AuthorDominion Wealth Advice

September is upon us, and spring is in the air. It’s time to shake off the winter cobwebs and enjoy the warmer weather the new season brings.   

In a mixed picture for the Australian economy, inflation eased but not as much as expected. Meanwhile, rapidly rising discretionary spending along with global uncertainties may mean another interest rate rise in September or November. 

The CPI was at 3.5% in the 12 months to July, down from 3.8% but a bigger fall was expected. And, underlying inflation, which the Reserve Bank watches more closely, remained steady at 3.6%.  

Consumer confidence improved during August, rising to its highest level since March. Nonetheless, the result is considerably lower than a year ago. 

There were some solid gains (and falls) in Australian shares during the month with the S&P/ASX 200 above 9000 for the first time since the Iran air strikes began. Globally, markets remained resilient despite the ongoing uncertainty. 

The Aussie dollar ended August at its highest level in three months.

In this issue

Why Transition to Retirement deserves a second look

Tax Alert September 2026

The business of winning

---

Why Transition to Retirement deserves a second look

For many people approaching retirement, the transition from full-time work to retirement is no longer a sudden stop. Instead, it’s often a gradual process that involves reducing work hours, maintaining cash flow and continuing to build retirement savings.

One strategy that can support this approach is a Transition to Retirement Income Stream (TRIS or TTR).ⁱ

While TTR strategies have been available for many years, they are often overlooked despite offering valuable flexibility for people in their 60s who are still working.ⁱⁱ

What is a TTR strategy?

A TTR strategy allows you to access some of your superannuation while continuing to work, provided you have reached your preservation age. For anyone born on or after 1 July 1964, preservation age is 60.ⁱⁱⁱ

The arrangement works by transferring part of your super balance into a TTR pension account. You then receive regular pension payments while continuing to earn employment income. This can help replace lost income if you reduce your working hours or supplement your cash flow while making additional contributions to super.

Unlike a standard retirement-phase pension, a TTR pension has restrictions. Generally, you must draw a minimum pension each year and cannot withdraw more than 10 per cent of the account balance annually. Lump-sum withdrawals are generally not permitted while the TTR remains in the pre-retirement phase.^iv

Who might benefit?

A TTR strategy may suit people who:

• want to reduce their working hours without a significant drop in income
• are approaching retirement but are not ready to stop work completely
• earn a moderate to high income and wish to boost superannuation through salary sacrifice
• want greater flexibility in planning their transition from work to retirement.

For example, someone aged 60 might decide to move from working five days a week to three days a week. By drawing a pension from their super, they can help replace part of their lost income and ease gradually into retirement.

Combining work income and pension payments

One of the key attractions of a TTR strategy is the ability to combine employment income with pension payments.

If you are aged 60 or over, pension payments received from a TTR income stream are generally tax-free in your hands. Instead of experiencing a substantial reduction in disposable income, a tax-free pension payment can help bridge the gap.

The tax-saving strategy

Another commonly used TTR strategy involves salary sacrifice.^v

In this approach, an employee diverts part of their salary into superannuation through concessional contributions, which are generally taxed at 15 per cent within the super fund. The reduction in take-home pay is then partially replaced through tax-free TTR pension payments.

For people on higher marginal tax rates, this may improve tax efficiency because income that would otherwise be taxed at personal rates may instead be contributed to super and taxed at a lower rate. The TTR pension can then be used to maintain cash flow.

In some circumstances, this strategy may also help increase retirement savings while maintaining a similar standard of living before retirement.

Is a TTR strategy right for you?

A Transition to Retirement strategy can provide valuable flexibility for people who want to scale back work, supplement their income or potentially improve the tax efficiency of their retirement planning.

But the benefits depend heavily on individual circumstances, including age, income level, super balance, retirement objectives and tax position. What works well for one person may offer little benefit for another.

If you are approaching retirement and would like to explore whether a TTR strategy could help you achieve your goals, please contact our office. We can help assess whether the approach aligns with your broader retirement and financial planning objectives.

i Transition to retirement | ATO
ii iii Transition to retirement – Moneysmart.gov.au
iii Preservation age | ATO
iv TRIS requirements | ATO
v Using TTR to save on tax | Moneysmart

---

Tax Alert September 2026

Key changes for businesses, SMSFs and employers

A new range of tax measures and compliance changes were recently announced and are set to affect businesses, investors and trustees. Here’s a roundup of the latest tax news.

New approach for PAYG instalments

A new way of managing pay as you go (PAYG) instalments will be introduced from 1 July 2027.

Businesses will be able to use dynamic PAYG, ATO-approved calculations in their accounting software to vary their tax instalment payments in line with real-time business conditions.

The ATO says it will not apply a general interest charge (GIC) if dynamic PAYG is used as intended.

It’s important to note these measures are not yet law.

Rule change for SMSF borrowing

Self-managed Super Fund (SMSF) trustees need to be aware that more restrictive tax rules now apply to borrowing money under Limited Recourse Borrowing Arrangements (LRBA).

From 10 August 2026, LRBAs can only be used to acquire real property if it meets the definition of ‘business real property’.

Existing LRBAs that were entered into before 10 August 2026 are unaffected, as are refinancing arrangements relating to those existing borrowings.

The changes do not apply where a binding contract for the acquisition of a property is exchanged before 10 August 2026 (even if the contract is settled or the LRBA is entered into after this date).

Luxury car tax rate change

The 2026-27 luxury car tax (LCT) threshold has been announced, with vehicle purchases over the threshold attracting the luxury car tax rate of 33 per cent.

From 1 July 2026, the LCT threshold for fuel efficient vehicles increased ever so slightly to $91,661, up from $91,387 in 2025-2026, with the threshold for other vehicles now sitting at $80,809.

Change to penalty fees

Administrative penalties for taxpayers failing to meet their tax obligations also increased from 1 July 2026.

The penalty amount for the current financial year has increased to $364 per unit, up from $330, which applied for the 1 November 2024 to 30 June 2026 period.

The ATO imposes different penalty unit amounts based on several factors including taxpayer behaviour and the amount of tax avoided.

Payday Super compliance tips

The ATO has reiterated that, during the first year of Payday Super, it will focus on helping employers transition to the new rules. From a compliance perspective, it will consider an employer’s behaviour more than genuine mistakes or unintentional errors.

The best way to minimise the risk of compliance action is to pay your super contributions every payday and fix any errors quickly.

If you make a mistake, it should be corrected as soon as possible and outstanding contributions paid to the fund immediately, rather than waiting to receive a notice of assessment.

SG payment timing for contractors

The ATO has warned employers there is no separate timing or special treatment for contractors under the Payday Super regime.

Super for eligible independent contractors must be paid each payday and must reach the contractor’s fund within seven business days after payday.

Division 296 reminders

The ATO has recommended that individuals with Total Super Balances (TSB) above the large super balance threshold ($3 million for 2026-2027) and very large super balance threshold ($10 million for 2026-2027) check the Division 296 web guidance.

Under the new tax rules, the ATO calculates your TSB based on information provided by your super fund and then uses the fund’s earnings report to calculate Division 296 tax and issue a notice of assessment.

As the new rules change the calculation of TSBs, the ATO suggests that eligible taxpayers discuss the implications with their accountant.

Updated trust reporting requirements

From 1 July 2026, trustees of closely held trusts are no longer required to lodge a quarterly beneficiary tax file number (TFN) report.

The ATO is currently reminding trustees they are now required to report beneficiary TFNs in their statement of distribution when completing the trust’s annual return.

There is no change to the existing TFN withholding and reporting obligations if a beneficiary fails to quote their TFN before distribution payments.

Source: https://.ato.gov.au 

---

The business of winning

We see the winning moments in sport. The gold medal celebrations. The match-winning performances. The standing ovations and record-breaking achievements.

What we don’t see are the efforts that made them possible.

Whether it’s the drama of the World Cup, the incredible achievements celebrated at the Commonwealth Games, or the excitement of footy finals season, elite sport reminds us that success is rarely an overnight achievement. Behind every medal, premiership and world title are thousands of hours of preparation, setbacks and sacrifice.

In many ways, small business owners are like elite athletes. Not because they push their bodies to the limit to succeed, but because they understand success is built through consistency, resilience and the willingness to keep moving forward even when things don’t go to plan.

While the playing fields may look different, the mindset behind success is remarkably similar. The approaches that help athletes perform at their best can also contribute to building a strong business. Let’s explore those secrets to success and how they can apply to small business.

“It’s a marathon, not a sprint.” – Amby Burfoot

When we watch elite athletes, we’re seeing the result of years of preparation. What we don’t see are the early mornings and countless training sessions. The perseverance over time.

Business is much the same. Your customers see the finished product. They don’t see the late nights, difficult decisions or the hard work over months or years that made it possible.

Success rarely comes quickly or from one defining moment. More often, it’s built over time by taking small steps.

“Success is built on endless repetition.” – Simone Biles

Elite athletes don’t spend every training session trying something new. They master the fundamentals. The world’s best swimmers still practise their turns. The best footballers work on passing drills. Tennis players spend countless hours perfecting their serve. They understand that repetition is where improvement happens.

As business owners, we’re often chasing the next big idea. Sometimes the greatest gains come from getting better at the basics. That might mean investing more in staff training, streamlining internal processes or simply making small tweaks week after week. Progress isn’t always exciting, but it is powerful.

“Every loss has a lesson.” – Kobe Bryant

One of the greatest lessons elite sport teaches us is that success isn’t always measured by a gold medal. The path to success can be littered with failures.

The same is true in business. Didn’t win the tender? Learn from it. Had a quieter month than expected? Review what worked and what didn’t. Tried something new that fell flat? Take the lesson and move forward.

A setback is rarely the end of the story. Sometimes it’s just being better than you were yesterday.

“I’ve never scored a goal without getting a pass from someone else.” – Abby Wambach 

Sport might celebrate individuals, but success is usually a team effort. Behind every athlete is a support network helping them perform at their best. Coaches, trainers, and teammates all play an important role.

Business is no different. Whether it’s your employees, professional network or family cheering you on from the sidelines, building a successful business isn’t something you have to do alone.

“Success is about perseverance.” – Ash Barty

Athletes don’t train only when they feel motivated. They train because they’ve developed habits and routines that support their goals.

The same principle applies in business. Building a successful business isn’t about being exceptional occasionally. It’s about being consistently good. Returning calls promptly. Delivering excellent service. Continuing to learn. Showing up when things are difficult. These habits are often what separates businesses that survive from those that thrive.

“The final goal requires years of patient building.” – Ian Thorpe

Champions aren’t made in one game, season or tournament. They’re built over time, through perseverance, preparation and continuous improvement.

In business, there will be wins worth celebrating and challenges that test your resolve. There will be periods of growth and moments when progress feels slower than you’d like. The important thing is to keep moving forward.

As we watch athletes compete, it’s worth remembering that what makes them successful isn’t talent alone. It’s the choices they make every day when nobody is watching.

Success isn’t built solely on the winning moments. It’s built in the moments that nobody else sees. Keep showing up, keep improving and keep playing the long game.

Family trusts have long been a popular structure for managing business income, investments and succession planning. However, a major change is proposed from 1 July 2028, with the Federal Government planning to introduce a 30 per cent minimum tax on discretionary trust income and reduce some of the tax advantages these structures have traditionally offered.ⁱ

Treasury estimates there are approximately 840,000 discretionary trusts in Australia and around 350,000 active small businesses operating through these structures.ⁱⁱ

The proposal, outlined in a consultation paper, is that from 1 July 2028, trustees will pay 30 per cent tax at trust level before distributions to beneficiaries.ⁱⁱⁱ

Because the trustee-paid tax credits would be non-refundable, individual and other non-corporate beneficiaries generally would not be able to reduce the tax on discretionary trust income below 30 per cent, even if their personal tax rate is lower.

Proposed exemptions

A number of entities are exempt, with fixed and widely held trusts, complying superannuation funds, charitable trusts, deceased estates and special disability trusts, all excluded. Testamentary trusts established for genuine testamentary purposes are also exempt.

Certain types of income (such as primary production income, select income for vulnerable minors and amounts already subject to non-resident withholding tax), are also excluded from the new rules.

Until the final legislation is released, key questions are yet to be clarified about calculation of taxable income, treatment of capital gains, franking credits and carried-forward losses.

Trustee-level tax changes the mechanics

Under the proposed rules, trustees would pay the 30 per cent tax upfront and beneficiaries would receive a tax credit for their share of that tax. Beneficiaries would still need to include their trust income in their tax returns, but the way the tax is collected would change.

Trustees will be required to calculate, report and pay the minimum tax and notify beneficiaries of their entitlements and associated tax credits.

Tax offsets for beneficiaries

Individual and other non-corporate beneficiaries will receive a non-refundable tax offset for the tax paid by the trustee and will be required to declare their trust income in their tax return.

Corporate beneficiaries, however, will not be able to claim credits for tax payable by the trustee. This is designed to ensure the minimum tax cannot be avoided by cycling income through a ‘bucket’ company set up simply to receive discretionary trust distributions.

As currently proposed, distributions to corporate beneficiaries could be subject to tax at both the trust and company level because corporate beneficiaries would not receive a tax credit for trustee-paid tax. Treasury is still consulting on aspects of this treatment.^iv

Restructure options

For small businesses and other taxpayers wishing to restructure out of a discretionary trust into another arrangement, expanded relief from income tax consequences (including capital gains tax) will be available for three years from 1 July 2027 to 30 June 2030. The relief is an expanded version of the existing Small Business Restructure Roll-over.^v

For small businesses wishing to reduce the impact of the new rules, there are other alternatives to consider, including employing beneficiaries working in the business rather than paying them trust distributions. Salary or wage payment to employees will not attract the minimum tax.

Restructuring into a company would allow you to access dividend imputation and the lower 25 per cent corporate tax if your aggregated annual turnover is less than $50 million.

What are the implications?

While no immediate action is recommended before the legislation is finalised, business owners and investors should begin assessing how the proposal could affect their current structure and whether alternative arrangements may be worth considering.

For many families, discretionary trusts will continue to provide valuable asset protection and succession planning benefits, even if some of their tax advantages are reduced.

If you would like help understanding how the new rules will affect your trust, contact our office today.

Comparison of tax outcomes for different business structures

The following example, taken from Federal Budget papers, shows how the proposed minimum tax could change the relative attractiveness of discretionary trusts compared with companies.

In 2028–29, Kurt and Loretta each earn $300,000 operating small businesses.

Loretta provides her services through a company. Loretta pays herself a salary as an employee of $100,000 and retains the remaining income in the company to build the business.

The company pays the small business rate of 25 per cent on this profit. Overall, $72,002 of tax will be paid.

Kurt provides his services through a family discretionary trust with himself as the trustee. The trust pays Kurt a salary of $100,000 as an employee and has remaining taxable income of $200,000. Kurt makes four of his extended family members, who have no other income, each entitled to $50,000, while retaining the money in the trust to build the business. In total, Kurt’s family will pay $42,010 in tax.

With a minimum tax in place, the trust would pay 30 per cent tax on the $200,000 of income not paid as wages, regardless of how this income was distributed. Overall, $86,002 of tax will be paid if Kurt does not change the distributions made to his family members.

By accessing the small business tax rate, Kurt would pay less tax operating through a company than a trust once the minimum tax is in place.

Source: Budget 2026-27 factsheet
i Tax reform | ATO
ii Minimum tax on discretionary trusts factsheet | Federal Budget papers
iii Minimum tax on discretionary trusts | Consultation Paper
iv Deloitte | tax@hand
v Small business restructure roll-over | ATO

A range of superannuation changes that came into effect on 1 July 2026, are reinforcing the role of super as one of the most tax-effective investment structures available.

For many investors, it’s not simply that super remains attractive but that the rules continue to change. Understanding these changes can help ensure your strategy takes advantage of available opportunities while staying on track with your financial goals.

A changing tax environment

Outside of super, tighter rules around the use of discretionary trusts and closer scrutiny of income distributions have reduced some traditional tax planning flexibility. Combined with the ongoing treatment of capital gains, this has made tax outcomes in non-super structures less predictable for some investors.ⁱ In contrast, superannuation continues to provide favourable tax treatment. This is a key reason why super is becoming increasingly important in long-term financial planning.

Payday Super – boost your retirement savings

One of the more practical changes is the introduction of Payday Super, which requires employers to pay super contributions at the same time as wages rather than quarterly.ⁱⁱ While this is primarily an administrative shift, it can have a real impact on individuals’ super balance. More frequent contributions mean compounding begins earlier. Over time, this could lead to improved retirement outcomes.

Higher contribution caps create more opportunities

From 1 July 2026, the concessional superannuation contribution cap (including employer contributions and salary sacrifice) increased to $32,500 from $30,000 in the 2025-2026 financial year.

Non-concessional caps have also increased, from $120,000 in 2025-2026 to $130,000 in the 2026-2027 financial year, enabling larger after-tax contributions. This can be particularly relevant for individuals who have accumulated savings outside super and wish to transfer funds into a more tax-advantaged environment.ⁱⁱⁱ

Carry-forward and bring-forward rules

Two existing rules continue to offer significant opportunities when used effectively.^iv

The carry-forward rule allows those with a total super balance below $500,000 on 30 June in the previous financial year to use unused concessional cap amounts from previous years. This can be especially beneficial for those with irregular income patterns, such as business owners or individuals returning to work after a break.

The bring-forward rule allows you to make several years’ worth of non-concessional contributions in one year, subject to eligibility criteria. This can be particularly useful when receiving an inheritance, selling an asset or restructuring investments.

Parental leave contributions

Another important development is the extension of super contributions to government-funded parental leave, introduced last year. It recognises the long-term impact that time out of the workforce can have on retirement savings, particularly for women.^v While the financial impact may appear modest in the short term, over time the effect of compounding can be meaningful.

Division 296 tax

One of the more widely discussed measures is the Division 296 tax, which applies an additional tax on earnings associated with super balances above $3 million.^vi

While this affects a relatively small proportion of investors, it represents an important shift in the superannuation landscape. The measure is designed to target very large balances, with the objective of limiting the extent of tax concessions at higher levels of wealth.

Transfer Balance Cap increase to $2.1 million

The increase in the Transfer Balance Cap to $2.1 million is another positive development, particularly for those approaching or entering retirement.

This cap determines how much can be transferred into the tax-free retirement phase. An increase allows more capital to benefit from a zero per cent tax rate on earnings, enhancing after-tax income in retirement.

Bringing it all together

Superannuation continues to offer a compelling tax environment, particularly when compared with other investment strategies that are facing increased complexity and scrutiny.

Contribution caps, along with carry forward and bring forward rules, provide multiple pathways to build super balances over time. Changes such as Payday Super and parental leave contributions highlight the benefits of regular, ongoing investment into super and the power of compounding. While new measures such as Division 296 introduce additional considerations, they do not diminish the overall value of super for most investors.

Please get in touch if you’d like to discuss any of these superannuation options.

i Capital Gains Tax and Discretionary Trusts Reform | Treasury.gov.au

ii Payday Super | Fair Work Ombudsman

iii Contributions caps | Australian Taxation Office

iv Carry forward and bring forward rules | ATO

v Paid Parental Leave Superannuation Contribution | ATO

vi Better Targeted Super Concessions is law | ATO

At its latest meeting, the Reserve Bank Board announced it was keeping the cash rate on hold at 4.35 per cent.

The latest data show that headline and underlying inflation are still too high. Oil prices have eased in recent weeks, although energy and most related commodity prices remain higher than they were prior to the conflict in the Middle East.

There are signs that some firms experiencing cost pressures are increasing the prices of their goods and services and others are looking to do so. Short-term measures of inflation expectations have eased but remain higher than earlier in the year.

Please click here to view the Statement by the Monetary Policy Board: Monetary Policy Decision.

Please get in touch if you would like to discuss recent rate movements or if you would like to review your finance options.

Tax time is just around the corner, so now is the time to make sure you’re prepared for 30 June.

Each year, the ATO highlights its areas of focus. Taking a few minutes now to review these can help you avoid issues when lodging your return.

Work-related deductions under scrutiny

This year, the ATO is focusing on work-related deductions and income that’s not declared on tax returns.

If you are claiming work-related expenses, ensure they meet the ATO’s three golden rules:ⁱ

1. The expense must be directly related to earning your income
2. You must not have been reimbursed
3. You must have records to support your claim, such as receipts or a logbook

For working from home expenses, you can use either the actual cost method or the fixed rate method.

Instant asset write-off

The instant asset write-off remains an important tax concession for Australian small businesses in the 2025–2026 financial year. Eligible businesses with an aggregated turnover of less than $10 million can immediately deduct the business portion of eligible assets costing less than $20,000, instead of depreciating them over several years. The asset must be first used or installed ready for use between 1 July 2025 and 30 June 2026.ⁱⁱ

This measure helps improve cash flow and encourages investment by allowing businesses to reduce taxable income sooner. However, businesses should keep accurate records and seek professional tax advice to meet ATO requirements.

Don’t overlook income

The ATO is also paying close attention to undeclared income. This includes:ⁱⁱⁱ

• Cash payments
• Interest income
• Rental income
• Earnings from crypto assets

For those with a side hustle, check whether it may be considered a business. All business income, regardless of amount, is assessable and must be declared.^iv

If you intend to claim deductions for business expenses related to your side hustle, ensure they are directly connected to earning that income and are supported by receipts.

Tax timing strategies

If you have regular deductible expenses, such as investment loan interest or annual costs, it may be useful for some to prepaying them before 30 June to claim a deduction for this financial year.

You may also consider the timing of income expected before 30 June. Deferring income until after the end of the financial year may help reduce your tax liability.

Tax rates are also changing for lower income earners. From 1 July 2026, the rate for income between $18,201 and $45,000 will reduce from 16 per cent to 15 per cent, with a further reduction to 14 per cent the following year.

Super contribution strategies

The end of the financial year is an ideal time to review your super contributions.

If you plan to contribute before 30 June, check when your employer will make their contributions. The introduction of Payday Super means some employers are contributing earlier, which may affect your contribution caps.

Ways you could boost your super before 30 June include:

1.  Salary sacrifice – make concessional (before-tax) contributions using a salary sacrifice arrangement.
 
2.  Personal deductible contributions – You may be eligible to claim a tax deduction for personal contributions, if you have spare cash available.
 
3.  Catch-up contributions – Unused concessional caps from the past five years if eligible.

4.  Non-concessional contributions – Non-concessional contributions, made from your savings or after-tax pay.

5.  Government co-contribution – Low-to-middle income earners making after-tax contributions before 30 June may be eligible to receive up to $500 from the government as a co-contribution.

6.  Spouse contribution tax offset – If your spouse earns less than $40,000, you may be eligible for a tax offset of up to $540 by contributing to their super.

For SMSF members, make sure that:

• All contributions are received by the fund’s bank account by 30 June
• Minimum pension payments are made
• Asset valuations are up to date
• Fund records are current

Be alert for tax time misinformation

The ATO is warning taxpayers to be cautious about the growing wave of tax “tips”, shortcuts and refund claims circulating online.

Content from social media, “finfluencers” and even artificial intelligence tools can sound convincing, but it is not always accurate or relevant to Australian tax law. Acting on this kind of advice can lead to incorrect claims, delays in processing returns and, in some cases, penalties.

The key message is simple: if something sounds too good to be true, it probably is, says ATO Assistant Commissioner Anita Challen.

“In an environment where misinformation can spread within minutes, it’s important to pause and check your tax information before you act on it,” she says.

Larger refunds, easy deductions or so-called “loopholes” should always be checked against trusted sources.

While AI tools can be useful, they often draw on a mix of outdated or international information, which may not apply to your situation, she says.

Ultimately, you are responsible for the accuracy of everything included in your tax return, regardless of where the advice came from.

Taking a few extra minutes to verify information before you lodge can help you avoid costly mistakes and keep your return on the right side of the rules.

Please get in touch if you need any help preparing for the end of the financial year.

Source: https://www.ato.gov.au

Reform and resilience in uncertain times

Treasurer Jim Chalmers has framed the 2026 Federal Budget as “the most important and ambitious budget in decades”.

“This Budget is about getting us through the global oil shock and taking pressure off Australians while building a stronger economy, better tax system, a more sustainable budget and lifting living standards,” the Treasurer told Parliament.

With an overarching theme of ‘reform and resilience’, the Federal Government is aiming to shore up investor confidence at a time when the global economy teeters thanks to war in the Middle East and the disruption of global oil supplies. Despite the challenges, Treasury says Australia’s economy continues to grow faster than every major advanced economy.

For households and wage earners, the Budget delivers a mix of targeted cost-of-living relief and significant structural reform, particularly in tax and housing.

The big picture

At the headline level, the Budget forecasts an underlying cash deficit of $31.5 billion in 2026–27, an improvement of $2.8 billion on the mid‑year update, despite slower global growth and higher oil prices.

Economic growth is forecast to slow from 2.25 per cent this financial year to 1.75 per cent in 2026–27, reflecting weaker international conditions, before gradually strengthening over the medium term. Inflation is expected to rise temporarily in the June quarter to around 5 per cent driven largely by fuel and transport costs linked to the war‑driven global oil shock. Despite this near-term pressure, the Government continues to project a return to a balanced budget in the mid-2030s followed by modest surpluses.

The Treasurer maintains that budget repair is being driven primarily by savings and spending restraint, rather than broad-based tax increases.

From a policy perspective, the Budget rests on five pillars: managing the global oil shock; easing cost‑of‑living pressures; lifting productivity; reforming the tax system; and strengthening national resilience. Each has direct implications for household finances, superannuation, investment structures and long‑term planning.

The Treasurer has made clear that a major goal is to “rebalance the tax system” so that wage earners are not treated substantially differently from those who earn income through assets and investments.

While some measures will take years to flow through, the direction is to prioritise the national security, energy supply, productivity and care sectors, while accepting political risk, to strengthen the economy over the medium to long term.

Cost-of-living

The Government has been careful to structure cost-of-living measures so that they don’t meaningfully add to inflation. The most prominent initiative is the Working Australians Tax Offset, providing a $250 offset for more than 13 million employees from the 2027–28 income year.

In addition, workers will be able to claim a $1,000 instant tax deduction for work-related expenses from 2026–27, without the need to keep receipts.

Income tax thresholds will also be adjusted. From 1 July 2026, the 16 per cent tax rate, applying to income between $18,201 and $45,000, will be reduced to 15 per cent before falling further to 14 per cent from 1 July 2027.

The government will increase Medicare Levy low-income thresholds by 2.9 per cent from the 2025–26 income year, a change expected to benefit more than one million lower-income Australians who will remain exempt from the Levy or pay a reduced rate.

Productivity

Productivity comes in for renewed focus, reflecting concern that long-term improvements in living standards can’t be sustained without structural change. The Budget allocates funding aimed at reducing red tape by an estimated $10.2 billion per year, including faster environmental approvals and streamlined foreign investment processes.

Housing construction remains a central productivity priority. New funding for local infrastructure is designed to support up to 65,000 extra homes, alongside measures to fast‑track skilled migrant trades and improve construction capacity.

Investment in transport infrastructure also features prominently, with $8.6 billion committed to nationally significant road and rail projects, improving freight efficiency and workforce mobility particularly across the regions.

Taken together, these measures represent a shift toward capability building. For business owners and investors, the emphasis is on reducing friction, improving labour supply and supporting capital investment that lifts output over time rather than fuelling higher prices.

Tax reform

The most debated element of the Budget is the tax reform package directed at property investors and discretionary trusts.

From 1 July 2027, negative gearing will be limited to new housing, with existing arrangements grandfathered. At the same time, the 50 per cent capital gains tax (CGT) discount will be replaced with cost-base indexation, alongside a new minimum effective tax rate of 30 per cent on capital gains.

The CGT settings for super and self-managed super funds will remain unchanged, which means investors will continue to receive a CGT discount of 33.33 per cent for relevant assets held for over 12 months in super.

The Government argues these changes are essential to address intergenerational inequity and housing affordability, while continuing to support investors who add to new housing supply. Treasury modelling suggests a modest impact on rents over time, with savings redirected toward care services and tax relief for wage earners.

Trusts have also been brought into the Government’s tax reform agenda, with a new minimum 30 per cent tax rate to apply to discretionary trust distributions from 1 July 2028. The measure is aimed at improving integrity and reducing income‑splitting arrangements that allow some taxpayers to pay significantly less tax than wage earners on comparable incomes.

Housing affordability

The Treasurer aims to address housing shortages and affordability, by increasing total investment to $47 billion and supporting an estimated 75,000 additional Australians to achieve home ownership over the next decade through the tax reform package.

The Government claims around 65,000 additional homes will be delivered over 10 years through its support for new developments. A new $2 billion fund has been established to help local governments and state utilities build the infrastructure needed to support new housing.

To free up additional supply, the Government is extending the ban on foreign buyers purchasing established homes until mid-2029.

Aged care and health

Health and aged care receive significant additional funding as demand continues to rise. The Budget commits $25 billion in additional hospital funding over the medium term, alongside incentives to expand bulk billing and reduce strain on emergency departments.

The Government has confirmed further reductions in the cost of medicines, building on earlier PBS reforms, with cheaper scripts and faster access to newly listed drugs funded through additional PBS investment.

Aged care reform focuses on both supply and workforce sustainability. The Government will fund incentives to support construction of an additional 5,000 residential aged care beds per year by 2029.

The NDIS also features prominently, with continued efforts to rein in unsustainable cost growth and strengthen integrity. Measures include tightening eligibility, reducing rorting and redirecting funding towards participants with the highest needs.

Future proofing

The focus on national resilience is a defining characteristic of the Budget. Fuel security is front and centre following the global oil shock, with measures to secure domestic fuel reserves, reserve 20 per cent of gas exports for Australian use and provide concessional finance to logistics and manufacturing firms most exposed to price volatility.

Defence spending also rises sharply, with a record additional $53 billion committed over the coming decade. The focus is on readiness, supply chains and regional security, reflecting growing geopolitical risk in the Indo‑Pacific and beyond.

Looking ahead

The outlook remains uncertain. Treasury acknowledges the risk of further inflation spikes if global energy markets deteriorate, with worst-case scenarios still modelling inflation above 7 per cent and higher unemployment. But the central forecast avoids recession and assumes gradual improvement from late 2027 onward.

If you have any questions about how the 2026 Federal Budget may affect your personal finances, please contact us to discuss.

Information in this article has been sourced from the Budget Speech 2026-27 and Federal Budget Support documents.  

It is important to note that the policies outlined in this article are yet to be passed as legislation and therefore may be subject to change. 

At its latest meeting, the Reserve Bank Board announced it was increasing the cash rate to 4.35 per cent.

Inflation picked up materially in the second half of 2025, and information since the beginning of this year confirms that some of this increase reflected greater capacity pressures.

In addition, the conflict in the Middle East has resulted in sharply higher fuel and related commodity prices, which are already adding to inflation.

Please click here to view the Statement by the Monetary Policy Board: Monetary Policy Decision.

We’re watching closely what the banks do with their rates, as some of Australia’s biggest lenders may make changes to their rates.

Please get in touch if you would like to discuss recent rate movements or if you would like to review your finance options.

There’s a particular kind of unease that creeps in when market headlines start mixing geopolitics with talk of oil prices and recessions. That feeling has been hard to avoid, as the escalating war in the Middle East spooked global markets and brought fresh uncertainty to an already fragile economic landscape.

For investors, watching so many forces moving at once and volatile numbers, there can be a strong temptation to “do something”.

Before reacting, a good understanding of what’s driving market movements is useful to assess the short and medium term. More importantly, it helps to work out how your long term strategy fits in.

Energy markets have felt the most immediate effect of the conflict. Iran is at the centre of one of the world’s most strategically important regions for oil and gas production.

As tensions escalated, markets quickly priced in the risk of supply disruptions, particularly through critical shipping routes in the Middle East. That alone has been enough to push oil and gas prices sharply higher.

History shows that energy markets tend to react first and fastest during geopolitical crises.ⁱ

Even when physical supply is not immediately interrupted, uncertainty itself drives speculative buying. Higher energy prices then feed into almost every corner of the global economy: transport, manufacturing, agriculture and ultimately household budgets.ⁱⁱ

Global share markets responded quickly to the crisis with sharp drops after the first bombs in Iran.

Share prices have fallen and recovered several times since the conflict began, often related to US President Trump’s announcements. But, in both Australia and the US, the markets were down more than eight per cent by the end of March. Technology stocks have fallen particularly hard.

The conflict has come at a time when the global economy was already fragile. Before March, analysts were debating whether the US economy would manage a “soft landing” or slip into recession as higher interest rates worked their way through the system.

Adding an energy price shock into the mix increases the risk that higher costs slow spending and investment. Rising fuel prices act like a tax on consumers and businesses. Money spent at the petrol station is money not spent elsewhere in the economy. As a result, concerns about slowing economic growth have been quick to re‑emerge.

In Australia too, there’s increasing talk of recession – as much as a 30 per cent chance within the next 12 months, according to AMP.ⁱⁱⁱ

However, Treasurer Jim Chalmers disagrees saying that, while the economy is expected to take a “sizeable hit”, a recession is not expected.^iv

The immediate effects

Market volatility is likely to continue with sharp price swings as the markets react to either good or bad news coming out of the Middle East.

For households, the most visible impact is likely to be at the pump and in their power bills. Widespread price rises here are likely to affect consumer confidence and spending patterns.

So-called “safe-haven” assets such as cash, government bonds and some currencies often benefit during uncertain times as investors look to defend their portfolios, however bond yields have experienced volatility as investors assess the evolving situation in the Middle East.

Gold was also once on the list of safe havens.  But, during the most recent crisis, its value has plunged nearly 15 per cent during the month. Nonetheless the price remains high – up by almost 300 per cent over the past decade.^v

While there’ll be plenty of market “noise” ahead, it’s important to remember that short‑term market reactions may be driven as much by emotion as by fundamentals. Fear, uncertainty and rapid shifts in sentiment often exaggerate price moves in the early stages of a crisis.

Looking further ahead

Looking beyond the immediate panic, the medium term (the next six to 18 months) will depend on how the world adapts to the energy prices shock.

Continued high oil prices can have several effects:

• Inflation pressures may linger. Energy price rises affect almost every sector of the economy. However, some sectors may perform better including commodities, energy companies and defensive assets such as infrastructure, healthcare, utilities and consumer staples.
• Economic growth may soften. Higher input costs squeeze businesses and reduce consumer spending power. Over time, this can weigh on economic growth and corporate earnings.
• Structural change can accelerate. Energy shocks often act as catalysts, encouraging investment in alternative energy sources, efficiency improvements and supply chain diversification. While disruptive, this can create long‑term opportunities in certain sectors and regions.

It is also worth remembering that energy shocks don’t last forever. Markets adapt, alternative supply routes emerge and prices eventually reflect new realities. The timing is uncertain, but history suggests that economies and markets are more resilient than they often appear in the heat of the moment.

Strategy over fear

Perhaps the most important thing to remember right now is that your financial plan was built for times like this.

Sound financial planning anticipates that markets will be periodically disrupted by wars, pandemics, financial crises and recessions.

Diversification is your first line of defence. A portfolio spread across various asset classes doesn’t eliminate volatility but it means that no single event can derail your entire financial position.

Ensuring your investment mix reflects your time horizon (the length of time you expect to hold an investment) and capacity for loss is your second.

The discipline required in moments of market stress is to distinguish between short-term fear and long-term strategy. Fear says: sell everything and wait for calm. Strategy says: stay invested, stay diversified and if anything has changed, let’s talk about it properly.

If the events of last month have raised questions for you, we’re here to help you navigate with confidence. Please give us a call.

i The Impact of Geopolitical Events on Oil Prices | Gulf News

ii Sheltering From Oil Shocks | IEA

iii Fuel surcharges are adding to consumers’ financial stress | ABC News

iv Chalmers says there is no ‘expectation’ of a recession | The Guardian

v Gold is meant to be a ‘safe haven’. Why is it crashing? | The Conversation