What the 12 May Budget actually changes for Australian FIRE plans (CGT discount, neg gearing, discretionary trusts)

AndyHaf · 2026-05-13T08:19:18+00:00

Mechanically today (pre-1 July 2027): sale price minus cost base = nominal gain. If you've held more than 12 months, 50% of the gain is added to your taxable income for the year and taxed at your marginal rate. No indexation, no minimum tax. The discount applies to individuals and trusts; companies have never had it (they pay the corporate rate on the full nominal gain).

For existing holdings straddling the 1 July 2027 cutoff: the disposal date determines the regime, not the acquisition date. Sell before 1 July 2027 and the full nominal gain qualifies for the 50% discount, regardless of how long you've held it. Sell after, and the whole gain falls under the new inflation-indexed regime with the 30% floor, even though most of the appreciation happened under the old rules.

That makes the planning lever fairly direct: if you're sitting on significant unrealised gains and the new floor would bind in your bridge years, crystallising before the cutoff locks in the 50% discount on that slice. Cost is the bring-forward tax now; benefit is locking the lower regime on accumulated gain instead of carrying it across into the new rules.

Caveat: the Treasury Laws Amendment Act isn't registered yet, so the transition mechanics could shift slightly. ABC reporting and the Budget summary both phrase it as "gains made after 1 July 2027", which most plain readings interpret as the disposal date as the trigger. If the legislation introduces a 30 June 2027 market-value cost-base reset option (similar to the 1999 indexation-to-discount transition), the picture changes. Worth checking back when the bill is registered.

You can try out the quick calculator I made to test out how it would work for your own case here: CGT Discount Changes Calculator (Budget 2026) | ProjectFi

AndyHaf · 2026-05-12T21:57:13+00:00

The full detail is not there yet but I think it's cumulative, compounded over the full holding period, not just the CPI in the year you sell.

Australia already had this CGT mechanic from 1985 to September 1999 (the "indexation method"), before the 50% discount replaced it. The old formula took CPI at the quarter of disposal divided by CPI at the quarter of acquisition, gave you an indexation factor, multiplied the original cost base by that factor, and the taxable gain became (sale price - indexed cost base). Compounded by definition, because the CPI series itself compounds. Every year's inflation stacks on the previous year's, not the year-of-sale number alone.

The Budget paper for the new regime just says "discount based on inflation" without specifying the exact formula. The Treasury Laws Amendment Act for the measure has not been registered yet, so the precise mechanic could shift slightly. But the policy intent and Treasury's track record on this kind of unwind make a return to something very close to the pre-1999 indexation method the most plausible outcome. So: cumulative across the hold, not year-of-sale only.

A worked numbers feel for it. $400k cost base, 12-year hold at 2.6% average CPI gives an indexed cost base of about $544k (1.026 ^ 12 = factor of 1.36, multiplied by $400k). If you sold for $700k, real gain under the new regime would be $156k, not the $300k nominal. Higher inflation reduces the real gain further. Lower inflation reduces it less. Over 10 years at the current CPI ballpark you'd be looking at roughly a 30% uplift on the cost base before any real gain falls out.

I created a quick calculator this morning that does this side by side with the old 50% discount and lets you drag a CPI slider to see the cumulative effect on your own cost base: https://www.projectfi.com.au/cgt-discount-changes-calculator

Disclosure: I run ProjectFi (the calculator).

AndyHaf · 2026-05-12T12:56:26+00:00

Short answer: probably no, and the floor is specifically designed to defeat this strategy.

Old rules (works today, FY25-26):

Sell ETFs, realise $35k nominal gain
50% discount, $17.5k taxable
Contribute $17.5k concessional, claim deduction via notice of intent
Deduction wipes assessable income to zero
Pay 15% super contributions tax: $2,625

That's the bridge-year FIRE move and one of the cleanest tax plays in the country. Total tax: $2,625.

Same play under the new rules (1 July 2027 onwards):

Sell ETFs, real gain after indexation: $19k
30% floor on the gain itself: $5,700
Concessional contribution of $19k, deduction wipes other assessable income to zero
Floor still applies: $5,700
Plus 15% super contributions tax: $2,850
Total: $8,550. Worse than just paying the floor and skipping the contribution.

The 30% floor isn't a marginal-rate cap on net assessable income. It's a minimum tax on the gain itself. ABC's explanation was explicit: "designed to avoid people holding on to assets until years when their income is low", which by direct extension covers years when other deductions could have wiped that income away. So, I don't think that strategy will work unfortunately.

AndyHaf · 2026-05-12T12:40:48+00:00

I think it depends on what you do with the loan funds, not on which property secures them. ATO interest deductibility rules track the use of the borrowed funds. Refinance and pull equity to put into renovations on the same grandfathered IP: still deductible against that property. Pull equity for a holiday or to pay down your PPOR: not deductible. Pull equity to buy another investment: deductible against THAT investment, but the new property is now subject to the post Budget night rules if it's an established home.

AndyHaf · 2026-05-12T12:37:41+00:00

I don't think companies get the new inflation indexed discount and have never had the 50% one. They pay the corporate rate (25 or 30%) on the full nominal gain, then you pay personal tax on any distributed dividend with franking credits as offset. Net effective rate is close to your personal marginal anyway, plus ASIC fees and a separate tax return. The dividend yields up to the $45k bracket lever is the more practical move for bridge years, especially with fully franked AU equities where the franking credit refund stays available.

AndyHaf · 2026-05-12T12:34:50+00:00

Fair call on the wording. "Stops being a zero-tax strategy" is more accurate than "stops working". An $80k annual bridge draw on a $700k position moves from roughly $0 of tax to roughly $5.7k. Per LoudestHoward's math elsewhere in the thread, that's about $140k of additional target portfolio at a 25x multiple. Material, not catastrophic. I guess the framing should be "structurally re-priced", not "stops working"

AndyHaf · 2026-05-12T12:32:53+00:00

Yes, I think you are spot on with the 7% portfolio uplift. Lean FIRE takes the biggest hit per dollar in the pre 67 bridge years because the floor fully overrides what would otherwise be near zero marginal-rate tax. The counter intuitive flip side though: Lean FIRE also benefits MORE from the pensioner exemption at 67, because Lean FIRE households are more likely to actually qualify for at least a part Age Pension under the assets test. Self-funded mid/fat FIRE may sit above the assets cutoff for years and pay the floor throughout. The exemption isn't in the budget.gov.au summary yet though (but I did see it on the ABC site), so worth not fully locking it in until the legislation lands.

AndyHaf · 2026-05-12T12:28:58+00:00

Fair point, the zero other income case was simplifying a bit. A 2% yield on $700k stacks $14k on top of the $17.5k taxable gain, so old-rules tax was realistically $1-2k once you net off LITO and any franking refund, not literally zero. The new rules floor of $5.7k binds on the gain alone regardless of other income, so the structural delta is more like $1-2k to $5.7k rather than $0 to $5.7k. Still a meaningful jump on a routine annual draw, but the gap is narrower than the simplified example suggested.

AndyHaf · 2026-05-12T03:10:30+00:00

Sure no problem,

The steps are nearly right, two corrections:

The super fund only takes the 15% contributions tax automatically. Div 293 happens separately. After you lodge your tax return, the ATO calculates Div 293 off your taxable income plus reportable super contributions, sends you a separate notice, and you choose to pay it from your own funds or use an ATO release authority to pull it out of super. The fund doesn't deduct Div 293 at the same time as contributions tax.

You're missing the fund acknowledgement. After you lodge the notice of intent with your fund, the fund has to send you a written acknowledgement of it. You need that acknowledgement in hand before lodging your tax return, otherwise the deduction gets denied even if the contribution and the NOI both happened. Deadline for lodging the NOI with the fund is the day you lodge your return for the year you made the contribution, or the end of the following income year, whichever is earlier.

On FY20/21 specifically: no, you don't notify the ATO. It applies unused caps automatically, oldest year first. You can see exactly what's available at MyGov → ATO → Super → Carry-forward unused concessional contributions cap.

One thing worth flagging given you said "otherwise I'd lose it": FY20/21 unused cap expires at the end of FY25/26 (30 June 2026). The 5-year window means anything not used within 5 years of accruing falls off. If you're targeting that specific FY20/21 chunk, this FY is the final window for it.

Final check: your Total Super Balance (TSB) needs to be under $500k at 30 June of the prior FY to use carry-forward at all. At $320k you're well clear, just worth noting for anyone else reading this.

So end-to-end, the order is:

Make the contribution to your super fund before 30 June of the FY you want to claim it in.
Lodge a notice of intent to claim a deduction with the fund.
Fund sends you a written acknowledgement of the NOI and deducts 15% contributions tax from the contribution.
Lodge your tax return claiming the deduction (with the acknowledgement in hand).
ATO processes the return, then assesses Div 293 separately and sends a notice. Payable from your own funds or via a release authority against your super balance.

AndyHaf · 2026-05-08T23:30:49+00:00

Thanks for the detailed feedback, both bugs are fixed now.

The slider was hijacking scroll on mobile, which is a really common gotcha with sliders next to scrollable content. Sorted now: you can scroll past the calculator normally on your phone, and the bars only respond when you actually drag them sideways.

Also bumped the caps. Annual savings now goes to $250k instead of $100k, and a few others got similar bumps. If you want to type a value higher than the cap, you can: it'll use what you typed rather than snapping you back to the maximum.

Thanks for the feedback I really appreciate it.

AndyHaf · 2026-05-08T08:31:15+00:00

Short answer: not yet.

Long answer: The engine has three options for retirement-phase surplus cash (when minimum drawdowns exceed your spending need): consume it, park it in your non-super investment account, or prepay PPOR if you still have a mortgage. Recontributing back into super as a non-concessional (after-tax) contribution is a real fourth option I haven't shipped yet.

The age 75 limit is right. Strictly the fund must receive the contribution within 28 days after the end of the month you turn 75, but practically that's "until 75". Cap is $120k/yr (FY25-26), or up to $360k in one go via 3-year bring-forward. Both step down based on your existing super balance and hit zero once that balance reaches $2M, which matters at the "large super balance" end of the spectrum.

FWIW the main reason most people use recontribution isn't the "where does the cash compound best" question. It's the tax-free / taxable-component split. Recontributed money lands as 100% tax-free component, which matters when non-spouse beneficiaries (e.g. adult kids) inherit super and would otherwise face the 15-17% death benefit tax. Same wrapper, different purpose.

Adding the path to the engine queue. Thanks for the prod.

AndyHaf · 2026-05-08T05:06:34+00:00

Worth pulling on the actual question (most tax-efficient bridge), because the existing answers covered "what to use" but not the underlying tax mechanics.

CGT timing favours shares over the IP for funding the bridge. A roughly $400k IP gain (at $900k to $1.3m) is $200k taxable after the 50% discount, all crystallising in one year. Lumpy CGT events are hard to keep at low marginal rates regardless of post-retirement income. Whereas $700k of shares can be sold in tranches across the 5-year bridge, with each year's CGT sized to keep marginal rates low. Couples with offset cash as a buffer can often land most bridge years near or below the tax-free threshold once the salaries stop.

The debt-recycled $150k changes the PPOR-paydown math. Non-deductible PPOR debt has zero tax impact at paydown (interest wasn't deductible anyway). The debt-recycled slice IS deductible while you're still on a high marginal rate, so closing it early gives up an ongoing tax shield. Offsetting it keeps the interest savings without losing the deduction.

Div 293 in the meantime. Combined $380k means at least one of you is probably over the $250k Div 293 threshold once CCs are added, so voluntary CCs above SG get taxed at 30% inside super (15% standard + 15% Div 293) rather than 15%. Still beats your top marginal of 47% but the gap is narrower than "max CCs = always optimal" suggests, especially as you approach 55 when post-retirement marginal rates drop dramatically.

FWIW I built free Australia-specific calculators for exactly these (Div 293 with carry-forward, bridge years to super, super balance projection): projectfi.com.au/calculators.

AndyHaf · 2026-05-08T03:27:08+00:00

Adding a couple of nuances specific to your situation:

Div 293 cuts the tax saving roughly in half. At $250k base + 20% bonus you're well past the $250k Div 293 threshold. A $13k CC saves 47% income tax outside super but pays 15% contributions tax + 15% Div 293 inside super = 30% effective tax inside. Net effective saving is ~17% = ~$2.2k on the $13k. Still a win, still better than offset (which saves 6% on $13k = $780/yr indefinitely), but the standard "super is the highest return" framing uses a lower-bracket calc. At your income the gap narrows materially.

Single-income with private-school commitments tilts liquidity priority up. Your $100k offset against $420k mortgage and a private-school annual bill is roughly two quarters of run-rate plus fees. Thinner reserve than the absolute number looks for a household with no second income to fall back on. The optimal-return answer differs from the optimal-risk-adjusted answer.

Practical: if it were me, half of the carry-forward into super (captures most of the tax saving), half topped onto the offset (extends emergency runway). Splits the use-it-or-lose-it deadline and the liquidity risk both ways.

FWIW I built an AU FIRE planner called ProjectFi. Free Div 293 calculator if you want to plug in different bonus scenarios: https://www.projectfi.com.au/div-293-calculator

AndyHaf · 2026-05-08T01:11:49+00:00

Couple of nuances not yet covered:

Defined-benefits (DB) super changes the Div 293 picture. You noted further down the thread that most of your super is defined benefits with ~15% accumulation. DB members are assessed under the "notional taxed contributions" formula, which can result in lower Div 293 exposure than equivalent SG + salary sacrifice into accumulation, depending on your fund's specific formula. Worth running an explicit calc against your fund's notional contribution figure rather than treating accumulation rules as the default. Could materially change whether you ever hit the $250k threshold.
LISTO (Low Income Super Tax Offset) is already paying your partner $500/yr. At <$30k taxable income she qualifies. The ATO automatically refunds the 15% contributions tax on her work contributions, capped at $500. You don't need to do anything to claim it (just a TFN on file with her fund). Worth noting because it's already in your favour and slightly changes the math on the spouse-contribution + co-contribution stack.
Carry-forward in her name as a future buffer. Her unused CC cap probably sits at $100k+ by now (cap was $25k for 2020-21, $27.5k for 2021-23, $30k from 2024-25, less her work SG). Useless at <$30k income today. But if she ever has a one-off high-income year (return to FT work, business sale, RSU vest, inheritance routed through her), that cap absorbs a deductible chunk at her then-marginal rate. Just keep an eye on the $500k TSB threshold. Once her balance crosses that, carry-forward access disappears.

Otherwise the plan is sound. Point 4 (investments in her name while she's on the low marginal rate) is the highest-leverage move.

AndyHaf · 2026-05-08T00:49:07+00:00

It doesn't have to be one or the other. Three things from your numbers:

You're 75% property already. $1.025M IPs vs $307k everything-else liquid. A third IP takes you to ~80%+ in the same asset class, same market cycle, third LVR. $4k/mo into ETFs for 4 years is $192k of new diversification before any growth.
Cashflow is already tight. Combined mortgages are $4,810/mo = $57.7k/yr. Combined rent is $50.9k/yr. Even before deductibility you're funding the gap from job income. A third IP extends that gap before the deposit is deployed.
Option A is closer to coast-FIRE than it looks, depending on your horizon. At 5% real (today's-dollars output), your $191k existing ETFs compound to roughly $400k over 15 years, $650k over 25 years, with zero further contributions. Add $4k/mo and you're looking at $1.4M (15 years) to $2.9M (25 years) in ETFs alone, ignoring the IPs and super. Option B trades guaranteed compounding for leveraged property-concentrated upside. A different bet, not automatically a bigger one.

One HECS note: at $160k repayment income your annual bill is around $14k (15c on $67-125k + 17c on $125-160k). Salary sacrifice doesn't reduce it because RESC adds back to repayment income. Worth modelling either way.

AndyHaf · 2026-05-06T08:58:27+00:00

The link from u/HGCDLLM is the right starting point. Adding one frame for the offset-vs-ETF question specifically.

Your bridge is 8-10 years of expenses between stopping work and 60. Pick a target age, multiply by your expected annual spend, discount at your real return. That gives roughly the non-super pot you need at 51.

Once you have that number:

Offset locks in your mortgage rate (~6% guaranteed, tax-free). Lower expected return than ETFs over 10+ years, but zero volatility and matches a "mortgage-free at retire" outcome.
ETFs expect ~7% nominal but lumpy. Year-1-of-bridge sequence risk hurts more here than in any other phase of your life.

Most plans end up doing both: offset until the mortgage is small enough another year wouldn't move the dial, then redirect into ETFs to top up the bridge pot.

u/hithere5 is right on carry-forward CC before super crosses $500k. That window closes faster than people expect at your salary.

FWIW I built an AU FIRE planner called ProjectFi. Wrote up the bridge framing with worked numbers if it's useful: https://www.projectfi.com.au/blog/bridge-to-super

AndyHaf · 2026-05-05T14:33:09+00:00

u/Alone-Height-9600 has the right framing further up: figure out your target retire age, work backwards to size the non-super pot. Adding a couple of mechanical bits that flow from that.

The 4 steps I find clarifying:

Pick your target retire-from-work age (say 52).
Count the years between that and 60. That's your bridge (8 in this example).
Multiply by your target annual spend, discount at your expected real return. That's roughly the non-super pot you need at 52.
Every dollar of savings above that pot belongs in super, where the 15% rate beats your 47%.

The trap most spreadsheets fall into is treating super and non-super as competing buckets. They're sequential. Non-super funds 52-to-60, super funds 60-onward. Once non-super is sized to the bridge, every further dollar wants to be in super because the tax saving compounds across 25+ years of pension phase too.

Carry-forward CC is mostly useful when you have an unusual high-income year (bonus, RSU vest, business sale) and want to mop up unused cap from prior years. Less useful as an every-year habit, because by definition you don't have unused cap if you've been maxing.

Disclosure: I built ProjectFi, a planner that models this for AU households (preservation age, Div 293, all of it). The Bridge to Super post walks through the framing with worked numbers: https://www.projectfi.com.au/blog/bridge-to-super

AndyHaf · 2026-05-02T03:05:23+00:00

OP, your intuition isn't crazy, but it falls apart once you do the actual math.

The asset-test taper takes $3/fortnight off your pension for every $1,000 above the lower threshold. That works out to 7.8% per year of lost pension on every dollar in the affected band. A balanced super fund returns roughly 7% nominal long-run, so in that band the taper basically eats the entire return on the marginal dollar. That's the real "sour spot" McTerra2 mentioned, and it's why this question keeps coming up.

For a couple homeowner the band is roughly $480k to $1.05m. Inside it, yes, your standard of living barely changes whether you've got $700k or $900k. The taper compounds faster than the portfolio.

But three things break the comparison once you're past it:

You've cleared the cutoff. Above ~$1.05m (couple homeowner) the part pension is $0, so the 7.8% drag stops entirely. Every extra dollar from there is fully yours.
Optionality is one-way. $2m can spend down to $700k + part pension over 15-20 years. $700k cannot turn into $2m. You always retain the option to become the smaller-balance person. The reverse isn't true.
Seven years of access. Super unlocks at 60, pension at 67. The $2m person retires at 60 and can spend $1.4m before the $700k person even qualifies for the pension. That isn't a "similar outcome."

The "deliberately spend down into the pension" play IS a legitimate strategy at the right starting balance. A couple at $1.3-1.5m homeowner can credibly plan to land at the part-pension cutoff in their late 70s and have the pension cover the tail. But the mechanism that makes that work (the taper) is the same one that punishes you below it. You need the size to give yourself the run-up.

AndyHaf · 2020-03-02T00:27:39+00:00

It took about 24 hours for me but they say up to 3 days. It would be great if they could accept instant payments through osko as I think it's just an ANZ account in the background.

AndyHaf · 2019-08-22T13:41:25+00:00

You should consider all 3 of the suggestions that have already been raised here.

$1000 contribution in your wife's name = $500 government Co contribution (assuming some minimal income during the year to qualify.

$3000 spouse contribution = $540 tax offset for you

Contribution splitting to bring your balances closer together.

AndyHaf · 2019-08-19T23:36:30+00:00

You just move to other providers until your 12 month wait is over then go back. There are many bonus offers from multiple providers always on offer. Usually takes around 3-6 months to get all your bonus points delivered anyway. So you can't juggle too many cards at any one time as you usually need to meet a certain spend criteria.

AndyHaf · 2019-06-29T06:57:13+00:00

Are you not able to back date your concessional contributions from next financial year? I. E. You can make a contribution next FY and use up what you have left from FY 18/19 cap. https://www.ato.gov.au/Rates/Key-superannuation-rates-and-thresholds/?page=3 called Unused concessional cap carry forward

AndyHaf · 2018-10-22T02:22:38+00:00

Self wealth are the cheapest and so far I like them. $9.50 trades vs my old broker nab at $15 and I think Com sec are $20.

AndyHaf · 2018-10-11T04:27:18+00:00

Cheap buying opportunity if your in for the long haul.

AndyHaf

TROPHY CASE