Chalmers delivers details on defence, security funding under 2026 Federal Budget

Supporting the strategy, the 2026 Integrated Investment Program includes major long-term spending commitments across maritime, autonomous and industrial capability projects. This includes up to $130 billion for enhanced undersea warfare capabilities tied to the AUKUS nuclear-powered submarine pathway, up to $77 billion to deliver the enhanced surface combatant fleet, up to $15 billion for autonomous and uncrewed systems such as drones and the Ghost Bat program, and an initial $12 billion to establish the Henderson Defence Precinct in Western Australia as a major shipbuilding and sustainment hub.

“We’re investing an additional $53 billion over the next decade in our defence force to keep Australians and our region safe,” Chalmers said during his Budget speech earlier this week.

“We’re also taking action to strengthen our national security and national unity since the devastating antisemitic terror attack at Bondi Beach.

“We’re adopting every recommendation from the Royal Commission on Antisemitism and Social Cohesion’s Interim Report and fast-tracking tougher gun laws through the National Cabinet.

“There is $600 million for a new Counter-Terrorism Online Centre, grants to support affected communities and money for our law enforcement agencies to crack down on the hate speech, violent extremism and terrorism which has no place in Australia.”

Total funding across the Defence portfolio is projected to reach $887 billion to 2035-36, including allocations for the Australian Signals Directorate, the Australian Submarine Agency and the Australian Naval Nuclear Power Regulator. Of this, $425 billion over the decade will be directed toward delivering accelerated capability.

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The Government has also identified around $5 billion over the forward estimates and $15 billion over the decade in projects for which Defence will explore alternative financing options with private sector participation. These projects include developments across the Defence estate, the Henderson Defence Precinct and the Guided Weapons and Explosive Ordnance enterprise.

In response to the Royal Commission into Defence and Veteran Suicide, more than $770 million in additional funding has been allocated to implement recommendations aimed at improving veteran wellbeing and support services. This includes $169.7 million over five years to increase fees for allied health providers from 1 July 2027.

The Budget also provides $29.8 million to establish a National Veterans’ Data Asset and $16.6 million for the Defence and Veterans’ Service Commission to conduct an independent Inquiry into Military Sexual Violence in the Australian Defence Force from mid-2026. Budget documents further outline plans to establish a new Defence Delivery Agency from 1 July next year.

“The decision to replace the 50 percent CGT discount with an inflation-indexed model, while framed as restoring fairness, risks a significant disincentive effect on private capital formation,” according to Beaten Zone Venture Partners founder and chief executive officer Steve Baxter.

“Australia competes globally for mobile capital and mobile capital is, by definition, mobile. When comparable jurisdictions offer more favourable treatment of long-term investment gains, we should expect capital to follow. This is not a theoretical concern; it is basic portfolio behaviour.

“The indexation model also exposes a fundamental misunderstanding of how early-stage companies are built. When a founder or investor backs a startup, the capital base at inception is effectively zero. These companies begin with little to no hard assets, no revenue, and no balance sheet to speak of. The entire value creation journey happens over years, sometimes a decade or more, before any liquidity event. Applying an inflation-indexed cost base across that holding period dramatically understates the real return that investors require to justify the risk they took on day one. You are taxing the journey, not just the destination.

“The same problem cascades down to the people who actually build these companies. Startup employees routinely accept below-market salaries in exchange for equity issued at very low early-stage valuations, often cents on the dollar compared to what that equity might be worth at exit. That trade-off is the lifeblood of the startup ecosystem. It is how founders attract talent they otherwise cannot afford to pay. If the gains on that equity are to be indexed from the date of issue, the financial logic of accepting equity in lieu of wages collapses. You are effectively penalising the engineer, the salesperson, the operator, who backed themselves and backed their company. 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.

“The VC tax incentive expansion is welcome, but it does not offset the broader signal this sends to investors about Australia's appetite for private risk capital. If we want a sovereign capability in deep tech and defence technology, we need a tax system that rewards the people willing to back companies when they are worth nothing.”

Some early criticism from the budget also includes the introduction of an Annual Monetary Limit for veterans’ allied health services.

Robert Dougherty

Robert is a senior journalist who has previously worked for Seven West Media in Western Australia, as well as Fairfax Media and Australian Community Media in New South Wales. He has produced national headlines, photography and videography of emergency services, business, community, defence and government news across Australia. Robert graduated with a Bachelor of Arts, Majoring in Public Relations and Journalism at Curtin University, attended student exchange program with Fudan University and holds Tier 1 General Advice certification for Kaplan Professional. Reach out via email at This email address is being protected from spambots. You need JavaScript enabled to view it. or via LinkedIn.