Federal Budget 2026/27

# Federal Budget 2026-27: What the Changes Mean for You, Your Family and Your Business *Published by Homemax Accounting | May 2026* The 2026-27 Federal Budget, handed down on 12 May 2026, contains some of the most significant tax reforms we've seen in years. From a complete overhaul of the capital gains tax (CGT) discount, to a new minimum tax on discretionary trusts, to a permanent $20,000 instant asset write-off, the changes will touch almost every individual, investor and business in Australia. In this guide, we've broken down the announcements that matter most to our clients and what you should be thinking about between now and when each measure starts. --- ## At a glance — the headline changes - The 50% CGT discount is being replaced with cost base indexation and a 30% minimum tax from 1 July 2027. - Negative gearing for established residential properties is being reformed from 1 July 2027 (with measures locked in from Budget night for new purchases). - Discretionary trusts will face a minimum 30% tax from 1 July 2028. - A new $250 Working Australians Tax Offset and a $1,000 standard deduction for work-related expenses are being introduced. - The $20,000 instant asset write-off becomes permanent, and loss carry-back returns for companies. - Fuel excise has been temporarily cut by around 32 cents per litre. Let's unpack each of these in more detail. --- ## 1. A fundamental rewrite of the CGT regime ### Goodbye 50% discount, hello indexation From 1 July 2027, the 50% CGT discount that has been a cornerstone of investment planning since 1999 will be replaced. In its place: - Cost base indexation will apply to assets held for more than 12 months. - A 30% minimum tax will apply to net capital gains. The new rules will apply to all assets held by individuals, trusts and partnerships, including pre-CGT assets. **The good news on transition:** the changes only apply to gains that accrue on or after 1 July 2027. Any gain that built up before that date will still get the existing 50% discount treatment, and pre-CGT gains accrued before 1 July 2027 remain exempt. **What this means for you:** - If you're sitting on assets with large unrealised gains, the period before 1 July 2027 takes on real planning significance. - Investors in new residential properties get a choice between the 50% discount or the new indexation-plus-minimum-tax model — modelling will be important to pick the right path. - Age Pension and other income-support recipients are exempt from the 30% minimum tax. - Assets sold before 1 July 2027 stay under the existing rules. ### Renewables concession for foreign investors There's also a time-limited CGT concession for foreign investors disposing of certain renewable energy infrastructure assets, running until 30 June 2030. --- ## 2. Negative gearing — major changes for property investors If you own or are considering an investment property, this is the section to read twice. From 1 July 2027, losses from established residential properties will only be deductible against: - Rental income, or - Capital gains from residential properties. Any excess losses will be carried forward and can be offset against future residential property income. ### The Budget-night cut-off The new rules apply to established residential properties acquired from **7:30 PM AEST on 12 May 2026**. If you already owned the property — or had a contract in place (even if not yet settled) before that time — you're grandfathered until you sell. ### What's exempt - Eligible new builds - Properties held in superannuation funds and widely held trusts - Build-to-rent developments - Private investors supporting government housing programs **Bottom line:** existing investors are protected, but the economics of buying an established rental property changed at 7:30 PM on Budget night. If you're weighing up a purchase, talk to us before you sign anything. --- ## 3. Discretionary trusts — a new 30% minimum tax This is the change that will reshape family-group structuring for many of our clients. From 1 July 2028 (the 2029 income year): - Trustees of discretionary trusts will pay a minimum 30% tax on the trust's taxable income. - Non-corporate beneficiaries receive non-refundable credits for tax paid by the trustee. - Corporate beneficiaries are assessed on their share of trust income but cannot claim credits for tax paid by the trustee. The minimum tax will not apply to fixed trusts, fixed testamentary trusts, complying super funds, special disability trusts, or deceased estates. Certain income types are also excluded, including primary production income, certain income relating to vulnerable minors, amounts subject to non-resident withholding, and income from assets of discretionary testamentary trusts in existence at announcement. ### A three-year window to restructure The Government has announced expanded rollover relief for three years from 1 July 2027 for small businesses and others wanting to restructure out of discretionary trusts into a company or fixed trust. **This is the most important takeaway:** if you run a family business or hold investments through a discretionary trust, the next two to three years are critical for reviewing your structure. Restructuring decisions made now will need to balance the rollover window with the new minimum tax that starts in 2029. --- ## 4. What's changing for individuals ### A new $250 Working Australians Tax Offset From the 2028 income year, a permanent $250 tax offset will apply to Australians earning income from work — salary, wages, and sole-trader business income. ### A $1,000 standard deduction for work-related expenses This is one of the most practical changes in the Budget. From the 2027 income year, taxpayers earning income from work will be able to claim a flat $1,000 deduction for work-related expenses without needing to itemise or substantiate the costs. If your actual expenses exceed $1,000, you can still claim the higher amount in the usual way. Donations, union fees and professional association membership fees can still be claimed separately on top of the standard deduction. For many wage and salary earners with modest deduction profiles, this will simplify tax time significantly. ### The legislated tax cuts roll on The previously legislated rate cuts continue: - The 16% rate drops to 15% from 1 July 2026. - The 15% rate drops to 14% from 1 July 2027. | Threshold | 2026 | 2027 | 2028 | |---|---|---|---| | $0 – $18,200 | Tax-free | Tax-free | Tax-free | | $18,201 – $45,000 | 16% | 15% | 14% | | $45,001 – $135,000 | 30% | 30% | 30% | | $135,001 – $190,000 | 37% | 37% | 37% | | $190,001+ | 45% | 45% | 45% | ### Medicare levy thresholds lifted From 1 July 2025, the Medicare levy low-income thresholds increase by 2.9%: - Singles: $28,011 (up from $27,222) - Families: $47,238 (up from $45,907) - Single seniors and pensioners: $44,268 (up from $43,020) - Family seniors and pensioners: $61,623 (up from $59,886) - Per dependent child or student: $4,338 (up from $4,216) ### Private Health Insurance Rebate — age uplift removed From 1 April 2027, the higher rebate percentage currently available to people aged 65 and over will be removed. Older policyholders should factor this into private health cover decisions over the next year. --- ## 5. What's changing for businesses ### $20,000 instant asset write-off — now permanent From 1 July 2026, small businesses with turnover under $10 million can permanently write off eligible assets costing less than $20,000. Assets at or above $20,000 continue to go into the small business depreciation pool, and the five-year lockout on re-entering the simplified depreciation regime remains suspended until 30 June 2027. ### Loss carry-back returns For tax years starting on or after 1 July 2026, companies with aggregated global turnover under $1 billion will once again be able to carry back a tax loss against tax paid up to two years earlier. The rules will apply to revenue losses only and will be capped by the franking account balance. ### Loss refundability for start-ups A genuinely new measure: from 1 July 2028, start-up companies with aggregated turnover under $10 million will be able to convert a tax loss in their first two years into a refundable tax offset, capped at the value of FBT and wage withholding tax paid in respect of Australian employees in the loss year. ### Dynamic PAYG instalments From 1 July 2027, small and medium businesses will be able to opt in to monthly PAYG instalments calculated by ATO-approved software in real time. The change is designed to better match instalments to actual trading conditions. Note that businesses with a history of non-compliance will be required to report and pay monthly. ### Fuel excise temporarily cut For three months from 1 April 2026, fuel excise has been cut by 60.9% — around 32 cents per litre for petrol and diesel. The road user charge for heavy vehicles has been temporarily reduced from 32.4 cents per litre to zero. ### R&D Tax Incentive reforms From 1 July 2028, the R&D Tax Incentive is being significantly recalibrated, including a 4.5 percentage point increase in core R&D offset rates, a reduction in the intensity threshold from 2% to 1.5%, an increase in the refundable offset turnover threshold from $20 million to $50 million, and a lift in the maximum R&D expenditure threshold from $150 million to $200 million. Eligibility for supporting R&D expenditure is being removed, and the minimum expenditure threshold rises from $20,000 to $50,000 (with smaller activities required to be undertaken through a registered Research Service Provider or CRC). ### Small Business Debt Helpline The Government has committed $8.2 million over three years to extend the Small Business Debt Helpline and the NewAccess for Small Business Owners mental health coaching program to 30 June 2027 — a welcome continuation for owners doing it tough. --- ## 6. Electric car FBT concession scaled back The generous FBT concession for electric vehicles is being trimmed. From 1 April 2029, a permanent 25% FBT discount will apply to electric cars valued up to the fuel-efficient luxury car tax threshold (delivered via a 15% rate in the statutory formula). Key transitional rules: - Existing eligible electric cars keep the FBT discount rate that was in place when their arrangement started. - Electric cars valued at or under $75,000 provided before 1 April 2029 continue to get the 100% FBT discount. - Electric cars valued above $75,000 (up to the luxury car threshold) provided between 1 April 2027 and 1 April 2029 get a 25% discount. If you're considering a novated lease or business EV purchase, timing now matters more than ever. --- ## 7. Other measures worth knowing about ### Foreign purchase ban extended The temporary ban on foreign purchases of established residential dwellings has been extended by two years and three months — through to 30 June 2029. ### Major investment in fraud protection The Government is investing $86.3 million over four years from 1 July 2026 to modernise fraud prevention in the tax and super systems. The ATO is gaining new powers to pause tax debt recovery for victims of fraud by tax intermediaries, recover debts from those intermediaries, and expand garnishee powers over jointly held assets used to frustrate recovery. Additional compliance activities will target fraud generally — including in the R&D tax incentive. ### Global minimum tax — OECD alignment Australia's global and domestic minimum tax legislation will be amended to implement the "side-by-side" package agreed by the OECD/G20 Inclusive Framework on 5 January 2026. --- ## What you should be doing now There's a lot in this Budget, but a handful of issues stand out as urgent: - **Property investors:** the 7:30 PM 12 May 2026 cut-off for negative gearing changes means any new established-property purchase decisions need careful consideration *before* signing. - **Family groups using discretionary trusts:** start the restructure conversation now. The three-year rollover window from 1 July 2027 is generous, but planning takes time. - **Investors with large unrealised gains:** model whether realising before 1 July 2027 (and locking in the 50% discount) is the right move — it won't be for everyone. - **Small business owners:** confirm your asset purchase timing to take full advantage of the now-permanent $20,000 instant asset write-off, and review whether loss carry-back could free up cashflow. - **EV buyers:** if a business EV is on the cards, the next 12 months offer the most generous FBT treatment we're likely to see. --- ## Let's talk Every client's situation is different, and the changes in this Budget interact in ways that aren't always obvious on a first read. If you'd like to walk through what the announcements mean for your circumstances — your business, your investment portfolio, your family group structure — get in touch with the team at Homemax Accounting and we'll book a time to work through it together. --- *This article summarises measures announced in the 2026-27 Federal Budget on 12 May 2026, based on the NTAA Budget Summary. Measures discussed are announcements and, in most cases, are not yet law. The information here is general in nature and does not constitute personal advice. Please contact Homemax Accounting before acting on any of the matters discussed.*