Treasurer Jim Chalmers handed down the 2026–27 Federal Budget on 12 May 2026, delivering cost-of-living relief alongside the most significant structural tax reform in decades. Here is what it means for you.

Economic snapshot at budget night:

• Cash rate: 4.35%
• Inflation (CPI): 4.6%
• GDP growth: 2.6%
• Unemployment: 4.3%
• Avg house price: $1,074,700
• AUD/USD: US$0.71
• Budget deficit: $31.5bn

Individuals and employees

From the current 2026–27 income year, Australian resident workers can claim an instant $1,000 tax deduction for work related expenses without itemising or keeping receipts. Those with actual expenses above $1,000 can still claim the higher amount in the usual way. Charitable donations, union fees and professional memberships remain claimable on top.

From 1 July 2027, a $250 Working Australians Tax Offset will be available for all wage earners and sole traders, raising the effective tax-free threshold to approximately $19,985, applied automatically on lodgement. Income tax rates are already legislated to fall: the 16% rate on income between $18,201 and $45,000 drops to 15% on 1 July 2026 and to 14% on 1 July 2027. Medicare levy low-income thresholds have been raised from 1 July 2025, and the age-based Private Health Insurance rebate uplift for policyholders aged 65 and over will be removed from 1 April 2027.

Property investors

From 1 July 2027, negative gearing on established residential properties will be restricted. Losses can only be offset against rental income or residential property capital gains, not against salary or other income, with excess losses carried forward. Properties owned or under contract before 7:30pm AEST on 12 May 2026 are fully grandfathered. New residential builds remain fully exempt.

The 50% CGT discount will be abolished from 1 July 2027 and replaced with CPI cost base indexation alongside a new 30% minimum tax on net capital gains. This covers all CGT assets held by individuals, trusts and partnerships, including pre-CGT assets, but only on gains accruing after 1 July 2027. New residential property investors may elect either the 50% discount or the indexed method. The ban on foreign purchases of established homes has been extended to 30 June 2029.

Family and discretionary trusts

From 1 July 2028, a 30% minimum tax will apply to the taxable income of discretionary trusts, targeting the practice of distributing trust income to lower-taxed beneficiaries. Beneficiaries other than companies will receive non-refundable credits for tax paid at the trustee level. The minimum tax does not apply to fixed trusts, widely held trusts, superannuation funds, special disability trusts, deceased estates or charitable trusts. Primary production income, income for vulnerable minors and non-resident withholding tax amounts are also excluded.

An expanded rollover relief window opens from 1 July 2027 and runs for three years, allowing restructuring from a discretionary trust into a company or fixed trust.

Small and medium businesses

The $20,000 instant asset write off is now permanently legislated from 1 July 2026 for businesses with turnover up to $10 million. From 1 July 2027, businesses can opt in to monthly PAYG instalment reporting and payment with ATO approved calculations embeddable into accounting software for better cashflow alignment.

Loss carry back is reintroduced from 1 July 2026 for companies with global turnover under $1 billion, allowing revenue losses to be offset against tax paid in the prior two years, capped at the company’s franking account balance. Start-up companies with turnover under $10 million can convert losses in their first two years into a refundable tax offset from 1 July 2028. The R&D Tax Incentive will be reformed from 2028–29, with core offset rates increasing by up to 50%, the intensity threshold reduced to 1.5% and the refundable offset threshold raised to $50 million turnover.

Superannuation and employers

Payday Super is now law. From 1 July 2026 employers must pay superannuation at the same time as salary and wages, with updated penalties for late or missed payments. Division 296 introduces an additional tax from 2026–27 on balances above $3 million, resulting in a 30% overall rate between $3 million and $10 million and 40% above $10 million, with thresholds CPI indexed. The LISTO eligibility threshold rises to $45,000 and the maximum benefit increases to $810 from 2027–28.

The FBT exemption for electric vehicles is transitioning to a permanent 25% discount from 1 April 2029. The full 100% exemption continues for eligible EVs valued up to $75,000 provided before that date. EVs between $75,000 and the fuel-efficient luxury car tax threshold provided from 1 April 2027 attract a 25% discount. Plug-in hybrids remain excluded.