2026-27 Federal Budget

What the Budget means if you’re retired or close to retirement

Four changes, at three different stages. The private health insurance rebate cut for over-65s is a bill before Parliament, not law — it would start 1 April 2027. The end of the 50% CGT discount and Division 296 are both law. Pension supplement changes for those travelling overseas are announced. Each one below says which it is.

Current as at 28 August 2026. Tax law is changing rapidly following the 2026–27 Budget. Measures marked Passed — awaiting assent, Before Parliament, Consultation or Announced are not law and may change or not proceed.

PHI rebate — bill before Parliament

$800–$1,600+

Estimated annual premium increase for over-70s on Gold cover if the bill passes. Proposed start 1 April 2027. Not law yet.

CGT discount removed

From 1 July 2027

50% discount replaced by indexation + 30% minimum tax. Affects realising shares and other personal investments.

Division 296 — commenced

30 June 2027

Already law and running since 1 July 2026. For 2026-27 your liability is set by your total super balance at 30 June 2027 — that is the date to plan towards, not 30 June 2026.

An honest framing

This Budget’s combined effect on retirees and pre-retirees is mixed at best, and slightly negative for many. The personal tax cuts apply to any part-time work income you earn, but they are modest — on the order of a few hundred dollars a year. The losses — the proposed PHI rebate cut, the CGT discount removal, Division 296 for higher balances — will outweigh that for many clients at this stage of life. The right response is informed planning, not panic — and noting that the largest single item, the PHI rebate cut, is not yet law.

The change with the biggest dollar impact

Private Health Insurance rebate cut for the over-65s

Before Parliament — Private Health Insurance Amendment (Modernising the Private Health Insurance Rebate) Bill 2026

The proposal removes the age-based uplift on the PHI rebate from 1 April 2027, leaving an income-based rebate only. For over-65s and over-70s that means a meaningfully higher out-of-pocket premium. This is a bill before Parliament. It has not passed and it is not law — so the figures below are what would happen if it passes in its current form.

Law Passed and assented. Plan around it.

Passed — awaiting assent Through both Houses; commences on Royal Assent.

Before Parliament Introduced, not yet passed.

Consultation Treasury paper or exposure draft only.

Announced Budget announcement. No draft, no paper.

Effective 1 April 2027

The age-based uplift is being abolished

Currently, the PHI rebate has three age tiers: under 65, 65-69, and 70+. The rebate percentage is higher for older policy holders, recognising that they pay higher premiums.

Under the bill, the higher age tiers would be flattened back to the under-65 rate from 1 April 2027. On the base income tier that means the rebate falls from about 28.1% to about 24.1% for ages 65–69 (roughly 4 percentage points) and from about 32.2% to about 24.1% for ages 70 and over (roughly 8 percentage points). Anyone under 65 is unaffected — their rate does not change.

The change is expected to save the Government $3 billion over 4 years. Private Health Australia estimates the impact on premiums could be significant.

Estimated premium increase — individual on Gold hospital, aged 70+

approx. $807 / year

Estimated premium increase — couple on Gold hospital, aged 70+

approx. $1,614 / year

Rebate reduction — ages 65–69 (base income tier)

approx. 4 pct points

Rebate reduction — ages 70+ (base income tier)

approx. 8 pct points

People affected (over-65s with PHI, including 400,000+ pensioners)

3 million+

The Medicare levy threshold increase doesn’t come close to offsetting this

The Budget also lifts Medicare levy low-income thresholds by 2.9% — a routine annual adjustment that helps lower-income seniors continue to qualify for the levy exemption. But for most retirees who already pay the levy and rely on private health cover, the rebate change has a far larger annual dollar impact than the threshold adjustment.

Estimates from Private Health Australia (8 May 2026). The exact impact on your premium depends on your insurer, policy, income tier and current age tier. Because the bill has not passed, we would not cancel or downgrade cover on the strength of it — but it is worth knowing your number so you can decide quickly if it does pass.

Other changes that affect you

Four further items worth knowing

Each of these may apply depending on your specific situation. The CGT change is the most important for self-funded retirees with material share portfolios; pension supplement changes affect anyone planning overseas travel.

Law

50% CGT discount being replaced

The 50% CGT discount on assets held over 12 months is being replaced with cost base indexation and a 30% minimum tax on real (inflation-adjusted) gains.

For retirees realising shares, managed funds or other investments to fund retirement, the “realise in a low-income year” strategy is largely ended unless you receive an income support payment. Recipients of the Age Pension, JobSeeker and similar payments are exempt from the 30% minimum.

Law

Division 296 super tax

An additional 15% tax on the proportion of super earnings attributable to balances above $3 million, and a further 10% (so 25% additional) on balances above $10 million.

Now law (Royal Assent 13 March 2026) and commenced 1 July 2026. It taxes realised earnings only — unrealised gains were removed before it passed. Tested on individual Total Super Balance, so a couple can hold up to $6M combined without being affected. For 2026-27, liability is determined on your balance at 30 June 2027. See the SMSF page for the cost base reset election.

Announced

Pension supplement: 6 weeks → 12 weeks

Full-rate pension supplement payment extended from 6 to 12 weeks for recipients temporarily absent from Australia. Useful for retirees taking extended overseas trips.

But: the supplement ceases for those residing permanently overseas or temporarily absent for longer than 12 weeks. Retirees considering moving overseas, or spending months at a time away, should be aware of the change. The commencement date has not been confirmed — check current Services Australia rates and rules before relying on either the extension or the cut-off for a specific trip.

Law

Personal tax cuts apply to your work income

If you earn income from part-time work or a sole-trader business, you’ll get the personal tax cuts: the lower bracket rate drops to 15% from 1 July 2026, then 14% from 1 July 2027.

The new $250 Working Australians Tax Offset also applies to work income (sole traders are eligible too). Keep the scale in mind: each 1% step on the $18,201–$45,000 bracket is worth up to about $268 a year, so from 2027-28 the two rate cuts together are worth up to roughly $536, plus the $250 offset. Automatic, but modest — and smaller than the PHI rebate change would cost you.

A strategy worth thinking about

Realising gains before 30 June 2027

The CGT changes are prospective — gains accruing before 1 July 2027 keep the 50% discount. For retirees with sizeable investment portfolios outside super, this creates a window worth considering carefully.

Plan, don’t rush

The pre-1 July 2027 window for realising gains

Personal investments (shares, managed funds, property other than your main residence) sold before 1 July 2027 use the existing 50% CGT discount on the full gain. Sold after that date, gains accruing post-1 July 2027 are subject to indexation and the 30% minimum tax floor.

For retirees considering realising long-held positions in coming years anyway — to rebalance, simplify, or fund retirement spending — bringing forward those sales into 2026-27 may produce a meaningfully better after-tax result, especially if your marginal tax rate is below 30%.

But this is genuinely planning territory, not a blanket recommendation. The right answer depends on your other income for the year, whether the underlying investment still suits your strategy, transaction costs, the CGT consequences of selling, and what you plan to do with the proceeds. We can model the outcome for your specific position.

If you receive income support, the 30% minimum doesn’t apply to you

Recipients of the Age Pension, JobSeeker, DSP, Carer Payment and similar income support payments are exempt from the 30% minimum on capital gains. The exemption applies if you receive any payment in the year you realise the gain — even part-pensioners qualify.

For full self-funded retirees with no Centrelink payment, the minimum tax does apply. That changes the maths of realising gains in low-income years.

What you should do

Practical steps for the next 12 months

The actions worth considering depend on your specific situation — particularly your super balance, your personal investment portfolio, and whether you receive any income support payments.

Find out your PHI number — but don’t cancel cover yet

Ask your insurer what the proposed change would do to your specific policy, age tier and income tier. Knowing the number now means you can decide quickly if the bill passes. Dropping or downgrading cover before it passes risks paying Lifetime Health Cover loading to get back in, over a change that isn’t law.

If you’re over $3M in super — plan towards 30 June 2027

Division 296 has commenced. For 2026-27 your liability is determined on your total super balance at 30 June 2027, so there is a planning year in front of you. Separately, the cost base reset election has to be decided before we lodge the 2026-27 fund return. If you are in or approaching this range, let’s book a meeting this financial year rather than next.

Review your investment realisation plans for 2026-27

If you were already planning to realise investments — to rebalance, simplify, or fund spending — doing it before 1 July 2027 keeps the 50% CGT discount on accrued gains. Don’t rush a decision that doesn’t make investment sense, but if the timing was already flexible, this is a meaningful factor.

If you’re planning overseas travel, check the new rules

The 6-week to 12-week extension is helpful for longer trips. The cessation rule beyond 12 weeks is stricter. Worth confirming the implications before booking longer-term arrangements.

Check if you qualify for the income-support CGT exemption

If you receive any Age Pension, JobSeeker or similar payment in the year you realise a gain — even a part-pension — the 30% minimum tax doesn’t apply. For part-pensioners, this is an important interaction worth being aware of.

Revisit your estate plan

Under the trust consultation paper, testamentary trusts existing at 12 May 2026 would be grandfathered from the proposed 30% minimum trust tax, while new ones created from later estates would not. That measure is at consultation stage only, with no bill. Having a Will with testamentary trust provisions is sound estate planning regardless — the possible tax advantage is a reason to get on with it, not the reason to do it.

Which of these you can actually plan around

Division 296 and the CGT changes are law. Division 296 has commenced; the CGT changes were assented on 26 June 2026 and start 1 July 2027. Plan around both.

The PHI rebate cut is a bill before Parliament and the pension supplement change is an announcement with no confirmed start date. Neither is settled. Understand what they would cost you, but don’t cancel health cover or rearrange travel on the strength of them. And bringing forward investment realisations purely for tax reasons is rarely the right call — if the timing was already flexible that is a different conversation, and one worth having with us.

Mastin Harris Family Wealth Protection

Estate planning matters more, not less, under the new rules

Testamentary trusts existing at 12 May 2026 are grandfathered from the new minimum trust tax. New ones from future estates are not. CGT rules change for transfers between generations. For retirees thinking about how wealth passes to children and grandchildren, the next 18 months are a meaningful planning window — not a time for inaction.

Learn more →

Other Budget changes that might apply to you

Retirees often fit more than one of these

Most retirees also have investment property, run an SMSF, hold shares or have a discretionary trust as part of their family structure. The full picture matters.

If this applies

I have a Self-Managed Super Fund

Division 296 has commenced. The residential property borrowing ban took effect 10 August 2026.

Read about SMSF changes If this applies

I hold shares or other investments

Now law from 1 July 2027. The 50% discount is replaced with CPI indexation and a 30% minimum tax.

Read about CGT changes If this applies

I own (or am buying) an investment property

Now law. Losses quarantined from 1 July 2027 — but property held at 12 May 2026 is grandfathered.

Read about property changes If this applies

I run a business through a trust

A proposed 30% minimum tax on discretionary trusts from 1 July 2028. Consultation stage — no bill.

Read about trust changes If this applies

I’m a PAYG employee

All law: the rate cut on the $18,201–$45,000 bracket, the $1,000 instant deduction and the $250 offset.

Read about employee changes If this applies

I run a small business

Permanent $20,000 write-off and loss carry-back passed Parliament 19 August 2026. PAYG changes announced only.

Read about small business changes

Make sure your retirement strategy stays on track.

Several of the Budget’s changes affect retirees specifically. The right response depends on your super balance, your investment mix, your family arrangements and your travel plans. We help clients see the full picture — tax, super, estate — and adjust where it matters.

Book an appointment Contact us