The 2026/2027 Australian Federal Budget signals one of the most significant shifts in Australia’s tax settings in decades. Proposed changes to capital gains tax and negative gearing reforms will be particularly important for mobile employees, especially those who own residential properties.
There is uncertainty around how some of the proposed measures will operate in practice. Mobility professionals should begin considering the potential impact on mobility costs and questions mobile employees are likely to raise, particularly around property and investments.
From a migration perspective, the Budget takes a firm approach to reducing net overseas migration while reshaping Australia’s migration program towards younger, higher-skilled and economically productive migrants. The measures strongly favour skilled workers who can quickly contribute to priority sectors, while tightening integrity settings and increasing compliance oversight.
Five key items for global work
1. Limiting of negative gearing
Negative gearing on residential properties will be limited to newly constructed dwellings from 1 July 2027. Included in the announcement were provisions for transitional arrangements covering individuals with arrangements in place prior to the release of the Budget.
Residential properties impacted by the change will see their losses quarantined and only available to offset rental income or capital gains from residential properties. Unused losses can be carried forward and used against future years’ income from this same asset class.
For many mobile employees, the financial impact of renting their home can be a major factor in deciding whether to undertake an international move. This announcement could see costs increase for those employees not covered by the transitional arrangements.
What remains to be seen with the release of draft legislation is exactly which individuals and properties will be covered by the transitional arrangements. Clarification is required as to whether they will apply only to properties already negatively geared at the time of the announcement, or whether they will cover all properties owned by an individual at the time of the announcement.
2. Removal of Capital Gains Tax (CGT) discount
As previously announced, the Government will abolish the 50% CGT discount and revert to a pre-1999 system of indexation.
From 1 July 2027, the 50% CGT discount will be replaced by cost base indexation for all assets (including property and shares) held for more than 12 months, with a 30% minimum tax on net capital gains. These changes will apply to all CGT assets, including pre‑1985 CGT assets, held by individuals, trusts and partnerships.
Transitional arrangements will limit the impact on existing investments as detailed in the table below:
| Transitional arrangements | ||
| Asset acquired | Asset sold | CGT treatment |
| Before 20 September 1985 | Before 1 July 2027 | Exempt from CGT |
| Before 20 September 1985 | After 1 July 2027 | Portion of gain accrued prior to 1 July 2027 exempt from CGT
Post 1 July 2027 gains subject to cost base indexation and the proposed 30% minimum tax |
| After 20 September 1985, before 1 July 2027 | Before 1 July 2027 | Eligible for 50% CGT discount |
| After 20 September 1985, before 1 July 2027 | After 1 July 2027 | 50% CGT discount applies to gains accrued up to 1 July 2027
Post 1 July 2027 gains subject to cost base indexation and the proposed 30% minimum tax |
| All eligible new builds | After 1 July 2027 | Eligible to choose either the 50% CGT discount, or cost base indexation and the proposed 30% minimum tax |
3. Minimum tax on discretionary trusts
The Government has announced a 30% minimum tax for discretionary trusts from 1 July 2028, which may significantly reduce the flexibility and tax benefits of these trust structures.
Key points include:
4. Tax deduction and offset for employees
From 1 July 2026, Australian tax resident individuals earning employment income will be able to claim an instant deduction for work-related expenses of $1,000. There will be no requirement to provide receipts or itemise the claim. Individuals who claim more than $1,000 can continue to do so in the usual way, maintaining appropriate records.
From 1 July 2027, a $250 Working Australians Tax Offset will also be provided for income earned from working individuals (including business income of sole traders).
5. Foreign buyer of established dwellings
The temporary ban for foreign buyers of established dwellings has been extended to 30 June 2029 with the Government’s intention to direct foreign buyers to new developments to boost Australian housing supply.
1. Electric cars and Fringe Benefits Tax (FBT)
In line with previous announcements, the FBT exemption for electric cars will be scaled back from the current 100% exemption. From 1 April 2029, the exemption will be limited to 25% for all electric cars valued up to and including the fuel‑efficient luxury car tax threshold (currently $91,387).
Transitional arrangements mean:
2. Employee Share Schemes (ESS)
The changes to the 50% CGT discount from 1 July 2027 will also impact the taxation of ESS interests. Most significantly, these changes may impact Start-up companies that have utilised the ESS start-up concessions to help attract, retain and incentivise employees. The Government has indicated that it will consult with stakeholders on the details of the CGT reforms to the start-up sector, so watch this space.
3. Migration planning levels and measures
Many of the Budget’s migration measures aim to lower net overseas migration (NOM) while improving the overall quality and suitability of migrants entering Australia. Additional reforms seek to optimise the General Skilled Migration points test to favour higher-skilled and younger migrants. There will also be changes to the Working Holiday Maker program to better manage numbers and allocation, including expanded use of ballots.
Permanent migration program settings have been set as follows:
These settings are designed to place downward pressure on NOM.
Skills assessments
The Government is investing $85.2 million to accelerate skills assessments and licensing for migrant trades workers. This could reduce workforce entry times by up to six months and add up to 4,000 skilled workers annually. Key initiatives include:
Migration system investments
The Budget includes targeted investment to strengthen migration system capability ($46.4 million), with a focus on skills assessment reform, including modernising TRA skills assessment and licensing pathways ($75.1 million), integrity measures and compliance, alongside plans to enhance governance through a potential Skills Migration Commissioner.
For a deeper discussion on the above, please reach out to your Vialto point of contact, or alternatively:
Shane Smailes
Partner – Tax
Marc Bosotti
Partner – Rewards
Cherie Wright
Partner – Immigration
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