The 2026-27 Federal Budget introduces a broad range of tax and regulatory changes affecting individuals, investors, businesses and employers. Many measures commence over the next two to three years, and several require proactive planning.

This article outlines the key announcements and their practical implications.

Individuals and Families

1. Working Australians Tax Offset

Start date: 1 July 2027

A permanent $250 offset will apply to individuals earning income from work. This increases the effective tax‑free threshold for labour income to $19,985 (or $24,985 for those eligible for the Low Income Tax Offset).

2. Standard $1,000 Work‑Related Deduction

Start date: 1 July 2026

A standard deduction of up to $1,000 will be available for work‑related expenses. Taxpayers with higher deductible expenses may continue to claim actual costs with substantiation.

Additional changes include:

• Certain depreciating assets excluded from low‑value pooling.
• Modified tax treatment on disposal of assets used to generate labour income.
• Removal of an FBT exemption for salary‑packaged work‑related items.

3. Income Tax Rate Adjustments

Start date: 1 July 2026

The marginal tax rate on income between $18,201 and $45,000 reduces from 16% to 15%, and to 14% from 1 July 2027.

4. Medicare Levy Threshold Increases

Start date: 1 July 2025

Thresholds for singles, families, seniors and pensioners will increase. Examples:

• Singles: $28,011
• Families: $47,238
• Single seniors/pensioners: $44,268
• Family threshold for seniors/pensioners: $61,623 The dependent child increment rises to $4,338.

Investors

1. Negative Gearing Restrictions

Start date: 1 July 2027

Negative gearing will only apply to new builds from this date. For established residential properties acquired after 12 May 2026 (7:30pm AEST):

• Losses can only be offset against residential rental income or residential property capital gains.
• Excess losses carried forward.

Properties acquired before this date are unaffected.

2. CGT Discount Changes & Removal of Pre‑CGT Exemption

Start date: 1 July 2027

Key changes:

• CGT discount replaced with CPI‑based indexation for assets held >12 months.
• Minimum 30% tax rate on gains accruing from 1 July 2027.
• Pre‑CGT asset exemption removed.

Transitional rules apply:

“The existing CGT discount and exemption for pre‑CGT assets will continue to apply to gains that accrued before 1 July 2027.”

Investors in new residential properties may choose between the 50% discount or indexation + minimum tax.

3. Minimum Tax on Discretionary Trusts

Start date: 1 July 2028

A minimum 30% tax will apply to taxable income of discretionary trusts. Non‑corporate beneficiaries receive a non‑refundable credit; corporate beneficiaries do not.

Limited rollover relief will be available for restructures between 1 July 2027 and 30 June 2030.

4. Other Investor Measures

• Foreign resident CGT concession for renewable energy asset disposals until 30 June 2030.
• Expanded venture capital incentives from 1 July 2027.

Business and Employers

1. Instant Asset Write‑Off

Start date: 1 July 2026

Permanent increase of the threshold to $20,000 for small businesses (<$10m turnover). Applies per asset; assets ≥$20,000 go to the small business pool.

2. Electric Vehicle FBT Changes

Start date: 1 April 2027

• Until 31 March 2027: Current exemption remains.
• 1 Apr 2027–31 Mar 2029: Full exemption only for EVs ≤$75,000; others below LCT threshold receive 25% discount.
• From 1 Apr 2029: All EVs below LCT threshold receive 25% discount. Existing leases unaffected.

3. Loss Carry‑Back for Companies

Start date: 1 July 2026

Companies (<$1b turnover) may carry back tax losses up to two years, subject to franking account limits.

4. Refundable Loss Offset for Start‑Ups

Start date: 1 July 2028

Start‑ups (<$10m turnover) can receive a refundable offset for losses in their first two years, capped at FBT and PAYG withholding amounts.

5. PAYG Instalment Reform

Start date: 1 July 2027

Businesses may opt into monthly PAYG instalments using ATO‑approved software‑embedded calculations.

6. R&D Tax Incentive Changes

Start date: 1 July 2028

• Higher offset rate for core R&D.
• Supporting R&D expenditure no longer eligible.
• Minimum expenditure threshold increases to $50,000.

7. Minimum Tax for Multinationals

Start date: 1 January 2026

Amendments to global and domestic minimum tax rules.

Government and Regulatory Measures

1. Tax Fraud Prevention

From 1 July 2026, $86.3m will be allocated to fraud detection and prevention. ATO powers expanded to:

• Pause debt recovery for victims of intermediary fraud.
• Waive debts where appropriate.
• Recover debts from intermediaries. Additional compliance activity will target R&D incentive fraud.

Economic Outlook

Growth

• 2025–26: 2.25%
• 2026–27: 1.75%
• 2027–28: 2.25%

Budget Position

• 2026–27 deficit: $31.5b
• Projected balance: 2034–35
• Projected surplus: 0.8% of GDP in 2036–37

Debt

• 2027 gross debt: $1,051b (34% of GDP)
• 2030 gross debt: $1,249b (35.6% of GDP)

Employment

• Unemployment: 4.25% → 4.5% (2026–27)
• Employment growth: 1.5% (2026 & 2027), 1.75% (2028)

Wages

• Wage Price Index: 3.25% (2026), 3.5% (2027 & 2028)

Inflation

• 2026: 5%
• 2027: 2.5% (subject to oil price assumptions)

Recommended Next Steps

The Budget measures will affect clients differently depending on their income, structure, investments and business activities. AdviceCo recommends the following actions:

For Individuals

• Review your work‑related deductions strategy ahead of the new $1,000 standard deduction.
• Assess how the new tax rates and offsets may affect your take‑home pay.
• Check eligibility for the increased Medicare levy thresholds.

For Property Investors

• Reassess investment plans involving established properties purchased after 12 May 2026.
• Model cashflow impacts of restricted negative gearing from 1 July 2027.
• Arrange valuations for existing assets before 1 July 2027.
• Review long‑term strategies in light of CGT indexation and the removal of the pre‑CGT exemption.

For Trust Structures

• Assess the impact of the 30% minimum tax on discretionary trust distributions.
• Consider whether restructuring into a company or fixed trust may be beneficial.
• Review distribution strategies for the next two financial years.

For Business Owners

• Plan capital expenditure to utilise the permanent $20,000 instant asset write‑off.
• Review EV fleet and salary packaging arrangements.
• Prepare for monthly PAYG instalments and ensure software compatibility.
• Review R&D activities in light of the increased $50,000 minimum threshold.

For Start‑Ups

• Model early‑stage losses to determine potential refundable offsets.
• Review payroll and FBT obligations, which cap the refundable amount.

For All Clients

• Monitor legislative progress, as several measures require passage through Parliament.
• Engage in forward tax planning to manage transition periods.
• Seek tailored advice to understand how these changes apply to your circumstances.