Every federal budget brings changes that ripple through retirement planning — some minor, some significant. This one is significant. Here is a plain-English guide to what has changed and what it means for you.
The family home: still protected
If you are planning to sell the family home to downsize, the news is straightforward — nothing has changed. The main residence CGT exemption remains fully intact. Whatever profit you make on the sale of your home, you will not pay capital gains tax on it.
The downsizer contribution rules are also unchanged. If you are 55 or older and have owned your home for at least ten years, you and your partner can each contribute up to $300,000 from the sale proceeds into superannuation — $600,000 per couple — outside the normal contribution caps. This remains one of the most powerful retirement planning tools available to Australians, and the budget left it untouched.
Investment property: a significant shift
This is where things get more complex. From 1 July 2027, the 50% capital gains tax discount that has applied to investment properties for individuals will be replaced with a new system — cost base indexation plus a minimum 30% tax rate on capital gains.
If you bought an investment property years ago and have been thinking about selling it to fund your retirement or your move into a retirement village, the timing of that sale now matters more than it used to. Sales completed before 30 June 2027 will still benefit from the 50% discount on gains made to that point.
The difference in dollar terms can be substantial. On a property bought for $800,000 and sold for $1.6 million, the new rules could add around $40,000 to your tax bill compared to selling under the old system. That is a meaningful number — and a strong reason to speak with your accountant sooner rather than later.
Superannuation: the couple trap
The new Division 296 tax — an additional 15% tax on superannuation earnings for balances above $3 million — has attracted a lot of attention. For most retirees with typical super balances, it will not apply directly.
But there is a scenario that catches couples off guard, and it is worth understanding.
If both partners each have $2.5 million in super, neither crosses the $3 million threshold. But when one partner passes away and their balance transfers to the survivor, the surviving spouse could suddenly find themselves with $5 million in superannuation — $2 million above the threshold — and subject to Division 296 on an ongoing basis.
If your combined superannuation is approaching $3 million, this is worth discussing with a financial adviser now, while there is still time to plan.
A small positive: higher contribution caps
From 1 July 2026, the concessional (pre-tax) contribution cap rises from $30,000 to $32,500 per year. For those still working part-time in the lead-up to retirement, this creates a slightly larger window to top up superannuation in a tax-effective way.
What to do now
For most downsizers, the 2026 Budget changes very little. Sell the family home, make your downsizer contribution, and the rules you planned around are still in place.
But if you have an investment property, or a combined superannuation balance approaching $3 million, the changes are material enough to warrant a conversation with your adviser before the end of the financial year.
The decisions you make in the next twelve months could look very different depending on when — and how — you act.
Connect with a retirement living and aged care specialist adviser here.
Rachel Lane and fellow finance expert Noel Whittaker are the authors of Downsizing Made Simple. The Downsizing Made Simple website is here to guide your downsizing journey with great information, tools and easy-to-use resources.
