NEWS + VIEWS – 22/05/2026
MARKETS
Global share markets were driven over the past week by inflation concerns, rising bond yields, oil price volatility and ongoing geopolitical tensions. Investors became worried that higher energy prices could keep inflation elevated and delay interest rate cuts from central banks, particularly the US Federal Reserve, which weighed on growth and technology stocks. At the same time, enthusiasm around AI and semiconductor companies continued to support parts of the US market.
In Australia, the ASX 200 was influenced by these global pressures and weaker domestic economic data, including a rise in the unemployment rate to 4.5% this week, which increased expectations that the Reserve Bank of Australia (RBA) may pause further interest rate rises. Before the Federal Budget was handed down last week, the RBA warned the government to be careful about additional spending that could make it harder to bring inflation back into its target range.
FEDERAL BUDGET
After promising not to touch negative gearing and capital gains tax during the federal election campaign a year ago, the government is proposing to significantly increase the tax payable as a result of both policies. Some of the other key measures in the Federal Budget include changes to the tax treatment of discretionary trusts and more support for the elderly. These measures are proposals only and may change before becoming law.
There were no new superannuation measures announced in the Budget, only acknowledgement of measures already legislated. The Division 296 tax, which is an additional personal tax levied on the proportion of taxable earnings above the individual’s large super balance, commences 1 July 2026.
The Low Income Superannuation Tax Offset (LISTO) will be expanded by increasing the income eligibility threshold from $37,000 to $45,000 and increasing the maximum payment from $500 to $810. LISTO is designed to ensure that low-income earners still receive a tax benefit from contributing to super by refunding the 15% contributions tax on eligible concessional contributions.
Negative gearing
Negative gearing will be unavailable from 1 July 2027 for established residential properties acquired from 12 May 2026. Any residential property acquired between these dates can be negatively geared up to 30 June 2027 but cannot be negatively geared after this time. Income losses can no longer be used to reduce other sources of income. Instead, those losses can only be used against residential property rent or capital gains, with any unused amount carried forward to later years. Properties acquired before 12 May 2026 as well as certain newly constructed residential properties are exempt.
Capital gains tax
From 1 July 2027, a 30% minimum tax rate will apply to capital gains. There are also changes to the way that capital gains tax (CGT) is calculated, which applies to all assets, not just property. The 50% CGT discount for assets held longer than 12 months will be replaced with an indexation method for gains made from 1 July 2027. Under the proposed indexation method, the asset’s cost base will be adjusted for inflation from this date before calculating the capital gain. This will apply to all assets owned by individuals, trusts and partnerships. Companies and super funds (including SMSFs) are not impacted by these changes and gains will continue to be taxed under the current rules. There are also no changes to the main residence exemption and small business CGT concessions.
The government is ‘consulting’ on changes to calculations for how start-ups are charged CGT, after founders and investors warned that axing the 50% CGT discount would hit innovation and send entrepreneurs offshore. The proposed measures have left founders and employees, who often take shares in lieu of salaries, facing the prospect of paying 47% tax if their company succeeds and is sold. Start-ups have a very low or no cost base to adjust, hence the argument for a concessional tax rate.
Discretionary trusts
From 1 July 2028, discretionary trusts (including family trusts) will pay at least 30% tax on trust income. The change ensures that at least 30% tax is paid by those with a tax rate of less than 30%, which may reduce the benefit of distributing income to family members who pay tax at lower rates. Rollover relief (including CGT) is available for three years from 1 July 2027 to assist small businesses and others to restructure out of a discretionary trust into another type of entity (e.g. a company).
Support at Home
More packages will be released for Support at Home and access will be expanded. From 1 October 2026, recipients approved for personal care can access services (including assistance with showering and dressing) free of charge. Personal care will be reclassified into the fully government funded ‘clinical support’ category.
COMPANY NEWS
CSL delivered a 90-day interim CEO review and financial update last week, revealing lower FY26 earnings guidance and plans for around $US5 billion in additional asset impairments. CSL now expects revenue to be around $US15.2 billion and net profit to be around $US3.1 billion for the year. US Immunoglobulin revenue will be reduced by $US300 million, Albumin in China down by $200 million and other impacts (including the Middle East conflict) are expected to weigh by $US150 million. CSL’s share price fell -16% on the day of the announcement.
Healthcare stocks broadly have struggled this financial year, but CSL’s problems have gone beyond sector weakness as the company has faced softer vaccine demand, operational restructuring and the abrupt departure of its CEO. However, CSL continues to expect revenue growth in the second half of FY26 for Behring, its plasma therapies division. Vaccines account for a minority of CSL’s total revenue, while the bulk of the company’s profits come from Behring, which develops treatments used for rare diseases, immune deficiencies and bleeding disorders.
Commonwealth Bank (CBA) posted a third quarter cash profit of $2.7 billion, which missed market expectations. Lending margins were broadly stable as competition in home and business lending persisted, while operating expenses were up 1% as the bank lifted spending on cloud computing and AI. CBA’s share price fell -10% as a result of the disappointing earnings, rising bad debts and fears that Labor’s tax concession changes will slash demand for loans.
The market had already been skittish about rising bad debts, with other major banks putting aside hundreds of millions of dollars in extra provisions for loans that could sour as the war in the Middle East increased costs. CBA described the changes to negative gearing and capital gains taxes as ‘not that friendly to major banks’ and said it would be most exposed given its 26% share of the property investor mortgage market.
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