start building a share portfolio in a structure that gives them flexibility, they walk into a fundamentally different landscape from the 44-year-old who made those same decisions ten years ago and is now fully grandfathered.

The ladder hasn't been kicked away. It's just been raised a few rungs. And the people who already climbed it are sitting comfortably at the top watching it happen.

---

The new build carve-out doesn't solve it

I anticipate the response here will be: but new builds are exempt from the negative gearing changes, and investors can still choose the 50% CGT discount method on new properties at the time of sale.

That's true. And for some clients it will be the right answer. But let's be honest about what we're actually directing aspiring investors toward. Off-the-plan purchases carry developer risk. Valuations at settlement don't always reflect the purchase price. Rental yields on new apartments in high-density buildings are often lower than established stock in the same suburb. Building defects, strata levies, and oversupply in certain markets are real risks. For a first-time investor who is just starting to build wealth, the new build carve-out is not a like-for-like substitute for the strategy that has been removed. It's a narrower, riskier path presented as an equivalent option.

---

What this budget actually rewards

Strip away the rhetoric and look at what the tax system now actively rewards:

Superannuation contributions, tax advantaged, locked away, rules subject to change.
New build property investment, viable, but riskier and narrower.
Salary and wages, taxed at your marginal rate with a $250 offset as consolation.

And what it now actively penalises or makes significantly less attractive: established investment property for new purchasers. Discretionary trusts for income splitting. Capital gains on assets held outside super. Wealth that can actually be accessed before preservation age.

The message to the aspiring 35-year-old investor is essentially: put it in super and hope the rules don't change again. And if you want accessible wealth outside of super, you'll be doing it with less tax efficiency, more structural complexity, and at a higher effective cost than every generation before you.

---

I'm not arguing for the status quo

To be clear: I'm not saying the previous tax settings were perfect. The 50% CGT discount had become significantly more generous than its original inflation-adjustment purpose. And there were genuine abuses of discretionary trusts by very high-income earners that were hard to justify on fairness grounds.

But there is a meaningful difference between reforming the extremes and systematically removing the tax-advantaged pathways that ordinary aspiring investors relied on to build accessible retirement wealth. This budget has done both simultaneously, and called the whole thing intergenerational fairness.

The people who will feel it most are not baby boomers with seven properties. They're my clients. They're in their thirties and forties, they've worked hard, bought their home, and made a deliberate and entirely reasonable decision to take their financial future into their own hands rather than trusting entirely in a super system that has already broken more than one promise about when and how they'll be able to access it.

They deserved better from this budget. And as their adviser, I'll be working hard to find the best path through what's left.

---

Matthew Timms is a Financial Adviser at Funded Futures Financial Services. This article represents his personal views and does not constitute financial advice. If you'd like to discuss how the Budget changes affect your personal situation, please get in touch.

Funded Futures Financial Services Socials