What to Expect From the 2026 Federal Budget

• Treasurer Jim Chalmers will hand down the 2026 federal Budget at 7.30 on Tuesday, May 12
• Chalmers and Prime Minister Anthony Albanese are framing this budget as a chance to address “Intergenerational fairness”
• A significant focus will be housing affordability, with negative gearing, capital gains tax and trusts all in the firing line
• The government has already announced unpopular measures, such as deep cuts to the NDIS

It’s almost the second Tuesday in May, which means it’s time for Treasurer Jim Chalmers to hand down the 2026 federal budget. And for the first time in a while, this year’s budget is actually shaping up to be quite interesting.

Prime Minister Anthony Albanese has been famously cautious about spending his political capital since taking office in 2022, and it’s served him well. But with a huge parliamentary majority, an opposition in shambles, and a rising populist One Nation on the right – not to mention a global crisis set off by the war in the Middle East – the stage is set for Albo to actually do something interesting and deliver a budget that will deliver real reform, rather than just kicking the can down the road.

So what can we expect from the 2026 budget? I’ve been in a few budget lockups in my time, so here’s a quick cheatsheet on what matters – and what doesn’t – when it comes to the 2026 federal budget.

What’s the Vibe of This Budget?

Put simply, the numbers are on Albo’s side. Along with 94 seats in the House of Representatives, Australia’s demographics are shifting. Boomers who have overwhelmingly benefitted from the current tax system are becoming a shrinking portion of the electorate. Millenials and Gen Z are now the biggest generational voting bloc, and poor old Gen X is stuck in the middle.

Meanwhile, the Coalition is facing an existential crisis, and One Nation is fast moving from the fringes to become a genuine political force that threatens both major parties. And the timing works – mid-way through a second term is the perfect time to do the hard work of difficult reform before the next election, due in 2028.

In theory, the stage is set for the government to really make some big reforms – especially in areas like housing and intergenerational fairness – where most people agree reform is long overdue. But it’s not that simple.

Donald Trump’s ongoing war in Iran has forced up the cost of petrol, diesel and fertiliser globally, and the knock-on effects of the crisis will last for years. Inflation and interest rates (aka, the cost of living) are rapidly rising again. Any attempt by Jim Chalmers to make life meaningfully easier for people will likely fuel inflation, which will only exacerbate the cost-of-living crisis.

It will be a delicate balancing act that involves taking away benefits from some groups and trying to help out those in need, all without pumping too much money into the economy. You wouldn’t want to be Jim Chalmers right now.

Related: Do Australians Really Pay More Tax on Beer Than Gas?

Does the Budget Actually Matter?

Yes and no. Most countries don’t do budgets like Australia does – with a big prime time speech and huge media push – and that’s because there’s not really such a thing as a ‘budget’. Aside from some basic housekeeping to keep the government’s supply of money flowing, the 2026 budget will really be a series of individual measures drawn together to outline a government’s priorities.

It’s a political document, and a moment of political theatre designed give the government something to talk about for the next year.

Ok, So What’s in the 2026 Budget?

We’ll find out for sure when Jim Chalmers stands up for his speech at 7.30 on Tuesday night, but this government is very good at managing the media, and it’s spent the last few weeks laying the groundwork for what’s to come. Here’s what we know (or strongly suspect) will be in the budget.

Negative Gearing

Negative gearing allows property investors to deduct losses from their investments from their taxable income. That means a person can invest in multiple properties, rent them out at around the cost of the mortgage repayments, then still make a loss through the costs of interest, repairs and property management. They can then deduct those losses from their taxable income, meaning they pay less tax, while growing their wealth through the property market.

The government has very strongly hinted that it will wind back these generous concessions, we just don’t know exactly how they’ll do it yet.

Capital Gains Tax

Capital Gains Tax is exactly what it sounds like. It’s the tax you pay on your profits when you sell an asset (like shares or an investment property) that has gained value over the period that you’ve owned it. In the past, these gains were taxed just like income, but in 1999, John Howard changed the rules to cut the capital gains tax rate in half.

Originally designed to make Australia a more attractive option for foreign capital, the CGT discount combined with negative gearing to light a fire under Australia’s housing market. Older Australians responded by pumping heaps of their wealth into the housing market over the last three decades, putting massive upwards pressure on house prices, all while locking younger generations out of the property market.

Trusts

Trusts are simply a different structure for managing wealth (rather than, say, having your money sitting in a bank account). Australia’s generous and opaque tax structures around trusts have made them a popular vehicle for people – especially wealthier Australians – to legally minimise their tax. The government is expected to crack down on this, but it’s not clear exactly how just yet.

The Great Property Pivot: Negative Gearing, CGT, and Trusts

All of the above – negative gearing, the capital gains discount, and discretionary trusts – have combined to create a sense that Australia’s tax settings no longer work in the way they were intended. Older Australians have been able to expand their wealth for decades, while younger Aussies are increasingly locked out of the property market. It’s created a two-tier economy where those with existing wealth are able to continue building on it, while those without can’t get a foot on the property ladder.

That’s why Jim Chalmers has spent so much of the last few weeks talking about “intergenerational fairness” – he’s setting the table to shift the balance more in favour of younger, less wealthy Australians.

A few options are on the table, including capping the number of properties that can be negatively geared, or allowing negative gearing to apply only to new houses. On CGT and trusts, we can expect the government to curb the generous tax breaks, while probably not going quite as far as Bill Shorten tried to do in 2019, when he lost the unloseable election.

Most of the changes will likely be “grandfathered”, meaning they’ll apply to future investments, but won’t affect people who already made investments under the current rules.

It will be a high-stakes gamble act for Labor – trying to do something to make life easier for younger Aussies while not upsetting so many of Australia’s existing property owners that they get thrown out of office at the next election.

NDIS cuts

But the budget isn’t all about housing. The NDIS is one of Australia’s great social reforms of recent decades, but it’s also one of the most expensive, and the cost is rapidly rising. The government has decided to act on that now, announcing before the budget that it will make massive cuts to the program in order to bring ballooning costs under control.

The savings will total $22 billion over four years, but that will mean a lot of people will no longer be able to access the service, which will be politically unpopular, and especially painful for those directly affected.

What Else is in the Budget?

Also in the budget, we can expect the government to wind back tax discounts on electric vehicles, they’ve already announced the cancellation of the rest of the (very expensive) inland rail project, and will possibly do something to raise more revenue from businesses that make a profit from selling our natural gas overseas.

All of the above is stuff that saves money for the government. We don’t know much about how they’re planning to spend that money, aside from budget repair and plans to increase defence spending.

The government has spent weeks softening the ground for unpopular decisions, on budget night you can expect them to balance that out with a few more popular measures to dominate the news cycle when attention is at its highest, all while trying to walk that delicate tight-rope of not adding to inflation.

Is the Albanese Government Breaking Its Promises?

Short answer, yes.

During the last federal election campaign, Anthony Albanese was very clear that he had no intention of touching negative gearing or capital gains tax. He was asked about it multiple times, and was emphatic every time – there will be “no changes”, he said.

The government will argue that the circumstances have changed – housing affordability has worsened and global uncertainty has made reform more important than ever. They’ll also be hoping that most people back the substance of the ideas because the balance of public opinion has shifted strongly in favour of younger generations.

Labor will argue that if people feel they’re not being given a fair chance in life, they’re more likely to drift towards the extreme fringes of politics, and that’s bad for social cohesion, making it irresponsible to not act when they have the chance. And they’re probably right. But all of that was true before the election, and the government knew it, they just didn’t say it out loud.

The truth is, the political circumstances have given Labor a once-in-a-generation chance to enact some serious reform, and they’re going to take it. The government has broken promises before and gotten away with it – see the stage 3 tax cuts last term – they’ll be hoping to do the same here.

Whether you think they’ll get away with it this time probably depends on exactly where on the property ladder you sit. Either way, we’ll be here to bring you any interesting news and notes from the 2026 budget once it’s finally revealed. Stay tuned.