In today’s edition, we’re talking all things Budget.

It was a late night in the TDA office as we worked through the (many!) changes announced by the Government yesterday. Something tells me the office coffee machine is getting a workout today.

With my double-shot piccolo in hand, let’s jump into it.

The Government has announced reforms to negative gearing in the Federal Budget, which will apply to properties purchased from last night. Under the changes, negative gearing will be limited to new builds only from 1 July 2027.

There will be no limit on how many new properties an investor can negatively gear.

The reforms will be ‘grandfathered’, meaning the new rules will not apply to properties that are already negatively geared.

Gearing refers to borrowing money from a bank to purchase an investment property. (It can also apply to other assets, but it’s mostly used in housing.)

Negative gearing is when a landlord spends more on an investment property than they earn in rental income.

That means the owner makes a loss on the property. Under negative gearing, that loss can be deducted from their taxable income, so they pay less tax overall.

For example, Dani owns an investment property. She rents it out for $800 per week, but she pays $1,000 per week in mortgage repayments, rates, and maintenance costs.

Dani can deduct $200 a week from her taxable income, saving thousands in taxes every year.

In this year’s Budget, the Federal Government announced that negative gearing will be restricted to newly built properties.

The change will apply to homes purchased on or after Budget night (12 May), but will not take effect until 1 July 2027.

This means an investor could still purchase a property tomorrow and claim negative gearing on it for a period, but if it isn’t a new build, they won’t be able to claim negative gearing after July 2027.

Any properties bought before Budget night that are already negatively geared will not be affected by the changes.

The Government said its data showed that almost a third of people who sold negatively-geared investment properties in 2022-23 paid less tax than they would have if they had never bought property.

“The tax benefit from rental loss deductions exceeds the capital gains tax investors eventually pay on sale," it said.

It noted these losses “are most valuable” for the richest Australians, taxed at the highest rates.

Speaking on the ABC on Sunday, Shadow Treasurer Tim Wilson questioned whether the changes would lead to more houses being built. He said: “People are arguing very clearly no.”

When asked if he’d vote against the reforms, Wilson explained it’d be “very hard” to support any measures that don’t boost housing supply.

“It will come down to the detail of what the Government's putting forward.”

The Government will need the support of the Opposition, minor parties, or independents to pass the changes in the Senate.

How to create an investment strategy:

→ Start your investment strategy by defining your goals and time frame – whether it’s saving for a home deposit, travel fund, or long-term wealth.

→ Know your risk tolerance, decide if you’ll invest actively or passively, and stay consistent.

→ Stay the course – don’t react to short-term market noise.

→ Review regularly and adjust as your goals and life circumstances change.

^{Transparency: This is a sponsored section of the newsletter. It’s the best way we can keep this newsletter free for you. Information is general in nature. Investing carries risk. To find out more, you can visit commsec.com.au}

At this year's Federal Budget, the Government announced big changes to the capital gains tax (CGT) discount.

The Coalition has previously said it rejects changes to CGT.

So, what is CGT and how is it changing?

Before understanding the CGT discount, you need to understand what CGT actually is.

CGT applies to the profit from the sale of an investment. It applies to a range of investments, including property and shares.

Since 1999, there's been a sweetener: if you held an investment for more than 12 months, you only paid tax on half the profit when you sold it.

For example: Margot bought an apartment in Brisbane for $1 million. Two years later, she sold it for $1.5 million. Instead of being taxed on the $500,000 profit, she was only taxed on 50% of the profit (so $250,000).

That’s what’s changing.

Why? The Government says that historically, recipients of CGT discounts have been the wealthiest Australians. In 2022-23, around 83% of this benefit was received by people in the top 10% of income earners, according to Treasury data.

From 1 July 2027, the flat 50% discount is gone.

Instead, your original purchase price will be adjusted to account for inflation. You'll only pay tax on the gain above that adjusted figure.

But there's a floor: no matter what, you'll always pay a minimum tax rate of 30% (on gains made after 1 July 2027).

The new rules will apply to gains arising after 1 July 2027.

For those who already hold assets, the new scheme will only apply to gains made on that asset from 1 July 2027 - not gains accrued before that.

Investors in newly built homes will have the choice of the existing 50% discount or the new inflation-based system, whichever is more favourable.

In a submission to a Senate Committee on CGT on 27 April, the Coalition said it was opposed to any changes to CGT discounts.

"The Coalition believes the current CGT discount is working as intended and should not be changed," the submission said.

In March, Shadow Treasurer Ted O'Brien told Sky News the Opposition would not support the Treasurer in "trying to ping Australians for more money because he can't stop his spending spree."

ETFs: the investing ‘bundle pack’

Instead of picking individual shares one by one, Exchange Traded Funds (ETFs) let you buy a basket of investments in a single trade. Think of it as getting exposure to dozens – sometimes hundreds – of companies across a market, sector or theme.

That built-in diversification is why many investors start with ETFs and keep them as a core long-term holding. They’re also transparent and flexible compared to many traditional managed funds.

And one myth worth clearing up? ETFs aren’t just for beginners – even experienced investors use them in their portfolios too.

To learn more, explore CommSec Pocket ETFs and get started with as little as $50.

^{Disclaimer: Information is general in nature. Investing carries risk. Consider the offer and Pocket T&Cs, and other fees and charges at commsec.com.au before deciding.} 

And now for some non-Budget news…

Despite fans’ complaints, FIFA has increased the prices of the top tickets for the men’s World Cup, with the most expensive seat now costing roughly $US32,970 (about $AU45,000).

The highest-priced seats sat at $US10,990 (about $AU15,200) at the start of last month, and since then, some ticket prices have tripled.

FIFA President Gianni Infantino defended the increases at a conference in Beverly Hills, saying: “We are in a market in which entertainment is the most developed in the world, so we have to apply market rates.”

U.S. politicians Frank Pallone and Nellie Pou criticised the costs, saying: “We are deeply concerned by reports that FIFA is employing opaque pricing, shifting rules, and potentially deceptive practices that are making it difficult for fans to access seats.”