2026 Federal budget update

2026 Federal Budget Recap

Brought to you by Dale Fenwick

Well, that escalated quickly!

Usually in the lead up to Budget Night, accountants (and occasionally the broader public) start getting hyped about what might be announced, only for the actual Budget to be a bit of a flop.

Not. This. Year.

In my 16 years working in accounting, I genuinely think this could be one of the most consequential Federal Budgets in memory – not because of any particular new tax rule or sector cut – but because this budget fundamentally changes how Australia taxes property, business & wealth creation.

Before we get bogged down in the details…

The Federal Budget is made up of a lot of really important information that directly affects us all in one way or another.

But for the purposes of this recap, the Government is really focused on these 2 major themes:

- Tax reform – making the tax system ‘fairer’ by taxing passive income higher and working wages lower, whilst also targeting tax effective structures commonly used by businesses

- Housing – improving affordability, supply & rental pressures

And in this Budget, the two overlap quite a lot!

Negative gearing is changing

Yep, the hype was real!

Essentially, from 1 July 2027, negative gearing on residential property will be limited to new builds only.

If you own an investment property before 7.30pm on 12th May 2026, you’re grandfathered in – meaning there is literally no change and you get to claim your negative gearing benefits as you currently are.

If you buy resi property from here, there are 2 pathways:

- New builds – again the rules won’t really change, so you can basically claim the same benefits that already exist

- Existing property – this is where it becomes a bit more complicated. Up to 30 June 2027, you can claim negative gearing benefits like normal. Post 30 June 2027 however, rental losses can only offset future rental income (not your salary)

In theory, these changes are intended to push investor money away from existing homes and towards new housing supply.

Whilst this could initially increase demand (and potentially prices) for new builds, the Government is banking that over time, this should encourage more construction, increase housing supply and eventually put downward pressure on house prices.

Capital gains tax discount is GONE (kind of)

And if that wasn’t enough to get you thinking, the Government has also announced a change to the current CGT discount system.

Currently, if you sell an asset, you (generally) receive a 50% discount on your capital gain. I.e. if you make a $1m profit, you only pay tax on $500k (normally taxed at your marginal tax rates).

From 1 July 2027, the Government is completely scrapping the 50% discount and replacing it with the old indexation system – which instead looks to tax your ‘real’ gain after inflation is taken into account.

On top of this, they have also imposed a minimum tax rate of 30% on all capital gains.

Importantly:

- Gains accrued before 1 July 2027 will likely be eligible for the old 50% discount system (meaning the value adopted at 1 July 2027 will be critical)

- Gains from there will be taxed under the new system

Also importantly, this doesn’t just impact property. It will also affect:

- Shares

- Business sales (and restructures)

- Pre-1985 assets (will be taxed for the first time ever, but only for gains after 1 July 2027)

But won’t affect:

- Eligible new builds (investors can choose to still apply the 50% discount)

- Superannuation (this hasn’t been explicitly confirmed, but we understand that the current 33% discount will remain)

Yes, it’s complicated, and some of the actual mechanics haven’t been fully explained yet. But long story short – before making any big decisions, make sure you reach out to us to fully understand the tax consequences.

Family trusts under attack

Ok, that might be a bit dramatic, but this is a big one.

From 1 July 2028, discretionary trusts (also known as family trusts) will be subject to a minimum non-refundable 30% tax rate.

Honestly, in its current form, I think this will be the biggest change to business and investment structures since the introduction of Division 7A.

For some family groups this may not change much at all.

For others however, this may mean a restructure would be worthwhile (or at least understanding the tax consequences of remaining in your current structure).

The Government has announced a raft of restructure concessions will be available from 1 July 2027 for 3 years – which will facilitate transitions to alternative structures. At this stage, they haven’t released much detail on what those concessions will actually look like.

Also importantly, we need to ensure that any Federal tax rollovers align with State Government transfer duty concessions – because there may not be much point in getting a tax benefit if you get smashed with a big transfer duty bill!

The devil will be in the detail here, but if you are currently operating through a trust, don’t panic. We have plenty of time to review your structure (and we already are) and work out the most tax effective way for you to operate moving forward.

Let’s take it down a notch

Ok, that’s enough of the spicy stuff… but there’s still a few other important things you should know…

$250 tax offset for workers

Everyone (that works) will get a tax offset!

From 2027-28, all workers will get this extra tax offset back on their tax. It’s not going to change lives, but we’ll take it.

$1k instant deduction

We’ve mentioned this before, but just a reminder – in your 2026-27 tax return, you will be able to claim up to $1,000 without any receipts or records. You can still claim more than this, but it should simplify tax time for a lot of salary & wage earners.

$20k asset write-off locked in permanently

Finally….

I’m sure you’re all sick of us sitting in tax planning meetings saying ‘this might be the last year of the instant asset write-off, so take advantage while you can!’ - only for it to get extended in some form for another 12 months.

Well, the Government has now confirmed the $20k instant asset write-off is being locked in permanently. This gives businesses certainty and allows them to properly plan asset purchases in advance, rather than waiting until Budget Night to see what the rules are for the following year.

Company loss carry back refunds

This one might fly under the radar (it is a bit boring to be fair), but it could be valuable for businesses that have had a rough trading year.

From 2026-27, companies will be able to carry back losses to refund tax from previous years. To keep it simple:

- Year 1 – Profitable and paid tax

- Year 2 – Losses

In Year 2, companies will now be able to get some (or even all) of their previous year tax refunded back. This could be massive for cashflow through tough times.

Start-up tax refunds

The Government is also trying to support small businesses through their early stages of business.

From 1 July 2028, eligible small start-ups (less than $10m turnover) that are making losses will be able to refund taxes they have already paid – including PAYGW (tax paid on their employees’ wages) & FBT taxes.

The detail is still a bit thin on the ground at this stage, but this could meaningfully help new businesses with their cashflow, encourage earlier hiring and help small businesses get off the ground.

Other start-up concessions

There are a broader range of start-up and venture capital concessions announced, including:

- increasing VC investment thresholds

- expanding tax incentives for early stage investors

- easier concession access for larger businesses

- heavy investment into AI & advanced manufacturing

- increasing R&D incentive thresholds & expenditure caps

- and increasing support for genuine innovation & development activities

The Government want more money flowing into tech & start-ups and less into new Ford Raptors…

Permanent FBT discount for EVs

Unfortunately, the current full FBT exemption for certain electric vehicles (EVs) won’t last forever.

At the moment, eligible EVs are exempt from FBT, and that will remain the same until:

- The full exemption will apply until 31 March 2027

- From 1 April 2027, higher value EVs will move to the reduced 25% FBT discount

- From 1 April 2029 onwards, the full exemption will effectively disappear and all eligible EVs will receive a permanent 25% FBT discount

Whilst the tax benefits are being wound back slightly, there is definitely still tax savings if you are in the market for a new Tesla.

Whether or not you think it’s for the better, this Budget undeniably shifts how Australians will approach tax, structuring, investment & housing.

Make sure before you make any major decisions based on the Budget headlines alone, reach out to us for support.

And finally… spare a thought for your accountant, who is going to have to put this all into action!