How the Australian Budget impacts Expats in Europe

The Australian government announced its 2026 budget this week and it is one of the most impactful budgets in decades. The changes could impact Australians living in Europe and others planning to live in Australia in the future.

In this article, we explain the main announcements and what they mean for you.

Before getting into the detail, there is some jargon that needs to be cleared up. We will start with some explainers and one quick clarifier. The clarifier is this: Black Swan Capital are regulated financial planners and investment advisers, but we are not tax advisers. We advise that if you have any questions about how these changes impact you and your financial plans, you contact us, and for specific tax advice, you speak with an appropriately licensed tax professional who understands both Australia and the country where you live.

What is CGT?

CGT is short for capital gains tax. In Australia, individuals are taxed on their earned income, which is known as income tax, and are taxed on what is called realised capital gains. ‘Realised’ means when the asset is sold. The capital gain is the sale price less the purchase price. This is what is taxed.

For a simplified example, if you buy an asset, it could be a property or shares in a company, for $100 and sell it for $125, the gain is $25. You therefore pay capital gains tax on the $25. Many countries in the EU have a capital gains tax system, including France, Germany, Belgium, and Italy, whereas others like the Netherlands have a wealth tax, although they are considering a switch to a capital gains tax in the next couple of years, and Spain has both.

What is negative gearing?

Negative gearing is peculiarly Australian. You know when you become an expat and you realise things that you thought were completely normal back home, when seen through an international lens, suddenly seem quite unusual? Negative gearing is one of those. This is a tax break that has been around for a long time. In fact, it was introduced as a short-term measure in the Great Depression, and after being scaled back, it was re-released in 1987 and has been in place in Australia since.

Negative gearing means you can use an income loss from your investments as a tax deduction against income tax from your regular salaried income. It could be used with various assets, however, it has mostly been used on investment properties. It works as follows: you receive AUD$5,000 per month in rental income, you have costs of $6,000 and therefore a $1,000 monthly loss. You can offset this against your regular salaried income.

It has become desirable over time for some investors to seek this negative cash flow outcome, on the basis that they will reduce tax and get the capital gains in the longer term.

What are discretionary trusts?

Discretionary trusts also feature in the 2026 budget. Trusts come from English law and are popular in the UK, Australia, and the US, in different forms, but are not recognised and essentially do not work in this form in the Netherlands, Germany, France, and countries with a civil law basis.

A trust is an entity that owns an asset. Individuals like family members can be beneficiaries. This allows income to be distributed from the trust to a beneficiary, often by selecting the lowest income earner. In countries where there is estate or death tax, it can sidestep this as the assets remain in the trust when a person passes away and the assets can continue to benefit family members without triggering a change in ownership. There is no inheritance or estate tax in Australia.

Trusts are used effectively to manage farms, for example, that have been in families for generations, and by some corporates and small companies. They have also been used by some investors, effectively as a tool to minimise paying tax and to distribute income across family members, and that is why they are in the spotlight in the budget this year. More on that below.

What did the budget announce?

The main announcements will drown out many other details in the budget. The big news is a change to the taxes around investment property. The pitch is centred around intergenerational fairness.

The question everyone will be asking is: did it achieve this or not? That is for another discussion and we will focus here on the what and how it may impact you.

One of the anomalies of the Australian tax system, and the growing criticism, is that it has favoured residential real estate investors ahead of homeowners. This included items such as the fact that a property investor can claim a tax deduction for the interest on their mortgage, whereas a homeowner cannot. This is part of the negative gearing model. In addition, investors in property had received a 50% deduction on capital gains tax when selling an asset if they had held it for at least 12 months. This has made flipping properties a potentially more tax-effective way of building wealth and this has been suggested as one of the factors driving the steep rise in house prices in Australia over the last 25 years. Affordability, or the lack of it, has manifested as intergenerational tensions and that sense of lack of fairness. The government states its budget is a response to this.

Change one: the 50% capital gains tax reduction has been removed

With this change, when investors sell an asset such as an investment property, they can no longer claim a 50% deduction on the capital gains tax payable. There will be a minimum of 30% CGT payable for all capital gains. This will apply to share sales as well as investment properties, where the impact is expected to be greatest. However, this change is not applicable to current investment property holders, only to new investors. This is expected to reduce the attractiveness of residential real estate as an investment asset class for new investors.

Change two: negative gearing has been overhauled

Losses on property can no longer be transferred to other income. Again, there is an exception, which applies to new-build properties. Losses can still be used against income from an investment but can no longer be transferred to other sources of income. This is expected to further reduce the attractiveness of residential property as an investment asset class for all investors.

Change three: discretionary and family trusts will be taxed differently

The primary change for trusts is the introduction of a minimum 30% tax on income and realised capital returns generated by and within trusts. Trusts will be less tax-effective and can no longer hold gains and income without paying tax. Setting up a discretionary or family trust only for tax minimisation will be less effective.

Who will like it?

People looking to get into the property market and those who want their children and grandchildren to be able to go from renting to buying their first home will be supportive of this change to taxes around real estate.

Who will not like it?

Property investors will probably not like this. Existing investment property holders will continue to have the capital gains tax benefit, but it will impact the total return on their portfolio. Some may be considering selling and moving into other types of investments. New investors who are planning to build a portfolio of properties will not see this favourably and may reassess their strategies.

What does it mean for you?

For Australians living in Europe, the impact is not so great as the non-resident tax rules are more aligned to the new changes. There has not been a capital gains tax 50% deduction for non-resident Australians for many years.

The most direct impact for Aussies in Europe is on your long-term planning and how you manage Australian-based assets. It is a catalyst to reassess your total global assets in the context of your longer-term plans. Whether you are planning to return to Australia eventually, to remain in Europe, or retire elsewhere in the world, it is a good trigger to assess whether these assets still best serve you to achieve your goals.

It is a reminder of the importance of diversification when it comes to managing assets and constructing a portfolio of investments. We have discussed with many clients over many years that real estate, like shares and all other growth assets, has a risk profile. Values can go up and down. Importantly, it is also subject to changes to regulations and laws, as is the case this week. We recommend you don’t hold all your wealth in one asset class because this concentration increases your exposure to these risks.

For investors with an investment property portfolio in Australia, a detailed portfolio assessment will be important.

If you are unsure, or even if it merely raises some questions, contact us at Black Swan Capital and we can talk through the impacts of the changes and the options you have.