Federal Budget 2026–27: What It Means for You

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The 2026–27 Federal Budget represents one of the most significant structural tax reform packages in over two decades. For business owners and high net-wealth individuals, the Budget introduces major changes to investment taxation, discretionary trusts and business structures, while maintaining targeted support for SMEs. The reforms are staged over several years, creating a critical planning window.

While these reforms give rise to various planning considerations for many businesses and family groups, it is important to remember that these measures will need to pass Parliament before becoming law. We will continue to monitor developments closely and provide updates as further detail emerges.

Below is a summary of the key changes and what they may mean for you.

Support for Small Business

Instant Asset Write-Off

• $20,000 threshold made permanent from 1 July 2026 for Small Business Entities (SBEs) with an aggregated turnover of $10m or less.

Tax Loss Relief

• Companies can carry back losses for up to 2 years from 1 July 2026 (2027 financial year) onwards.

• Startups can receive cash refunds on early losses (from 2029 financial year).

PAYG Improvements

• Optional monthly PAYG instalments based on real-time data (from 2028 financial year).

R&D Incentives

• Increased support and expanded eligibility from 2029 financial year.

What this means:

Improved cash flow, stronger support for startups, and incentives for innovation.

Electric Vehicle (EV) Tax Changes

• Current FBT exemption will scale back following the 2027 FBT return year (from 1 April 2027).
• From 1 April 2029, EVs receive a 25% FBT discount instead.
• Transitional concessions still apply for earlier purchases.

What this means:

EV tax benefits remain, but will be less generous over time.

Major Shift in Capital Gains Tax (CGT)

From 1 July 2027, the CGT regime will be overhauled:

• The 50% CGT discount will be replaced with an inflation based indexation of cost base.

• A minimum 30% capital gains tax rate will apply to capital gains that accrue from 1 July 2027.

• Changes will apply to all CGT assets, including pre-1985 CGT assets (capital gains will begin accruing for Pre-CGT assets from 1 July 2027, but any gains up to this date will remain exempt from tax).

• Existing investments are protected by transitional rules—the current discount will still apply to gains accrued before this date.

• Taxpayers will need to consider obtaining valuations in relation to capital assets which are subject to transitional rules, in order to minimise and understand their capital gains tax position.

What this means:

Long-term investors may face higher tax on future gains, particularly for high-growth assets.

Property investors:

Buyers of new residential property can choose between the current discount or the new regime.

Negative Gearing Changes

From 1 July 2027, negative gearing will be restricted:

• Losses on existing residential properties purchased after 12 May 2026 can only offset:

  • rental income, or

  • future property gains.

• Excess losses will be carried forward.

Exemptions include:

• Existing investments (grandfathered).

• New residential builds (conditions apply).

• Super funds and certain large-scale housing investments

• Negative gearing in relation to other asset classes including commercial property and share investments are not affected by the proposed rule changes.

What this means:

Tax benefits for property investors will reduce—particularly for established properties.

Minimum Tax on Discretionary Trusts

From 1 July 2028, discretionary trusts will face:

• A minimum 30% tax on trust income.

• Limited ability to stream income to low-tax beneficiaries.

Additional changes:

• Corporate beneficiaries taxed separately (no credits).

• 3-year rollover relief offered from the 2027 financial year to restructure into companies or fixed trusts.

What this means:

Trust structures may become less tax-effective, making restructuring considerations important.

Tax Relief for Individuals

New Benefits

• $250 Working Australians Tax Offset from 1 July 2027.

• $1,000 standard deduction (no receipts required) from 1 July 2026.

Tax Cuts (already legislated)

• Income tax rate reduces:

  • From 16% → 15% (2027 financial year)

  • Then to 14% (2028 financial year)

Other Updates

• Higher Medicare levy thresholds

• Reduced Private Health Insurance rebate for older Australians from 1 April 2027.

What this means:

Modest tax relief and simplified deductions for salary earners.

Other Key Measures

• Foreign buyers ban on established homes extended to 30 June 2029.

• Fuel excise cut (temporary relief in 2026 financial year).

• Increased ATO compliance and anti-fraud activity.

• Updates to global minimum tax rules for large multinationals.

If you would like further information on how these proposals may relate to your personal circumstances, please get in touch with our friendly team.