Federal Budget 2026

Breakdown of Proposed Income Changes

The Federal Budget, when compared to those of recent years, included a relatively large number of tax announcements. While our Treasurer suggested these announcements constituted “tax reform”, we take a different view on what meaningful tax reform should look like. True reform needs to be broad based, holistic and focused on creating a simpler, more productive system, not just a series of adjustments to individual taxes or isolated parts of the tax framework. You be the judge.

Several of the key proposed changes announced in the Federal Budget require more detailed supporting details before family groups can be fully informed on how they should proceed from here.

Income tax

• From 1 July 2027, the 50% capital gains discount will be replaced with cost base indexation for assets held for more than 12 months, with a 30% minimum tax on net capital gains applying from that date. This will apply to all CGT assets except new homes, including pre-CGT assets, held by individuals, trusts and partnerships.
• A minimum tax rate of 30% will be payable by trustees of discretionary trusts from 1 July 2028, beneficiaries (other than corporate beneficiaries) will receive non-refundable credits for any tax payable by the trustee.

Individuals

• Negative gearing for residential property will be limited to new builds from 1 July 2027, with no change for existing property investments held prior to 7.30pm (AEST) on 12 May 2026 (residential properties acquired between 7:30pm (AEST) on 12 May 2026 and 30 June 2027 may be negatively geared during this period, but not from 1 July 2027). 
• Instant $1,000 tax deduction for work-related expenses will apply from 1 July 2026
• Each working Australian taxpayer will receive a $250 Working Australians Tax Offset from the 2027–28 income tax year.
• The Medicare levy low-income thresholds for singles, families, and seniors and pensioners will be increased by 2.9% from 1 July 2025.
• The age-based uplift of private health insurance rebate (the PHI rebate) will be removed from 1 April 2027.

Business

• The instant asset write-off of $20,000 for small businesses applying the simplified depreciation rules has been extended permanently (currently in force and will now continue unchanged). 
• Companies with up to $1 billion in turnover will be eligible to carry back tax losses for up to 2 years from 1 July 2026 (it allows them to carry back tax losses and offset them against taxes paid up to 2 years earlier as opposed to claiming the loss as a deduction in a future period). The loss carry back tax offset will apply to revenue losses only and will be limited to the company’s franking account balance.
• Australia will transition to a permanent 25% discount on FBT for certain electric vehicles.
• Small start-ups in their first 2 years of operation will be able to get a refund for tax losses capped to the value of tax remittances relating to employment from 1 July 2028. 
• Reforms have been announced to the R&D tax incentive from 1 July 2028 as part of the government’s response to the Ambitious Australia: Strategic Examination of Research and Development Final Report. 
• The venture capital limited partnership (VCLP) and early stage venture capital limited partnership (ESVCLP) tax incentives will be expanded from 1 July 2027.

Superannuation

• No new measured announced in the budget.
• Payday Super commences from 1 July 2026 with the superannuation guarantee remaining at 12%.

Tax administration

• Access to monthly reporting and payments as well as dynamic PAYG instalment calculations will be expanded for small and medium businesses from 1 July 2027.
• Funding will be provided, and measures will be introduced, to protect and strengthen the tax system against fraud.
• Funding will be provided over 2 years from 2026–27 to streamline regulatory systems and secure access to data, including the synchronisation of director information, uplifting ABN authentication and completing the transition of ABN and superannuation lookup functions to the ATO.
• Reforms to harmonise state payroll tax administration frameworks will be explored as part of the government’s national competition policy (NCP).

Unfortunately, what we’ve seen in this latest Budget appears more like tinkering around the edges. On the surface, many of the measures seem designed primarily to increase government revenue, rather than deliver genuine structural reform that improves productivity, reduces complexity and makes life easier for businesses and individual taxpayers. What Australia needs is greater stability, simplicity and certainty in the tax system, not increasing layers of complexity.

In our view, this was a missed opportunity for the ALP Government to use its current political position to pursue genuine long-term reform. There was an opportunity to take a more courageous approach by reviewing the GST more broadly, including both its rate and scope, and shifting Australia toward a stronger consumption based taxation model, rather than continuing to place a growing burden on income generated by individuals and businesses.

Need Help?

Our team is here to help you navigate these changes with clarity, confidence and practical guidance.

If you have any immediate questions or concerns, we welcome the opportunity to discuss how these proposed changes may impact you and your business.