Issue #18 | Budget 2026: The Week That Shook Australia

ASX - Top 3 Winners & Losers
Deals Down Under - Founders Left Behind
Global Markets - Chalmer’s Middle East Bet
Other News - Aussie Politics, Sport and Culture

The ASX200 fell 1.3% for the week, enduring pressure from the Federal Budget and the ongoing Middle East conflict. Friday was meant to finish the week strongly with Wall Street posting record highs the night prior driven by an AI/Tech rally. Instead, the ASX slipped 0.1% as the mining sector sold off sharply. 

This year’s Federal Budget has caused divided opinions, already looming large over the ASX’s near-term outlook. Changes to the 50% CGT discount replaced by an indexation model is expected to affect investor sentiment in the market, particularly among investors who have long relied on the discount as part of their investing approach. Coupled with three RBA rate hikes already this year — and more expected — the future isn’t looking bright for Australian shares.

This week’s best performers

4DMedical (ASX:4DX) +29.91%

4DMedical bounced back after weeks of volatile trading, with investors buying back into the lung-imaging technology company on the back of its recent commercial and regulatory wins. The move was driven purely by sentiment — no material news has dropped since late March when the company announced EU certification to commence commercial operations in Europe.

Macmahon Holdings Limited (ASX:MAH) +11.61%

The Perth-based mining services contractor rode a broad rally in the resources sector, with Materials up nearly 2% and the Metals and Mining industry gaining over 2% on Wednesday. As investors rotated out of financials, capital flowed into resources and closely aligned service companies like Macmahon. Up nearly 200% over the past year, it has been one of the ASX’s quieter success stories of 2026.  

Develop Global Limited (ASX:DVP) +12.71%

Half-year results sent Dyno Nobel to a three-year high, with the commercial explosives maker reporting an 83% increase in net profit while also reaffirming its full-year earnings guidance. North American operations were a standout, delivering 42% EBIT growth compared to last year’s numbers, along with strong customer success in Canada, Western Australia and Ghana rounding out a compelling half-year results presentation.

This week’s worst performers

Elevra Lithium Limited (ASX:ELV) -18.50%

Elevra raised $275m to fully fund the expansion of their North American Lithium mine in Quebec, funding it through an institutional placement at $12.20 per share, lower than its pre-raise price at $13.74. When companies raise capital like this, existing shareholders are diluted, typically dropping the share price towards the placement price. Despite dilution, the placement has created promising signs for Elevra’s Quebec project and a strong result for long-term holders.

CSL Limited (ASX:CSL) -18.28%

CSL had one of its worst weeks ever. The $45bn+ blue-chip biotechnology company fell nearly 20% on Monday after interim CEO Gordon Naylor cut full-year guidance and reported US$5bn in non-cash impairments mostly related to their failed bet on their 2021 Vifor acquisition. With revenue and profit both down, a CEO search still ongoing and a failed acquisition, investor confidence has been severely damaged. CSL is now down 43% for the year.

Commonwealth Bank of Aus. (ASX:CBA) -9.39%

While only being the 7th worst performer this week on the ASX, CBA lost a staggering $30bn off its value this week after quarterly profit came in slightly below expectations. The bank also set aside a $200m increase in provisions to account for Middle East conflict risks - a signal to investors that CBA is bracing for the current and future macro environment. After the Federal Budget dropped on Tuesday night, CBA dropped 10.4% on Wednesday, with investors also fearing changes to negative gearing and CGT could decrease investment property demand and slow mortgage credit growth, which is a core aspect of CBA’s operations.

Australia's 2026 federal budget is being called the most significant transformation of Australia's tax system in more than a quarter of a century. Here's what actually changed, and why the startup world is worried.

What changed

Previously, if you sold an asset — shares, a business, an investment property — after holding it for more than a year, you only paid tax on half the profit. From July 2027, that's gone. Instead, gains are adjusted for inflation, and a minimum 30% tax applies to whatever profit remains. Negative gearing on existing properties is also restricted, and trusts face a new 30% minimum tax from 2028.

Why start-ups get hit hardest

When you build a company from scratch, your shares are essentially worth nothing on day one. There's no cost base to index against, which means that under the new rules, almost the entire exit gain becomes taxable, compared to half before. A founder who spends ten years building a business, taking a below-market salary and backing themselves through uncertainty, now hands over significantly more at the finish line.

That changes the fundamental question: is it worth it?

It's not just founders. Joining an early-stage startup typically means trading a higher salary for equity, taking a bet on future upside. As Steve Baxter founder and CEO of Beaten Zone Venture Partners put it: "If the financial logic of accepting equity in lieu of wages collapses, the result is fewer talented people willing to take that bet, and more startups that simply cannot compete for the talent they need to grow."

CPA Australia's tax lead Jenny Wong called the changes a "minimum tax on aspiration", warning it sends a clear message to anyone thinking about building something: the government takes at least 30%, regardless of the risk you took to get there. Fat Zebra co-founder Pred Dragila put it more bluntly: "The 2026-27 budget is telling current and future founders that Australia is closed to ambition and innovation."

The bigger picture

While governments globally are competing to attract founders and venture capital through startup-friendly incentives, Australia is moving toward tighter taxation of capital gains. More innovation will go elsewhere, and the consequences will be felt hard in the long term through the companies not built, the jobs not created, and the technology not developed here.

Jim Chalmer’s "ambitious" budget carried an uncomfortable assumption buried in its forecasts, predicting that oil prices will stay where they are, or fall. The Treasury modelled an escalation scenario, where oil prices would reach $200 per barrel by the end of the year and only fall to $80 per barrel by 2029. But the government’s base case assumes the conflict will gradually resolve from mid-2026. 

Simply, the Treasurer is effectively betting that conflict in the Middle East doesn’t get worse. 

The Budget forecasts assume that inflation will return to its target of 2-3% but there is a clear worst-case scenario that will seriously impact Australians. If the conflict escalates further, their modelling suggests that inflation reaches above 7% and unemployment 5% - levels we have not seen since COVID. Collectively these figures would force the RBA to hike rates further, adding more pressure to mortgage holders and pushing Australia’s economy near a recession. 

Despite modelling this nightmare scenario, the government didn’t meaningfully restrain its spending. In 2026-27, the deficit is expected to widen, with new policy decisions adding a net $6.5bn in spending. Economists viewed this budget as “neutral-to-mildly expansionary”, reflecting that the government is set to spend more than they receive. Clearly, this stance will do little to help the RBA’s battle against inflation and only opens the door to further rate hikes.

Hopefully the base case holds. But the budget is depending on the decisions made between Iran and the US, which has been anything but predictable so far.

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