Federal Budget 2026-27 at a glance

The 'Resilience and Reform' Budget

 On Tuesday 12 May 2026 the Treasurer Jim Chalmers handed down the 2026-27 Federal Budget, framing some of the more significant announcements as part of a broader plan to help young Australians access the property market.

While acknowledging that the key to housing affordability is supply, the Government clearly sees changes to negative gearing and the capital gains tax (CGT) discount as being important pieces in the housing affordability puzzle.

The Government has called this its most ambitious budget and if the proposed measures are implemented, the impact will be felt directly by a wide cross-section of Australian society, including individual taxpayers, investors, businesses, employers and those suffering from a disability.

The year’s budget has been released against a backdrop of significant economic challenges, including global fuel price shocks, persistent inflation, rising interest rates and growing concerns around housing affordability. These themes are reflected in the measures that have been announced by the Treasurer.

2026-2027 FEDERAL BUDGET OVERVIEW

While the Government has announced some significant changes to the tax system, the superannuation system looks to have been left alone this year. Key initiatives include:

Business and Employers

• The cost threshold for the purpose of applying the instant asset write-off for small business entities will be permanently increased to $20,000 from 1 July 2026.

• On 5 May 2026 the Government announced that the FBT exemption for electric cars would be gradually scaled back over the next few years.

• For income years commencing on or after 1 July 2026 the Government will allow companies with aggregated annual global turnover of less than $1 billion to carry back a tax loss and offset it against tax paid up to two years earlier.

• Start‑up companies with aggregated annual turnover of less than $10 million that generate a tax loss in their first two years of operation will be able to utilise the loss to generate a refundable tax offset.

• From 1 July 2027, small and medium businesses will be able to opt in to reporting and paying PAYG instalments monthly and will be able to use an ATO-approved calculation that is embedded in accounting software to calculate and vary instalments.

• The Government will reform the Research and Development (R&D) Tax Incentive which provides a tax offset for eligible companies that undertake R&D activities.

Fuel

• A $14.8 billion package will be used to help Australia strengthen fuel supply.

• A reduction in the fuel excise and heavy vehicle road user charge will continue to apply for three months from 1 April 2026.

Taxpayers

• The Government will provide a $250 ‘Working Australians Tax Offset’ from the 2027–28 income year.

• During the 2025 federal election campaign the Labor party committed to introduce a $1,000 instant tax deduction for work-related expenses. On 20 April 2026 Treasury released draft legislation on this proposal for public consultation.

• Legislation has already been passed to ensure that the 16% tax rate on taxable income between $18,201 and $45,000 will drop to 15%. The rate will then drop to 14% from 1 July 2027 (already announced in the 2025-26 Federal Budget).

• The Government will increase the Medicare levy low‑income thresholds for singles, families, and seniors and pensioners.

  • The threshold for singles will be increased from $27,222 to $28,011.

  • The family threshold will be increased from $45,907 to $47,238.

Investors

• The parameters around negative gearing for residential property are set to change with the Government announcing that existing negative gearing rules will only be available in connection with new builds from 1 July 2027.

• The Government is planning to revert to a CGT indexation system based on the Consumer Price Index (CPI), much like the system that applied between 1985 and 1999. Indexation would only be available for assets that have been held for more than 12 months.

• The Government has announced that a minimum 30% tax rate will apply to distributions made by discretionary trusts.

• The Government will provide a concession in the foreign resident CGT regime for investment in the renewables sector.

• The Government will expand the scope of existing tax incentives which relate to venture capital limited partnerships and early stage venture capital limited partnerships.

Important

Unless otherwise noted, the measures outlined here are only announcements at this stage. There is no guarantee that they will be implemented as per the Government’s announcements (or at all).

The Collins Hume team are available to help you understand how the Budget and any enacted measures might impact on you. We can assist you to capitalise on any opportunities or minimise your risk. As always, the detail is important so please let us know if we can assist. We will keep you up to date with key developments as things progress.