Key Insights from the 2026–27 Federal Budget

Executive summary

The 2026-27 Budget introduces a range of changes impacting individuals, families, investors, and businesses. These measures combine short term cost of living support with longer term structural reforms to the tax system. Key highlights include a new tax offset for working Australians, simplified deduction rules, significant changes to property investment taxation, and major reforms affecting trusts and capital gains tax. For businesses, there is continued support through asset write offs and loss carry back provisions, along with targeted incentives for start ups and research and development activity. Together, these changes create both opportunities and areas of complexity, making proactive planning more important than ever.

Property and Investment

Negative Gearing Changes
From 1 July 2027, negative gearing on residential property will generally be limited to newly constructed properties. This change will apply to properties purchased after 12 May 2026, while existing investments will continue under current rules. This represents a significant shift in the property investment landscape, as it may influence purchasing decisions, property values, and overall investment strategies. Investors who are considering entering the property market, expanding their portfolio, or restructuring existing holdings will need to carefully assess how these rules affect long term returns and cash flow.

Capital Gains Tax Reform
From 1 July 2027, the current 50 percent capital gains tax discount will be replaced with a system that incorporates cost base indexation along with a minimum 30 percent tax on capital gains. This change will apply across a wide range of investment assets, including property, shares, and trust held investments. The reform is likely to have a material impact on after tax investment returns, particularly for long held assets. Investors will need to review their asset holding strategies, timing of disposals, and overall portfolio structure to ensure they remain tax effective under the new regime.

Foreign Buyer Ban Extended
The existing ban on foreign buyers purchasing established residential dwellings has been extended until 30 June 2029. This measure is aimed at maintaining housing availability for local buyers and supporting affordability within the domestic market. While it does not directly affect most Australian investors, it provides important context around supply and demand dynamics, which may influence pricing and investment opportunities in certain segments of the property market.

Business

Permanent $20,000 Instant Asset Write Off
From 1 July 2026, the instant asset write off threshold of $20,000 for small businesses will become a permanent feature of the tax system. This allows eligible businesses to immediately deduct the cost of qualifying asset purchases rather than depreciating them over time. This measure supports ongoing investment in equipment, technology, and operational improvements, while also assisting with cash flow management. Businesses should consider how to strategically plan asset purchases to maximise the benefit of this provision.

Loss Carry Back Returns
Businesses with turnover under $1 billion will be able to carry back tax losses to offset profits from up to two prior financial years from 1 July 2026. This allows businesses that experience a downturn to receive a tax refund for taxes previously paid, improving cash flow during challenging periods. This measure is particularly valuable for cyclical industries and growing businesses that may experience fluctuating profitability, as it provides greater flexibility in managing financial performance over time.

Start Up Loss Refundability
From 1 July 2028, eligible start ups will be able to access refundable tax offsets for early stage losses. This effectively allows new businesses to receive a cash benefit even when they are not yet profitable. The measure is designed to support innovation and reduce the financial burden during the critical early growth phase of a business. For entrepreneurs and investors, this may improve the attractiveness of starting new ventures and encourage continued innovation.

Research and Development Tax Incentive Changes
The research and development tax incentive will be restructured from 1 July 2028, with a focus on better targeting support while increasing benefits in specific areas. While full details are still evolving, the changes are expected to refine eligibility criteria and enhance incentives for businesses undertaking genuine innovation activities. Companies involved in technology, manufacturing, and product development should review their R and D strategies to ensure they continue to meet the new requirements and maximise available benefits.

Trust and Wealth

30% Minimum Tax on Discretionary Trusts
From 1 July 2028, discretionary trusts will be subject to a 30 percent minimum tax rate. This represents a fundamental shift in how trust income is taxed, particularly for family groups and privately owned businesses that rely on discretionary distributions for tax planning. The measure is likely to reduce flexibility in income distribution and may increase overall tax liabilities for many structures. As a result, this change is expected to drive a significant increase in restructuring discussions, including the potential use of alternative entities or revised ownership arrangements.

Superannuation and Investor Integrity Measures
Additional funding and reforms will be introduced to strengthen oversight of superannuation funds and enhance investor protections. These measures signal a clear move toward increased compliance, transparency, and regulatory scrutiny across the wealth and superannuation landscape. Trustees, investors, and advisers will need to ensure they are meeting evolving obligations and maintaining robust governance practices, particularly within SMSFs and complex investment structures.

Individuals and Families

Working Australians Tax Offset
From 1 July 2027, a new permanent Working Australians Tax Offset will provide a $250 annual benefit to individuals earning income from employment or sole trader activities. While modest in value, this measure applies broadly across the workforce and effectively reduces the overall tax burden for many Australians. It also contributes to a gradual increase in the effective tax free threshold, helping to improve take home pay over time.

$1,000 Instant Tax Deduction
From the 2026–27 financial year, workers will be able to claim a standard deduction of up to $1,000 without needing to substantiate work related expenses. This simplifies the tax return process by removing the need to track and retain receipts for smaller claims. It is particularly beneficial for PAYG employees with relatively low or moderate work related expenses, offering both convenience and certainty when lodging returns.

Medicare Levy Threshold Increase
From 1 July 2025, the income thresholds for the Medicare levy will increase for low income earners. This reduces or removes the levy for eligible individuals and families, providing targeted cost of living relief. The change is particularly relevant for retirees, part time workers, and lower income households, helping to ease financial pressure in a rising cost environment.

Temporary Fuel Excise Reduction
Fuel excise will be reduced by 32 cents per litre for a three month period from 1 April 2026. This measure is designed to provide immediate, albeit temporary, relief from rising fuel costs. While short term in nature, it can have a meaningful impact on household budgets, particularly for individuals and families who rely heavily on transport for work or daily activities.

In conclusion

This Budget combines immediate relief measures with more significant long term reforms that will reshape the tax and investment landscape. While some changes simplify processes and support cash flow, others introduce new complexities that will require careful planning. Understanding how these measures interact with your personal, investment, or business position is key to making informed decisions and maintaining long term financial outcomes.

Get in Touch

If you have any questions about how these changes may affect you, your family, or your business, please get in touch with our team. We are here to help you navigate the changes, identify opportunities, and plan ahead with confidence.