Australian Federal Budget 2026-27: What It Means for You
The Australian Federal Budget 2026-27, handed down by Treasurer Jim Chalmers on 12 May 2026, puts housing affordability at the centre of the agenda and pays for it by overhauling negative gearing and the capital gains tax discount. From 1 July 2027, losses on established residential properties acquired after 7:30pm AEST on Budget night can only be offset against rental income or residential capital gains, and the longstanding 50% CGT discount will be replaced by CPI indexation with a 30% minimum tax rate on net capital gains. Workers get a permanent $250 Working Australians Tax Offset and a $1,000 instant deduction for work-related expenses. Small businesses keep a permanent $20,000 instant asset write-off. Family trusts face a 30% minimum tax on distributions from 1 July 2028. Superannuation was left untouched. Every measure below is a Government announcement and depends on legislation passing, so timing and detail may shift before the changes start.
Budget 2026-27 at a glance
The headline numbers tell you where the Government is spending, where it is cutting, and where it is raising revenue.
- Deficit: $31.5 billion in 2026-27, with a return to balance projected for 2034-35.
- Gross debt: forecast to reach $1,051 billion (34% of GDP) by 30 June 2027.
- Defence: $53 billion increase over the next ten years.
- Health: $25 billion in extra public hospital funding, plus new PBS listings for cystic fibrosis, kidney disease, and several cancers.
- NDIS: reforms projected to deliver $37.8 billion in savings over four years by focusing the scheme on permanent and severe disabilities.
- Fuel: $14.8 billion to shore up supply security, plus a three-month extension of the fuel excise reduction.
- Housing infrastructure: $2 billion for local governments and state utilities to support new dwellings.
The economic backdrop is softer than last year. GDP growth is forecast to slow from 2.25% in 2025-26 to 1.75% in 2026-27 before lifting again. Unemployment drifts up to 4.5% by mid-2027, and headline inflation runs at 5% through to June 2026 before easing to 2.5% the following year.
What individuals and families gain
Most working Australians come out ahead under the personal tax measures, though the gains are modest.
The $1,000 instant tax deduction
From 1 July 2026, Australian residents can claim a flat $1,000 deduction for work-related expenses without keeping receipts. The deduction is capped at the lower of $1,000 or your assessable labour income. Charitable donations, union fees, and professional association fees sit outside the cap and can still be claimed separately. If your actual work-related expenses come to more than $1,000 and you have the substantiation, you can still claim the larger amount. The trade-off is that low-value pooling for certain depreciating assets used to produce labour income gets removed, and the FBT exemption on salary-packaged work-related items goes too.
Working Australians Tax Offset
From 1 July 2027, a permanent $250 tax offset will apply to anyone earning income from work, including sole traders. The Treasury estimates 13 million workers benefit, with 97% getting the full amount. Combined with the Low Income Tax Offset, it lifts the effective tax-free threshold on work income to around $24,985.
Income tax cuts already legislated
The 16% bracket between $18,201 and $45,000 drops to 15% from 1 July 2026 and 14% from 1 July 2027. This is existing law, not a new announcement, but it stacks with the measures above.
What property investors need to know
This is the biggest structural shift in the Budget, and the rules turn on a single time-stamp.
Negative gearing limits from 1 July 2027
If you acquire an established residential property after 7:30pm AEST on 12 May 2026, you cannot offset rental losses against your wage or business income from 1 July 2027 onwards. Losses can only be deducted against rental income or future residential capital gains, with any excess carried forward. Properties contracted before that Budget-night cut-off are grandfathered and keep the existing rules. The new restrictions also do not apply to genuine new builds, which the Government wants to incentivise because they add to housing supply. Commercial property, shares, managed investment trusts, and super fund investments are unaffected.
CGT discount replaced by indexation and a minimum tax rate
From 1 July 2027, the 50% CGT discount for individuals and trusts (and the one-third discount for super funds) is replaced by CPI-based cost-base indexation for assets held longer than 12 months. A 30% minimum tax rate then applies to net capital gains accruing after that date. Pre-CGT assets acquired before 20 September 1985 lose their full exemption for gains accruing after 1 July 2027.
To make the transition work, investors will need a market valuation of existing assets as at 1 July 2027. Investors in new residential properties get a choice: keep the 50% discount or move to the new indexation and minimum-tax framework, whichever produces the better outcome. The changes cut across every asset class, so the planning work is not limited to property holders.
Changes for family trusts
From 1 July 2028, discretionary trusts face a 30% minimum tax rate on taxable income. Trustees pay the tax and non-corporate beneficiaries receive a non-refundable credit. Bucket companies get no credit, which materially undermines the long-running strategy of distributing to a corporate beneficiary to cap the tax rate at 25% or 30%.
There are carve-outs. Fixed and widely-held trusts, super funds, special disability trusts, deceased estates, and charitable trusts are excluded. Certain income types are also outside the rules. For small businesses and others who want to restructure, a three-year rollover relief window opens on 1 July 2027 and allows movement into companies or fixed trusts without triggering immediate CGT.
If your structure relies on a family trust, model the impact now. The lead time on a clean restructure (valuations, asset transfers, refinancing, banking covenants) usually runs to nine or twelve months once decisions are made.
What small business owners gain
The Budget is generally friendly to small business, though the standout measures are extensions of policies that already work.
$20,000 instant asset write-off, now permanent
From 1 July 2026, small businesses with aggregated turnover under $10 million can permanently write off depreciating assets costing less than $20,000. The threshold applies on an asset-by-asset basis, so you can stack multiple purchases. The permanence is the key change, because year-to-year uncertainty has been forcing operators to time capital expenditure around legislation rather than business need.
FBT on electric cars winds back
The full FBT exemption for battery electric and hydrogen fuel-cell vehicles continues until 31 March 2027. After that it scales back in stages. From 1 April 2027 to 31 March 2029, the full exemption only applies to cars under $75,000, with a 25% discount on cars between $75,000 and the luxury car tax threshold. From 1 April 2029, all qualifying cars under the LCT threshold get the 25% discount, and the full exemption disappears. Existing leases are protected. Reportable fringe benefits amounts still get calculated as if the exemption did not exist.
Loss carry-back and start-up refunds
Loss carry-back for companies under $1 billion in turnover returns from 1 July 2026. Eligible small start-up companies with turnover under $10 million can claim loss refunds from 1 July 2028. The R&D tax incentive gets a higher rate for core expenditure from 1 July 2028, but supporting expenditure is removed and a $50,000 minimum spend applies.
When the changes take effect
The timeline matters because several measures interact. Acting on one without planning for the next can leave you worse off.
- 7:30pm AEST, 12 May 2026: cut-off for grandfathering of negative gearing on established residential property.
- 1 July 2026: $1,000 instant deduction, 16% bracket drops to 15%, permanent $20,000 instant asset write-off, loss carry-back returns.
- 1 April 2027: EV FBT exemption begins to scale back.
- 1 July 2027: negative gearing restrictions apply, CGT discount replaced, 14% bracket starts, Working Australians Tax Offset begins, trust restructure rollover window opens.
- 1 July 2028: 30% minimum tax on family trust distributions, start-up loss refunds, R&D reforms.
Frequently asked questions
When do the negative gearing changes start?
The new rules apply from 1 July 2027, but the grandfathering cut-off is 7:30pm AEST on 12 May 2026. Established residential properties acquired before that time keep the existing negative gearing rules. Properties acquired after that time lose the ability to offset rental losses against wage or business income from 1 July 2027 onwards.
Does the CGT change apply to shares and other assets, or just property?
The replacement of the 50% CGT discount with CPI indexation and a 30% minimum tax rate applies across every asset class, including shares, managed funds, and business assets. It is not limited to property. The only asset-specific carve-out is for new residential properties, where investors can choose between the old 50% discount and the new indexation framework.
Can I still claim work expenses above $1,000?
Yes. The $1,000 instant deduction is a no-receipt option, not a cap. If your actual work-related expenses come to more than $1,000 and you have the substantiation, you can claim the higher amount. Charitable donations, union fees, and professional association fees sit outside the cap entirely and can be claimed in addition either way.
How does the 30% minimum tax on family trusts actually work?
From 1 July 2028, the trustee pays tax at a minimum 30% rate on the trust’s taxable income. Non-corporate beneficiaries receive a non-refundable credit for that tax when income flows through to them. Bucket companies receive no credit, which is what makes the measure bite. Fixed and widely-held trusts, super funds, special disability trusts, deceased estates, and charitable trusts are excluded.
Is the $20,000 instant asset write-off really permanent this time?
Yes, subject to legislation passing. From 1 July 2026, small businesses with aggregated turnover under $10 million can permanently write off depreciating assets costing less than $20,000. The threshold applies on a per-asset basis, so multiple eligible purchases can each be written off in full.
Were there any changes to superannuation?
No. Superannuation was notably absent from the 2026-27 Budget. Contribution caps, tax rates on earnings, and preservation rules remain unchanged. The CGT changes do affect the one-third discount currently available to super funds, but the broader super framework was left alone.
Should I rush to buy an investment property before 1 July 2027?
The relevant date is 12 May 2026, not 1 July 2027. Established properties acquired before 7:30pm AEST on 12 May 2026 are already grandfathered. Any acquisition after that time falls under the new rules regardless of whether you settle before or after 1 July 2027. Decisions should be driven by the underlying investment case, not the timing of the rule change, because the cut-off has already passed.
What to do next
Three planning conversations matter most over the next twelve months. Property investors with established holdings should map out which properties are grandfathered and model the cash-flow impact of losing negative gearing on any post-Budget acquisitions. Family trust beneficiaries should look at whether a restructure into a company or fixed trust makes sense before the rollover window closes in mid-2030. Small businesses should plan capital expenditure around the permanent $20,000 threshold and review whether EV salary packaging still stacks up under the staged FBT changes.
Every measure here is an announcement, not law. Bills still need to pass Parliament, and detail can shift during drafting. Treat the dates and thresholds as a planning baseline rather than a settled position, and review them again once the legislation lands. If you want to model your own numbers against any of these measures, book in with your usual adviser before the financial year closes.
