federal budget 2026

This year's Federal Budget aims to deliver cost-of-living relief for many Australians, although more remains to be done to create a fairer, simpler and more flexible super and retirement system.

Global uncertainty has shaped the 2026-27 Federal Budget, with international conflict and rising inflation slowing global growth and compounding cost of living pressures for many Australian households. Inflation is expected to rise to 5% in 2026-27 before gradually easing, while economic growth is forecast to slow.

The Budget pursued structural reform, with changes to capital gains tax (CGT) and negative gearing, targeted cost-of-living relief, and further funding in health, aged care and housing.

For HESTA members, there are positive developments supporting the cost of living, including measures such as personal income tax cuts and offsets, reductions in the cost of medicines and fuel, and ongoing efforts to boost the supply of housing. And while we welcome cost-of-living relief and further funding in healthcare and aged care, we continue to call on the Government to go further to modernise the retirement system for the Australians who need it most.

Note: many of these Budget measures are proposals only and are subject to passage of legislation.

federal budget key themes 

Super

Low Income Superannuation Tax Offset (LISTO) boost confirmed.  

Cost-of-living

Tax cuts and offsets, cheaper medicines and fuel.  

Work

Further funding for hospitals, urgent care and aged care. 

Housing

Infrastructure spend to support new housing; CGT and negative gearing reform. 

These measures sit alongside the extension of Paid Parental Leave to 26 weeks from 1 July 2026, with the super guarantee also paid on this leave. 

the full budget breakdown

Superannuation

A boost for low-income super savers

HESTA has long called for an increase to the Low Income Superannuation Tax Offset (LISTO), and this Budget delivers. From 1 July 2027, the LISTO income threshold will rise from $37,000 to $45,000 and the maximum annual payment will increase from $500 to $810, expected to benefit around 1.3 million low-income workers. Almost two-thirds of LISTO recipients are women, many working in lower-paid caring professions. This is a positive step toward closing the gender super gap.
 

Superannuation investments exempt from the capital gains tax (CGT) discount changes

The Budget's capital gains tax reforms will not apply to assets held inside superannuation funds. 

As previously legislated, Australians with total super balances above $3 million will pay additional tax on earnings above that threshold from 1 July 2026. Importantly, this applies only to actual earnings, not paper or unrealised gains.

Important super reforms starting 1 July 2026

Paid Parental Leave: extended to six months, with super

From 1 July 2026, the Paid Parental Leave scheme will expand to 26 weeks, with recent reforms meaning that super contributions now paid on every one of those weeks. For members who take parental leave, this helps support retirement savings during one of the most common career interruptions contributing to the gender super gap.
 

Payday super: your super paid when you get paid

From 1 July 2026, employers will be required to pay your super at the same time as your salary and wages, every single pay cycle, rather than quarterly. Your super should arrive in your account within a week of payday, helping it grow by being invested and making it easier to spot if an employer hasn't paid the right amount. Tougher penalties will also apply when super isn't paid on time.

For HESTA members who are more likely to work in casual and part-time roles, this is an important protection. Over time, earlier payments can add thousands of dollars to your retirement balance.

Cost-of-living relief

Tax relief for working Australians

Tax cuts already legislated for 1 July 2026 and 1 July 2027 will reduce the burden for low-and middle-income earners. The Budget also introduces a new permanent $250 Working Australians Tax Offset (WATO) and a $1,000 instant tax deduction from the 2026-27 financial year, together worth more than $6.4 billion over the forward estimates.

The Budget also includes reductions to the cost of medicines under the Pharmaceutical Benefits Scheme and measures to ease fuel costs, providing practical relief for the cost-of-living pressures many HESTA members continue to face.

Investment in health and aged care

The Government's $3.7 billion investment in aged care aims to deliver more beds, more support packages and better care for older Australians. Combined with a $25 billion investment in public hospitals and $1.8 billion for new Medicare Urgent Care Clinics, this is further funding for the sector where most HESTA members work, and for the health system they rely on.

Housing

CGT and negative gearing reform

From 1 July 2027, the existing 50% capital gains tax discount for individuals, trusts (excluding super) and partnerships will be replaced with cost-base indexation and a minimum 30% tax rate on real capital gains (with an option to retain the 50% discount for new builds). Negative gearing deductions for residential property will be limited to new builds from 1 July 2027. Existing investments will not be impacted as grandfathering will apply to this measure. 

These changes are expected to support around 75,000 additional first home buyers into the market over the next decade. Age pensioners and other income support recipients are exempt from the new minimum tax, and super fund assets are not affected.

The Budget also adds $2 billion to the Homes for Australia plan, providing the infrastructure to support up to 65,000 new homes over the next decade. 

what's next?

While HESTA welcomes the cost-of-living relief provided in this Budget, we continue to call on the Government for a fairer, simpler and more flexible superannuation and retirement system.

HESTA modelling shows only 45% of eligible Australians voluntarily transition to a tax-free retirement account. By 2030, nearly 3 million Australians could collectively miss out on $5.44 billion in retirement savings each year by remaining in accumulation (super) accounts. 

HESTA is calling for a default retirement transition mechanism that would automatically move eligible members into the tax-free retirement phase, with the ability to opt out. This has the potential to put billions of dollars into the pockets of Australian retirees, particularly women and lower-income earners, and help boost the Australian economy.

You can find more details on all Federal Budget announcements at budget.gov.au.