Recent changes announced in Australia’s 2026 federal budget are expected to significantly influence how and where investors allocate their money.Key reforms include the replacement of the existing 50 per cent capital gains tax (CGT) discount and restrictions on negative gearing for property investments, which will only apply to newly built homes purchased after 12 May.Experts suggest these measures could trigger a structural shift in investment behaviour across both property and share markets.

According to accounting academics, including experts from the University of New South Wales, the changes are likely to reduce the attractiveness of capital gains-focused investing and increase the relative appeal of income-generating assets.

In the share market, this may encourage investors to favour established Australian companies that pay regular dividends, such as major banks and large mining or industrial firms.These companies also benefit from franking credits, which may become more valuable under the revised tax environment.

In contrast, early-stage and high-growth companies that typically reinvest profits rather than pay dividends may find it harder to attract capital from investors seeking returns.

On the property side, the reforms are expected to shift investor interest towards newly built housing, as existing negative gearing benefits will be limited for new purchases.

Despite this, financial advisers argue that property will remain attractive due to leverage advantages and its illiquid nature, which encourages long-term holding.

Some investors may also restructure their portfolios, including using self-managed super funds (SMSFs), which can offer significant tax advantages in retirement phases, including potential CGT exemptions and tax-free dividend income.Financial experts also note that principal residences remain highly tax-advantaged, as they are exempt from capital gains tax.This may lead to increased investment in home ownership, renovations, or upsizing strategies.

Overall, while the reforms are still subject to legislative approval, they are widely expected to reshape investment strategies by altering the balance between growth-focused and income-focused assets in Australia.