Federal Budget 2026-27: What the Announcements May Mean for You

The Treasurer delivered the 2026-27 Federal Budget on Tuesday 12 May 2026. The Budget includes cost-of-living measures, personal tax changes, property and investment tax proposals, small business cash-flow measures and broader productivity reforms.

At this stage, the most important point is timing. Some measures do not start until 2026-27, 2027-28 or 2028-29. Others require legislation before they become law. The practical details, eligibility rules, transitional arrangements and ATO administration may change as legislation passes through Parliament.

Our approach is to keep clients informed without alarm. For most clients, the immediate action is to be aware, keep good records and seek advice before making major transactions or restructuring decisions.

Snapshot of Major Announcements

Area	Announcement	Indicative Timing / Status
Personal tax	Further rate cuts and a new Working Australians Tax Offset (WATO).	Rate cuts from 1 July 2026 and 1 July 2027; WATO from 2027-28.
Work-related deductions	$1,000 instant tax deduction proposed for eligible workers.	From 2026-27, subject to passage of legislation.
CGT	Proposal to replace the 50% CGT discount with inflation-based discounting and a 30% minimum tax on gains.	From 1 July 2027, applying to gains arising after that date.
Negative gearing	Proposal to limit negative gearing for established residential property acquired after Budget night.	From 1 July 2027; existing pre-Budget night holdings unchanged.
Small business	Permanent $20,000 instant asset write-off for businesses with turnover up to $10 million.	From 1 July 2026.
Companies	Loss carry back for eligible companies; start-up loss refundability.	Loss carry back from 2026-27; start-up refundability from 2028-29.
Discretionary trusts	Minimum 30% tax proposed, with exceptions and a restructure window.	From 1 July 2028; rollover relief from 1 July 2027 for three years.

Individuals and Families

Personal Income Tax Cuts

From 1 July 2026, the 16% rate applying to taxable income between $18,201 and $45,000 is proposed to reduce to 15%.
From 1 July 2027, that rate is proposed to reduce again to 14%.
The Government says the changes provide tax cuts of up to $268 from 1 July 2026 and up to $536 each year from 1 July 2027, compared with 2024-25 settings.

Working Australians Tax Offset (WATO)

A new annual tax offset of up to $250 is announced from the 2027-28 income year.
The Government expects over 13 million Australian workers to benefit, with most receiving the full offset.
As an offset, it reduces tax payable rather than increasing deductions. Further detail is expected in legislation.

$1,000 Instant Tax Deduction for Workers

The proposal would allow workers to reduce taxable income from work by up to $1,000 without retaining receipts for those expenses.
Workers with more than $1,000 of work-related deductions would still be able to claim under the usual substantiation rules.
The proposal is subject to legislation and is expected to apply from the 2026-27 income year, with benefits first seen when 2026-27 returns are lodged.

Client note: continue keeping normal records for 2025-26 and for any deductions above $1,000. Do not assume the new deduction applies until the law is enacted and guidance is issued.

Property Investors and CGT

Capital Gains Tax

The Government has announced it will replace the 50% CGT discount with a discount based on inflation and introduce a minimum 30% tax on gains from 1 July 2027.
The Government states the reforms will apply only to gains arising after 1 July 2027.
Investors in new builds are expected to be able to choose between the existing 50% CGT discount and the new arrangements.

Negative Gearing

The Government has announced it will limit negative gearing to new builds from 1 July 2027.
Existing arrangements remain unchanged for properties held before Budget night.
For established housing bought after Budget night, losses are expected to be deductible against residential property income, with unused losses carried forward rather than offset against salary or other income.

Client note: property decisions should not be rushed. Transitional rules, definitions of new builds and interaction with CGT rules will be critical. Seek advice before buying, selling, refinancing or restructuring.

Small Business and Companies

$20,000 Instant Asset write-off

The Government has announced the $20,000 instant asset write-off will be made permanent from 1 July 2026.
It is expected to apply to small businesses with turnover up to $10 million and eligible assets costing less than $20,000.
The measure may improve cash flow, but assets must still be genuinely used or installed ready for use in the relevant period and meet eligibility requirements.

Loss Carry Back and Start-up Loss Refundability

From 2026-27, eligible companies that make a loss are expected to be able to use that loss to obtain a refund against tax paid in the prior two income years.
From 2028-29, small start-ups in their first two years of operation may be able to receive refunds for tax losses, capped by FBT and withholding tax paid on employee wages.
These measures may assist cash flow, but detailed eligibility rules will matter.

PAYG Instalments and Red Tape

Businesses may be able to opt in to monthly PAYG instalments from 1 July 2027.
The Government also plans to expand use of ATO-approved software and continue payroll tax administration reform work with states.

Trusts and Business Structures

A significant announcement is the proposed introduction of a minimum 30% tax on discretionary trusts from 1 July 2028, with some exceptions. The Budget also refers to three years of rollover relief from 1 July 2027 to assist small businesses and others that wish to restructure.

Do not restructure solely because of headlines.
Review trust deeds, beneficiaries, business assets and succession plans before any changes.
Wait for draft legislation and professional advice, particularly where CGT, duty, asset protection or family succession issues are involved.

Other Measures to Watch

Fuel excise relief: a three-month reduction from 1 April 2026 was announced, reducing petrol and diesel excise from 52.6 cents to 20.6 cents per litre.
Housing infrastructure: a $2 billion Local Infrastructure Fund is intended to support infrastructure for up to 65,000 homes over the decade.
R&D Tax Incentive: reforms from 1 July 2028 are intended to better target core R&D, increase support for young fast-growing firms and raise certain thresholds.
Electric vehicles and FBT: the Government announced a transition to a permanent 25% FBT discount for eligible electric cars over $75,000 from 1 April 2027 and all eligible electric cars from 1 April 2029, while eligible cars up to $75,000 may continue to receive the full exemption if arrangements commence before 1 April 2029.
Nuisance tariffs: a further 497 tariffs are to be abolished from 1 July 2026, with consultation on additional tariffs.

Practical Next Steps

For individuals: keep tax records as usual and avoid assuming proposed deduction rules are available until legislated.
For property investors: seek advice before entering contracts, selling assets or changing ownership structures.
For small businesses: plan equipment purchases around commercial need, not tax alone, and confirm timing rules before committing.
For companies: monitor loss carry back eligibility and maintain accurate tax payment and loss records.
For trusts: start a calm review of the structure, deed and commercial objectives, but defer major changes until legislation is clearer.

Sources and Disclaimer

This newsletter has been generated by AI and is based primarily on Australian Government Budget 2026-27 materials available at budget.gov.au and Treasury Minister releases as at 14 May 2026. Key source pages include: Budget 2026-27 home page; Cost of living; Tax reform; Productivity; Care and opportunity; and the Treasury Ministers release on the $1,000 instant tax deduction.

General information only. This newsletter does not constitute financial product advice, legal advice or tax advice tailored to your circumstances. Tax outcomes depend on individual facts, eligibility rules and final legislation. Please contact us before acting on any Budget announcement.