2026-27 Federal Budget

On Tuesday, 12 May 2026, Treasurer Jim Chalmers delivered the 2026-2027 Federal Budget, his 5th Budget.

The Treasurer announced major reforms to CGT, negative gearing and the taxation of trusts in what he described as the “most important and ambitious Budget in decades”.

A Budget deficit of $28.3bn is forecast in 2025-26, to be followed by an underlying cash deficit of $31.5bn in 2026-27 ($31.0bn in 2027-28 and $34.4bn in 2028-29).

The Budget papers note that the conflict in the Middle East has created extreme global volatility and uncertainty. As a result, inflation is expected to peak around 5% through the year to the June quarter 2026 (up from 4.6% in the year to March 2026). Headline inflation is then forecast to decline to 2.5% through the year to the June quarter 2027 (back within the RBA’s targetband of 2-3%). This assumes a decline in global oil prices from the middle of 2026, a resolution of temporary pressures and a moderation in services inflation.

Real GDP growth is expected to slow from 2.25% in 2025-26 to 1.75% in 2026-27. While the economic outlook remains highly uncertain, the Australian economy is expected to grow by 2.25% in 2027-28. Once again, this recovery assumes that global oil prices begin to decline from the middle of 2026 and largely stabilise from the middle of 2027.
On the revenue side, $737.1bn in tax receipts are expected for 2026-27 (up 5.4%), representing 23.8% of GDP (up from 23.6% for 2025-26). Gross debt is expected to increase to $1.051 trillion (34.0% of GDP) in 2026-27 (up from $982.0bn in 2025-26) and peak at 35.8% of GDP in 2028-29 at $1.193 trillion.

The major tax related measures announced in the Budget included:

▪ 50% CGT discount abolished – to be replaced with an inflation-adjusted indexation method from 1 July 2027 (subject to transitional arrangements) for all CGT assets held by individuals, trusts and partnerships for more than 12 months. An exception will apply for new builds of residential properties;

▪ CGT minimum 30% rate – will apply on realised gains (including for pre-1985 assets) from 1 July 2027;

▪ Minimum 30% tax on discretionary trusts – from 1 July 2028 a minimum tax of 30% will apply to the taxable income of discretionary trusts. However, it will not apply to other types of trusts, including fixed and widely held trusts, complying super funds, special disability trusts, deceased estates and charitable trusts.

▪ Negative gearing – to be limited to new builds from 1 July 2027. Residential properties currently owned at Budget time (7:30 pm AEST 12 May 2026) will be excluded until they are sold;

▪ A new $250 working Australians tax offset (WATO) – will apply from 1 July 2027 to all eligible Australian workers for their income derived from work;

▪ Personal tax rates – the Budget confirmed the already-legislated reduction in the resident personal income tax rate from 16% to 15% (from 1 July 2026) and to 14% (from 1 July 2027) for the taxable income bracket from $18,201 to $45,000;

▪ $1,000 standard deduction – confirmed for work-related expenses from the 2026-27 income year;

▪ $20K instant asset write-off for small businesses – permanently extended;

▪ Loss carry-back regime – to be reintroduced from 1 July 2026 for certain businesses and start-ups;

▪ FBT exemption for EVs – the full FBT exemption for electric vehicles (EVs) will be phased out and replaced with a temporary $75,000 threshold;

▪ Loss refundability for small start-ups – from 1 July 2028 for start-up companies with aggregated annual turnover of less than $10m that generate a tax loss in their first 2 years;

▪ Venture capital tax incentives – the asset size caps will be increased from 1 July 2027;

▪ R&D tax incentive – to be overhauled;

▪ Dynamic monthly business tax payments from 1 July 2027 – the ATO will expand its pilot of dynamic pay as you go (PAYG) instalment calculations and expand access to monthly business tax payments, using an ATO-approved calculation embedded in accounting software to calculate and vary their instalments;

▪ More funding for ATO: compliance activities and combatting fraud – the funding will enhance the ATO’s ability to detect and prevent fraud in real time including the expansion of live monitoring of account access for tax agents, businesses and “high-risk” superannuation changes.

No major new superannuation measures announced. 

The Budget Papers don’t contain sufficient details to arrive at any conclusions and implications for super funds will be determined after the legislation is passed. Implications for self-managed superannuation funds (SMSFs), complying approved deposit funds (ADFs) and pooled superannuation trusts (PSTs), will be determined at a later date.

Currently, only two-thirds of any net gain on disposal or a CGT event is included in the complying fund’s assessable income, provided that the asset has been held for over 12 months. As a result, a complying superannuation fund, ADF or PST entitled to the CGT discount on the disposal of an asset or a CGT event will continue to be taxed at an effective rate of 10% (ie two-thirds of the 15% concessional tax rate for complying super funds).

Super Guarantee – no change to current rate of 12%.

Remember, these are proposed measures, and there will be more detailed information to come as legislation passes through parliament.

You can access the 2026-27 Budget Papers here:

https://budget.gov.au/

Get in touch if you’d like to find out more about how these measures and changes may impact your business.

Give us a call on 07 5649 7650.