2026-27 Federal Budget Summary

Investors

The Budget introduces structural tax reforms that will affect many private investors over coming years.

Capital gains tax (CGT)

• From 1 July 2027, the 50% CGT discount will be replaced with a cost base indexation for assets held for more than 12 months, with a minimum tax of 30% 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.
• Transitional arrangements will apply to existing investments with assets purchased and sold before 1 July 2027, still being able to utilise the 50% CGT discount. The CGT discount will also continue to apply to gains accrued until 1 July 2027 for assets purchased prior to that date, regardless of when the actual CGT event occurs.
• There will be further details to come outlining how the tax will be calculated under the transitional rules, with the options to use a market valuation method or time-based apportionment.
• Owners of new builds will be able to choose either the CGT discount or cost base indexation method (with the 30% minimum tax still applicable).

Negative gearing

• From 1 July 2027, negative gearing will be limited to newly built properties.
• Existing properties held before Budget night are unchanged, and investors who buy new builds will still be able to deduct losses from other income.
• Losses on newly acquired, established properties can be carried forward to future years but not offset against other income, such as wages.

Discretionary trusts

• A minimum tax rate of 30% for discretionary trusts will apply from 1 July 2028, with some exceptions to other types of trust, including fixed and widely held trusts, super funds, deceased estates and charitable trusts.
• Beneficiaries of the trust will receive non-refundable credits for any tax paid by the trustee.
• A three-year rollover relief period from 1 July 2027 will support restructuring.
• These changes aim to align the taxation of income derived by a trust more closely with the taxation of income from personal exertion.

Privately Owned Businesses

The Budget delivers a suite of tax and cash‑flow measures for businesses, particularly SMEs.

Small and medium businesses

• The $20,000 instant asset write‑off will be made permanent from 1 July 2026.
• Companies with up to $1 billion turnover can carry back tax losses for up to two years from 1 July 2026.
• Access to monthly reporting and payments, as well as dynamic PAYG instalment calculations, will be expanded for SMEs from 1 July 2027.

Fuel‑affected businesses

• A permanent 25% Fringe Benefits Tax discount will apply to certain electric vehicles, replacing the current temporary arrangements.
• As previously announced, the temporary fuel excise reduction is effective from 1 April 2026 for three months.
• ATO relief measures are available until 30 June 2026, including:
  • Flexible payment plans
  • Interest and penalty remission
  • Deferred compliance and debt collection, where appropriate

Innovation & Investment

The Budget includes targeted measures to support innovation, research and business investment.

Research & Development (R&D) Tax Incentive

• Reforms are made to the R&D Tax Incentive from 1 July 2028, following the Government’s response to the Ambitious Australia review.
• Reforms will better target the R&D Tax Incentive to support core experimental research and development.
• The turnover threshold for a higher refundable offset is increased to $50 million.
• The expenditure cap is increased to $200 million, encouraging more R&D onshore.

Venture Capital

• The venture capital limited partnership (VCLP) and early-stage venture capital limited partnership (ESVCLP) tax incentives will be expanded from 1 July 2027.
• The eligible venture capital investor program will be closed to new applications from 12 May 2026, 7:30 pm (AEST).

Start‑ups and scale‑ups

• 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.

Working Individuals

The Budget delivers two new individual tax measures which complement the previously announced income tax cuts.

Working Australians Tax Offset (WATO)

• A permanent Working Australians Tax Offset (WATO) of up to $250 will apply to eligible taxpayers from the 2027–28 income year.
• The effective tax‑free threshold will increase to $19,985 (or up to $24,985 for those eligible for the Low-Income Tax Offset).
• A $1,000 instant tax deduction is available from 1 July 2026 and allows workers to claim the deduction without keeping receipts.

Combined, these measures deliver ongoing tax relief and simplify tax time for employees and business owners alike.

Other announcements

• Temporary restrictions on foreign ownership of residential property will be extended.
• Funding will be provided from 2026–27 to streamline regulatory systems and strengthen access to trusted business data, including improved director identification and ABN checks, and transitioning ABN and superannuation lookup services to the ATO.
• The global and domestic minimum tax legislation will be amended from 1 January 2026 to implement the side-by-side package agreed by the OECD/G20 Inclusive Framework on Base Erosion and Profit Shifting on 5 January 2026.

Final Thoughts

The 2026–27 Budget introduces staged and interconnected reforms that will roll out over several years. For private wealth clients and SMEs, many of these changes may affect tax planning, cash flow, investment structures and long‑term strategy. The practical impact and tailored advice will depend on final legislation, commencement dates and individual circumstances.

This article is intended as an initial summary of announced Budget measures only, and we will continue to share further insights and updates over the coming weeks as more information becomes available and legislation progresses.

If you’d like to discuss how the Budget proposals may apply to your situation, speak with a Perks Adviser.