Set out below is a high-level summary of the key tax measures announced in the 2026 Federal Budget, based on material released on Budget night. This summary focuses on measures most relevant to individuals, investors and small businesses, and should be read as an overview pending draft legislation and further ATO or Treasury guidance.
A number of the more significant reforms are proposed to commence from 1 July 2027 or later. As always, the practical effect for clients will depend on the final legislation, detailed design rules and transitional provisions.
Tax planning will be important over the next 12 to 24 months, particularly for clients with investment property portfolios, discretionary trust structures, planned asset sales and businesses looking to invest and grow.
Individuals
- A $250 Working Australians Tax Offset is proposed from the 2027–28 income year. The offset is intended to be available on assessment when the 2028 income tax return is lodged.
- A $1,000 instant tax deduction for work-related expenses is proposed from the 2026–27 income year. Employees will be able to claim up to $1,000 without keeping receipts, while taxpayers with deductions above that amount can continue to claim under the ordinary rules.
- The Working Australians Tax Offset will also be available to sole traders.
- For an Australian worker on average earnings, the combined annual benefit from the Working Australians Tax Offset, the previously announced tax cuts and the instant deduction has been presented as up to $2,816.
Negative Gearing
- From 1 July 2027, negative gearing for residential property investments is proposed to be limited to new builds.
- For established residential properties purchased from 7.30 pm AEST on 12 May 2026, rental losses will only be deductible against other income from residential properties, including capital gains.
- Excess residential property losses will be able to be carried forward to offset future residential property income.
- Properties held before 7.30 pm AEST on 12 May 2026 are proposed to be grandfathered and exempt from the negative gearing changes until sold.
Discretionary Trusts
- From 1 July 2028, a 30% minimum tax on discretionary trusts is proposed.
- The tax is proposed to be paid by the trustee. Beneficiaries, other than corporate beneficiaries, are proposed to receive non-refundable credits for the tax payable by the trustee.
- The measure is intended to reduce the tax advantage available through income splitting using discretionary trusts.
- Expanded rollover relief is proposed to support small businesses and others restructuring out of discretionary trusts for a three-year period from 1 July 2027.
- Clients operating through discretionary trusts should review likely distribution strategies and longer-term structuring options once further detail is released.
Capital Gains
- From 1 July 2027, the 50% CGT discount for individuals, trusts and partnerships is proposed to be replaced with cost base indexation and a 30% minimum tax rate on capital gains.
- The stated policy intent is to tax real gains above inflation rather than apply a flat 50% discount.
- For assets acquired and disposed of after 1 July 2027, capital gains are proposed to be calculated under the new indexation model rather than under the existing 50% discount method.
- For assets acquired before 1 July 2027 and disposed of after that date, transitional rules are proposed to apply so that only gains accruing from 1 July 2027 are subject to the new regime.
- For assets transitioning into the new regime, it is expected that taxpayers will need either a market valuation at 1 July 2027 or an approved growth formula to determine the portion of the gain attributable to the post-1 July 2027 period.
- Assets acquired and disposed of before 1 July 2027 will remain subject to the existing CGT rules.
- Pre-20 September 1985 assets are proposed to become subject to CGT from 1 July 2027, with only post-1 July 2027 gains expected to be brought within the regime.
- Investors in new residential builds will be able to choose between the 50% CGT discount and the new capital gains arrangements when they sell.
Small Business
- The $20,000 instant asset write-off is proposed to become a permanent arrangement from 1 July 2026.
- A permanent two-year loss carry-back is proposed from 1 July 2026 for companies with turnover of up to $1 billion.
- Loss refundability is proposed from 1 July 2028 to help start-up businesses invest and grow in their first two years of operation, capped at the value of tax remittances relating to employment.
- Further business tax measures announced include expanded tax incentives for venture capital and changes to the Research and Development Tax Incentive.
EV and FBT Exemption
- From 1 April 2027, vehicles priced between $75,000 and $91,387 will receive a 25% fringe benefits tax concession.
- Fully electric vehicles priced under $75,000 will continue to access the full fringe benefits tax exemption until 1 April 2029, after which time the concession is proposed to reduce to 25%.
We expect further detail and clarification over the coming days as more information is released around the Budget announcements and their practical impact. As this unfolds, our team will continue communicating the key updates and what they may mean for individuals, investors, businesses, and business structures moving forward.
Given the significant long-term implications of several proposed measures particularly around trusts, capital gains, property investment, and business structuring now is a good time to seek advice early and start thinking ahead.
If you would like to discuss how any of the proposed changes may impact you or your business, please contact the HTA team.
