Pre-budget preview — 12 May 2026
Jim Chalmers hands down the 2026–27 federal budget at 7:30 tonight, and after a couple of weeks of pre-budget signalling (the customary leaks) we’ve got a reasonable idea of where it’s heading. Housing is the marquee theme, which matters for the energy and infrastructure sector because it tells you where the new money is most likely to land, and where the sector will probably be asked to deliver.
Here’s a quick read on what looks locked in, what’s still up in the air, and what to flick to first when the papers drop.
What we already know is in
The headline infrastructure number is a new $2 billion Local Infrastructure Fund over four years, directed to local councils and state utility providers to pay for the roads, water, power and sewerage that have to be in place before housing can follow. The government estimates it will enable around 65,000 extra homes over the next decade, with $500 million reserved for regional projects.
Alongside that, expect $500 million to streamline environmental approvals. It’s framed as a housing measure, but if it genuinely shifts EPBC timelines it should flow through to grid, transmission and renewables projects as well.
On the cost-of-living side, look for another tranche of quarterly energy bill rebates worth around $1.8 billion. Politically defensive, useful for households, and a measure that also helps soften the headline inflation print in the short term.
And on workforce, around $627 million over four years is expected to reframe the New Energy Apprenticeships Program and broaden it to cover residential construction trades — a deliberate bridge between the energy-transition and housing narratives.
On rail, the Prime Minister has already confirmed an additional $3.8 billion for Melbourne’s Suburban Rail Loop East, taking the Commonwealth contribution to about $6 billion. That’s on top of the earlier $2.2 billion for land acquisition and early works, with tunnelling expected to begin before year-end. Notably, it falls short of the one-third share Victoria had been pushing for on the project’s $34.5 billion total cost – so expect ongoing pressure for further top-ups in later budgets.
On EVs, the Treasurer pre-announced on 4 May a phased wind-back of the FBT exemption for electric vehicles. The full exemption holds until 31 March 2027; from 1 April 2027 it applies only to EVs valued at $75,000 or below, with a 25% FBT discount for higher-value EVs under the fuel-efficient luxury car tax threshold; and from 1 April 2029 the exemption is replaced by a permanent 25% discount. Existing leases are grandfathered. The change is estimated to save the Budget around $1.7 billion over five years and is likely to compress demand for higher-end novated leases over the next 11 months.
Where there’s still uncertainty
The biggest wildcard is fuel security. Pre-budget reporting has flagged a possible multi-billion-dollar package, with one preview suggesting up to $20 billion over five years to lift onshore liquid fuel reserves toward the IEA’s 90-day benchmark and potentially shore up domestic refining capacity. If anything near that scale lands tonight, it would be the largest energy-related line in the budget and a meaningful signal on how the government is pricing energy-security risk.
The renewables story is more ambiguous. The Sydney Morning Herald has reported the budget will contain no new money for renewable energy projects, which would be a notable inflection point after three years of steady increases. It doesn’t mean the pipeline stops: the Capacity Investment Scheme, Rewiring the Nation, Hydrogen Headstart, the hydrogen and critical minerals production tax incentives, Solar Sunshot and Battery Breakthrough are all multi-year envelopes already legislated. But no fresh top-ups would mean the sector has to deliver within existing settings rather than counting on new federal underwriting.
On the EV side, with the FBT change now answered, the open question is the road-user charge. Transport Minister Catherine King has said the government doesn’t want to disincentivise EV uptake with a new tax while also confirming the charge is being modelled. Whether anything lands tonight — and whether it’s paired with any purchase-side incentive — will reset the medium-term outlook for EV total cost of ownership and for fuel-excise revenue forecasts.
Tax: CGT discount reform and the super angle
The most significant pre-budget signal outside energy and infrastructure is the flagged wind-back of the 50% capital gains tax discount. Reporting points to assets purchased after budget night being subject to a return to the pre-1999 inflation indexation model from 1 July 2027, with the 50% discount preserved for assets bought under current rules. Chalmers has framed the change in terms of intergenerational fairness and rebalancing housing toward owner-occupiers, and it is expected to be paired with changes to negative gearing.
For investors, the practical effect is that long-dated capital gains on new investments – particularly in lower-inflation environments – would be taxed more heavily than under the current discount, while gains that just keep pace with inflation would attract little or no tax. Property and listed equity investors are most exposed; the one-year reprieve to 1 July 2027 creates an obvious window for repositioning.
For super funds, the position is more nuanced. On current signalling, the existing CGT treatment inside super is not expected to change, and assets already held inside super are not in scope. That widens the existing tax differential between investing inside and outside super, and several commentators have suggested the reform could push more capital into superannuation over time. Two second-order points are worth flagging for super investors and trustees: any interaction with the already-legislated Division 296 tax on balances over $3 million, and the potential for asset reallocation within funds if the relative attractiveness of long-duration capital assets shifts. Detail on transitional arrangements, definitions of what counts as a “new” acquisition, and any anti-avoidance provisions will matter as much as the headline.
What to look out for
When the papers drop, these are the lines worth turning to first:
- Capacity Investment Scheme: any auction expansion, contract-for-difference parameter changes, or new tender windows. Silence is itself a signal.
- Rewiring the Nation: top-ups to the $20 billion envelope, new project allocations, or movement on CEFC concessional finance terms.
- Fuel security: the scale of the package, the structure (strategic reserve vs. refining subsidy), and the contingent-liability footnote in Statement 8.
- Energy bill relief: the dollar amount per household, the duration, and whether it is means-tested.
- EV road-user charge: any timing, rate or modelling reference; offsetting EV purchase incentives.
- Future Made in Australia: incremental funding for hydrogen, critical minerals, green metals or low-carbon liquid fuels, and any changes to the production tax credits.
- Climate and disaster: the scale of the Disaster Ready Fund and any new provisions for intervention in the climate-affected insurance market.
- Infrastructure pipeline: revisions to the 10-year investment program, project deferrals, anything new on freight or corridors, and Inland Rail given the Coalition’s ‘Rescue our Rail’ campaign over the cuts.
- Suburban Rail Loop: any conditions or milestones attached to the new $3.8 billion, and signalling on whether further Commonwealth top-ups are off the table.
- CGT discount and negative gearing: the precise start date, grandfathering rules, treatment inside super, and any interaction with Division 296. Detail will matter as much as the headline.
- Environmental approvals: what the $500 million actually buys — more EPBC assessors, a one-stop-shop, accelerated bilateral agreements with the states.
- Treasury assumptions: the forecast track for retail electricity, gas and CPI in Statement 2 will frame the rest of the narrative.
Bottom line
This is shaping up as a budget that doubles down on housing-enabling infrastructure and short-term bill relief, leans on previously-announced clean-energy envelopes to do the heavy lifting on the transition, and – if the leaks are right – introduces a substantial new line on fuel security. The CGT and FBT changes shift the tax landscape for investors and EV buyers without directly touching the existing settings inside super. For energy and infrastructure investors, the signal to read tonight is less about new headline numbers and more about cross-sector linkages, and the pace and political durability of the existing policy stack. Watch the small print, not just the speech.
Sources: The Guardian, Capital Brief, SBS News, Westpac IQ, the Commonwealth Bank pre-budget note, Corrs Chambers Westgarth, KPMG, Deloitte, The Sydney Morning Herald, The Conversation, Mortgage Professional Australia, Super Review, PwC, the Prime Minister’s and Treasurer’s pre-budget remarks.
