Our three big takeaways from this year's budget

Cheek's initial impression of the biggest things we did (and didn't) see in the Albanese Government's 2026-2027 budget.

It’s late, but we’ve pulled out the three big headline points that we think you need to be across this budget. There’ll be plenty more commentary and analysis to come over the coming days, but this is what has stood out so far.

1. The missed opportunity of the Gas Tax

The elephant in the room: despite broad public support for (as high as 60% according to polling conducted on behalf of The Australis Institute), the 25% tax on gas exports is not to be.

By now, we all know the case for the gas tax well. Australia is one of the top three exporters of liquified natural gas (LNG) in the world, but we are not seeing our fair share of the profits made on this resource. This is because state-based royalties are inconsistent (and often completely absent), and the federal the Petroleum Resource Rent Tax (PRRT) system is only returning around a quarter of what it was originally designed to do (according to analysis prepared for Future Group’s submission to the gas task inquiry). We know that Qatar, which produces a similar volume of LNG to Australia, collects around five times as much revenue on exports than we do, and that Australia currently takes around an 18 per cent share of the gas sector’s profits - well below global norms of 75-90%.

All importantly, a 25% tax on gas exports could bring in $17 billion in Government revenue each year.

Of course, the gas tax snub did not come as a shock. The Prime Minister had already rejected the strong public campaign for taxing gas properly, ruling out the inclusion of any such measures in this year’s budget. A little surprising though, was that no outlets besides Cheek brought up the gas tax snub during the on-record briefings and press conferences we attended on the day.

The excuse for leaving such a popular policy opportunity on the table, per the Albanese Government’s spin, is that Australia needs to prioritise getting our domestic supply sorted and protect our two-way supply arrangements with partners in Asia.

The argument goes that the 25% gas tax could jeopardise our standing as a reliable and stable trading partner, and thus risk international investment in our gas exports - ostensibly because it would increase the price of our gas in the global market. This is framed as a ‘sovereign risk’.

But that talking point (popularised by the gas lobby and its allies) doesn’t stack with the evidence that gas prices are generally set globally, with Treasury officials themselves having told the gas tax inquiry committee that the economic burden of any tax changes would broadly fall onto multinational gas companies - and not be passed onto their international customers.

In lieu of a gas tax, Labor has also pointed to its $3.2 billion Australian Fuel Security Reserve - the centrepiece of a $14.8 billion package designed to strengthen the nation’s fuel security in the wake of the global disruptions brought about by the US and Israel’s decision to wage war on Iran.

Cheek had the chance to ask Jim Chalmers about the Government’s Gas Tax call (and what they have to say putting NDIS participants at the brunt of budget savings, rather than profiteering fossil fuels companies). This is what he had to say:

“When it comes to the gas tax, I want to be upfront with you and say I know there’s a really strong view of that - and of course I don’t miss the very substantial campaigns that a number of you are running on on social media. I get that. There’s a lot of strong views on that.

“I understand the arguments that people are putting to us. But there’s also really good reasons, I think, to prioritise two things. One, we’re trying to make sure we have enough fuel to keep the place ticking over - and so those two-way supply arrangements with our refining partners in Asia are really important. Not everybody agrees with that, but I think that.

“Secondly, this gas reservation thing we announced on Thursday is a very big deal - like it’s a huge deal. So we’ve prioritised those two things over changing the gas tax arrangements.

“Now, to assure you that I understand the arguments, in the first term I changed the PRRT so we get a bit more revenue sooner. I know that people would have rather I do much more than that, I get that that too.

“But I did change the arrangements to get more revenue sooner - in the budget there’s about an extra $1.6 billion. Again, I acknowledge that you would like that there to be much more than that. But we have changed the arrangements, we are collecting a little bit more, eating a little bit more and we’re prioritising those other two things.”

There’s no mistaking that this will be a huge disappointment for many Australians, and the Government may not have another opportunity to capitalise on the overwhelming level of support for a gas tax that has grown in recent months. But with Labor’s rhetoric so focused on the “timing” of the measures, against the current fuel crisis, many have speculated that the gas tax hasn’t totally been written off from future reforms.

2. The NDIS is carrying the burden of “historic savings”

We might not have $17 billion in gas tax revenues, but the Albanese Government has found another way to deliver “historic savings” in this years budget, with devastating cuts to the NDIS accounting for more than half of the $63.8 billion in budget savings over the forward estimates.

Note: forward estimates is 'budget speak for the next five financial years, including 2025-26 through to 2029-30.

Again, this has not come as a surprise, with the sweeping cuts announced by Minister for Disability and the NDIS, Mark Butler, at his National Press Club address in April. The proposed changes have landed as a terrifying loss to the disability community, who came together to protest the measures in a national day of action over the weekend.

During his budget speech on Tuesday night, Chalmers positioned the cuts as a necessary change to “restore the NDIS to its original intent and secure its future”, to ensure “it grows in a sustainable way in line with programs like Medicare”.

On paper, the cuts add up to a $37.8 billion cut over the next five years from 2025-26, based on the NDIS Actuary’s latest figures - those projections suggested that the scheme’s previous growth trajectory had it on track to grow by $13.9 billion over the same period. Labor hopes the changes will slow annual growth from 10% to 2% over the next five years.

Butler says these cuts will see 160,000 NDIS participants kicked off the scheme over the next five years, as eligibility thresholds are increased. The cruelty of this framing cannot be understated. Cuts will also be targeted at funding social and community participation, which Labor has promised to reduce by 30%. It’s really important to note here that this is the pool that enables Australians with a disability to participate in ordinary activities outside of the home - a meaningful reduction to this kind of funding will exacerbate isolation for many in the community.

This is what Chalmers had to say when we questioned him about targeting budgets cuts at one of Australia’s most vulnerable communities:

“First of all, spending on the NDIS continues to grow. I’m a huge supporter of the NDIS and my view is we kind of had to save it from itself, and the risk was that the growth in spending on the NDIS was going to become so extreme that some future government of a different political stripe to ours was going to be tempted to knock it off.

“We carry that responsibility heavily, we created the NDIS, we believe in it and we’re trying to save it. And what that means is that spending is still growing, but it will grow more slowly. We’re trying to make sure that we can afford to fund the services that people need. So whenever you’re making changes like that there’s a level of anxiety, I get that.”

While there are real issues with the NDIS system that require reforming - not least the widely reported cases of fraud and rorts by some providers - Labor’s approach ultimately punishes disabled Australians for market failings. There will be more to unpack here, including understanding the details of alternative supports and safeguards that will be available to those impacted by the cuts.

3. Landmark tax reforms, but with some big caveats

Now, we’re onto the good stuff. And to give Labor some credit, the tax reforms it has put forward in this budget are bold in a political landscape that has historically punished anyone who has dared touching the tax breaks enjoyed by the ultra wealthy. Labor was clearly well aware of the hostility it would face for taking on changes to negative gearing and capital gains tax - it buried the announcements more than halfway down its budget papers.

Like much of this budget, we already knew the overarching policy changes were on the table, so it was the details of what that actually looked like - and just how far Labor was willing to go - that we were all waiting on.

Those details look like this:

Starting from July 2027, the 50% capital gains tax (CGT) discount will only apply to new homes. All other investment properties will revert to the original pre-1999 inflation indexing approach (which means investors only pay tax on ‘real gains), with a minimum 30 percent tax to apply to net capital gains.

Negative gearing will also be restricted to new builds, with investors only able to deduct losses on existing residential properties against rental income or capitals gains from rental properties - not other forms of income, as was allowed under the previous settings.

It was widely speculated that Labor would take a grandfathering approach to both of these changes, under the guise of protecting investment decisions made prior to today’s announcements. Such an approach, experts have argued, would effectively exacerbate generational inequality, by allowing older and more established investors to continue to benefit from the previous settings that would not be offer to new investors - at the same time, it would limit the short term impacts on housing affordability, and reduce the amount of Government revenue that could be raised by the new policy (and spent on other important measures, like cost of living relief, healthcare, education, the NDIS… and so on).

On the negative gearing front, this is exactly what Labor has opted for - any properties purchased prior to the budget announcement (literally right up until the minute Chalmers began his speech) will be exempted from the new rules. However, for CGT, we’ve been served a mixed model, whereby all gains made prior to July 2027 will be taxed using the former system, and all future gains from that point onwards to be taxed using the new rules.

The Government projects that the CGT and negative gearing changes will together raise $3.6 billion in revenue over the next five years.

The upshot is that this is a good thing, and it will have tangible impacts on the housing market and generational wealth inequality. But at the same time, Labor’ efforts to appease the rich and powerful with grandfathering (even with a mixed model) will ultimately undermine just how far those impacts will go, at least in the short term. This creates a bit of a lose-lose situation for the Government - where it will face accusations of “broken promises” and “class warfare” on one side, and criticisms that they haven’t gone far enough on the other - by trying to making everyone happy, they’ve made no one happy. Though in this case, we know there are still plenty who are still happy to celebrate a pragmatic/progressive change.

We also can’t forgot the changes to discretionary trusts, for which a new 30% minimum tax will be introduced, with beneficiaries to receive non-refundable credits for the tax payable by the trustee. The reform will take effect from July 2028 and is expected to raise $4.5 billion in tax revenue over the next five years.

If you’re after a little more context, you can about how discretionary trusts, CGT, and negative gearing all work in the pre-budget explainer we published on Tuesday morning!

Okay HUGE day, I’m going to go sleep now so I am in top content-making form for you all tomorrow!!!!