Federal Budget 2026-27 Summary

Treasurer Jim Chalmers delivered the 2026–27 Federal Budget on 12 May 2026.

The changes that have been introduced in the Budget are among the most consequential for taxpayers in over a decade. They are far reaching and if passed will require all our clients to review their affairs.

We know Budget changes like these can feel unsettling – especially for families, investors and business owners who have planned for years under the previous rules. The 2026–27 Federal Budget introduces significant structural tax reform alongside cost‑of‑living measures, and many clients will understandably have questions about what this means for them. Naturally, the devil remains in the detail, and the legislation is yet to be introduced and passed by both the Upper & Lower Houses of Parliament.

Our priority is to stand alongside you: to cut through the noise, keep you grounded in what is (and isn’t) changing, and help you make practical decisions. Below is a clear summary of the key measures most relevant to our clients — and where we think early planning will matter most.

Income Tax Relief

Several previously announced measures have now been confirmed and will take effect over the coming years.

• Personal income tax rates will reduce for lower income earners, with the 16% rate dropping to 15% from 1 July 2026 and further to 14% from 1 July 2027.
• A $1,000 instant tax deduction will be available from the 2026-27 income year, allowing employees and sole traders to claim work-related expenses without receipts.
• A new $250 annual tax offset (from 2027-28) will apply to over 13 million workers.
• Medicare levy thresholds have been increased by 2.9% (backdated to 1 July 2025).

Superannuation

No new super contribution caps were announced. The previous legislated Division 296 tax will commence from 1 July 2026 as scheduled. An additional 15% tax (total 30%) applies to earning on superannuation balances above $3 million.

Capital Gains Tax (CGT) Reform – from 1 July 2027

This is a major reform and we understand it may feel frustrating for long‑term investors. The good news is there is time to plan, and transitional rules are intended to protect gains accrued before the start date.

• The existing 50% CGT discount for individuals, trusts and partnerships will be replaced with a system that indexes the cost base of an asset for inflation.
• A minimum 30% tax rate will apply to net capital gains accruing from 1 July 2027 (and will generally not affect taxpayers already taxed at rates of at least 30%).
• Transitional rules will apply with gains accrued prior to 1 July 2027 retaining access to the existing 50% discount.
• Gains accrued prior to 1 July 2027 will continue to be taxed under the existing rules, with the new rules applying only to gains accruing from that date (with no tax payable until the asset is sold).
• Investors in new residential property may have the option to apply either the existing CGT discount or the new indexed approach.

Importantly:

• The main residence exemption remains unchanged.
• The small business CGT concessions remain available for eligible taxpayers.
• These changes will also bring previously exempt pre-1985 CGT assets within the CGT regime for gains accruing from 1 July 2027.
• These changes are proposed to apply to individuals, trusts and partnerships, and do not apply to superannuation funds (including SMSFs).

Negative Gearing Reform – from 1 July 2027

Property investors have understandably been concerned about this announcement. The key point is that existing arrangements are protected, and there is a transition period to plan any future purchases.

• All existing investment properties acquired (or under contract) before 7:30pm (AEST) on 12 May 2026 will be fully grandfathered, meaning there are no changes to current tax treatment.
• For new purchases of established residential properties, the ability to offset rental losses against salary and other income will be removed from 1 July 2027.
• Instead, losses on these properties will generally only be able to be offset against other rental income or capital gains from residential properties (with the ability to carry forward unused losses).
• New residential builds will continue to qualify for full negative gearing benefits against all forms of income.

Transitional rules will also apply to properties acquired between 12 May 2026 and 30 June 2027, which may allow continued access to existing negative gearing rules until 30 June 2027 however, these arrangements are expected to be complex and will require careful consideration before proceeding with any purchase.

These changes primarily impact individuals and private investment structures, with exclusions for certain widely held entities and superannuation funds (including SMSFs), and targeted exemptions for build-to-rent and some government housing programs.

Existing investors are protected under grandfathering provisions.

Clients considering the purchase or restructure of property investments should review their position carefully, particularly where acquisitions are planned before or after 1 July 2027.

Discretionary Trust Changes (from 1 July 2028)

We appreciate that many families and business owners rely on trusts for flexibility. These proposed changes are significant, but there is a clear restructuring window and we can help you map the best path forward.

• A new 30% minimum tax will apply to income distributed from discretionary trusts.
• This effectively limits the ability to distribute income to lower-tax-rate beneficiaries as a means of reducing overall tax.
• The tax is expected to be applied at the trustee level, with beneficiaries receiving a credit for tax already paid (in certain cases).

A 3‑year restructuring window is proposed (1 July 2027 to 30 June 2030) to allow affected taxpayers to transition to alternative structures, with rollover relief expected to apply.

Further detail is expected as legislation is released – and the practical outcomes will depend heavily on those final rules.

In practical terms, this reform is likely to increase the effective tax rate on trust‑distributed income, reduce planning flexibility, and prompt many clients to review their structures.

Further detail on the application of these rules is expected as legislation is released.

Business Tax Measures

There are some helpful measures here, particularly around small business investment and cash flow.

• The $20,000 instant asset write‑off will be made permanent for businesses with turnover under $10 million. This allows immediate deduction of eligible assets (on a per asset basis) rather than depreciation over time. This will provide certainty for capital expenditure planning after years of temporary extensions.
• Eligibility will be limited to companies with aggregated turnover below $1 billion (loss carry-back) and $10 million (start-up loss refundability), subject to conditions including franking account balances. Companies can offset current year losses against profits from the previous two years, generating a refund of tax already paid.
• Additional support for start-ups, R&D, and venture capital include the ability for some early-stage businesses to access earlier cashflow support from losses. Changes to the R&D and venture capital regimes are aimed at encouraging innovation and investment in growth businesses, including increased offset rates, revised eligibility criteria and higher expenditure thresholds.
• Eligible businesses will be able to opt to report and pay PAYG instalments monthly from 1 July 2027.

Electric Vehicles (Fringe Benefits Tax)

Changes have been announced to the current tax treatment of employer-provided electric vehicles (EVs).

• The existing 100% FBT exemption for eligible electric vehicles will be retained for vehicles provided before 1 April 2029 and valued up to $75,000.
• From 1 April 2029, this concession will transition to a permanent 25% FBT discount.

Cost of Living Measures

A $2 billion Local Infrastructure Fund will be introduced to support essential infrastructure for new housing developments.

The funding is expected to support the delivery of up to 65,000 additional homes over time. Additional funding has also been allocated to streamline planning and approval processes for new developments. While the direct impact for most clients will be limited, these changes form part of the Government’s broader strategy to address housing constraints and will have flow‑on effects for property markets and investment decisions over time.

While the direct impact for most clients will be limited, these changes form part of the Government’s broader strategy to address housing constraints and will have flow‑on effects for property markets and investment decisions over time.

If you’re feeling uneasy about what this means for you, that’s completely reasonable. The key is not to make rushed decisions based on headlines.

Please reach out so we can map the impact on your specific circumstances and put a plan in place well before the start dates – whether that’s reviewing property plans, modelling CGT outcomes, or reassessing trust structures.

The Federal Government Budget papers can be found here: Budget documents | Budget 2026-27

Should you have any questions or need any help ensuring you receive all available assistance, please reach out to our team and we will be happy to assist.

The team at Rose Partners