Federal Budget 2026-27: what it means for you
Handed down on 12 May 2026, this Budget sets out some of the most significant tax reforms in a generation — a rebuilt capital gains tax regime, changes to negative gearing and discretionary trusts, and a mix of new offsets and small-business concessions. Here is a plain-English summary of the measures most likely to affect you, and when they are set to start.
English & Chinese PDF versions of this summary are available on request — please contact us.
* General information only. Kristy Pan & Co. provides this material for general knowledge; it does not constitute tax or financial advice and does not take account of your specific circumstances. Almost all of the measures below are Budget announcements only and must pass Parliament before they become law — the detail may change. Current as at 12 May 2026. Please contact us before acting.
These are announcements, not law — yet.
A Budget is a statement of intent. Most measures here still need to pass Parliament, and the final rules can differ from what was announced. A few have a trigger date that has already passed (notably the negative gearing change), so it is worth understanding them now — but please do not restructure your affairs on the strength of a Budget announcement without speaking with us first.
The headline reforms
Three structural changes stand out: a rebuilt capital gains tax regime, tighter negative gearing for residential property, and a new minimum tax on discretionary trusts. Each is proposed to start on a future date — but note the trigger dates.
The 50% CGT discount is replaced by indexation, with a 30% minimum tax.
For assets held more than 12 months, the 50% discount gives way to cost base indexation, with a 30% minimum tax on net capital gains. This applies to individuals, trusts and partnerships, across all assets (including pre-CGT assets).
Transitional rules limit the impact: the change only applies to gains accruing on or after 1 July 2027. Gains accrued before that date keep the 50% discount, and pre-CGT gains accrued before then stay exempt. Assets sold before 1 July 2027 keep the current rules entirely.
Investors in new residential property can choose either the 50% discount or indexation + the 30% minimum tax. Income-support recipients, including Age Pensioners, are exempt from the minimum tax.
Negative gearing on established rentals is being quarantined.
From 1 July 2027, losses from established residential property will only be deductible against rental income or capital gains from residential property. Excess losses are carried forward to offset residential property income in future years.
The change applies to established properties acquired from 7:30pm (AEST) on 12 May 2026. Property acquired before that time — including contracts entered into but not yet settled — is exempt until it is sold. Eligible new builds are exempt, as are properties in super funds and widely held trusts, with further carve-outs for build-to-rent and government housing programs.
A 30% minimum tax on discretionary trusts.
From the 2028-29 income year, trustees will pay a minimum 30% tax on the taxable income of a discretionary trust. Non-corporate beneficiaries receive non-refundable credits for the trustee's tax; corporate beneficiaries are assessed on the income they are entitled to, without those credits.
It will not apply to fixed trusts, complying super funds, special disability trusts, deceased estates or fixed testamentary trusts. Some income is excluded — primary production income, certain income of vulnerable minors, non-resident withholding income, and income from existing testamentary discretionary trust assets.
Expanded rollover relief will be available for three years from 1 July 2027 for small businesses and others wanting to restructure out of a discretionary trust into, say, a company or fixed trust.
For individuals & families
A mix of new offsets, a simpler way to claim work expenses, the next legislated tax cuts, and updated thresholds.
$250 Working Australians Tax Offset
A new permanent annual offset on income from work — salary and wages, and the business income of sole traders.
$1,000 standard deduction
Claim up to $1,000 for work-related expenses without itemising or keeping receipts. Spent more? Itemise as usual. Donations and union/professional fees can still be claimed on top.
Legislated tax cuts
The 16% rate falls to 15% from 1 July 2026, then to 14% from 1 July 2027. These are already law.
Medicare levy & private health
Medicare levy low-income thresholds rise 2.9% from 1 July 2025. From 1 April 2027, the age-based uplift of the private health insurance rebate is removed.
Resident personal income tax rates
The tax-free threshold and the upper brackets are unchanged — only the first taxable bracket steps down over the next two years.
| Taxable income | 2025-26 | 2026-27 | 2027-28 |
|---|---|---|---|
| $0 – $18,200 | Tax-free | Tax-free | Tax-free |
| $18,201 – $45,000 | 16% | 15% | 14% |
| $45,001 – $135,000 | 30% | 30% | 30% |
| $135,001 – $190,000 | 37% | 37% | 37% |
| $190,001+ | 45% | 45% | 45% |
See your tax cut
Enter your taxable income to compare the tax on it under the 2025-26 rates and the 2027-28 rates.
Income tax only — excludes the Medicare levy, offsets and deductions. Illustrative.
For business owners
Several concessions are aimed squarely at small and medium business — some permanent, some temporary, and some phased in over the next few years.
The $20,000 instant asset write-off is made permanent.
Small businesses with turnover under $10 million can keep writing off eligible assets costing less than $20,000 in the year they are first used. Assets of $20,000 or more still go into the small business depreciation pool.
Loss carry back returns
Companies with turnover under $1 billion can carry a tax loss back against tax paid up to two years earlier — revenue losses only, limited to the franking account balance.
Start-up loss refundability
Start-ups under $10m turnover that make a loss in their first two years can turn it into a refundable offset — capped at FBT and wage withholding on Australian employees.
Monthly PAYG option
Small and medium businesses can opt to report and pay PAYG instalments monthly, using an ATO-approved calculation built into accounting software.
Fuel excise cut
Fuel excise reduced by 60.9% — about 32c/litre off petrol and diesel — and the heavy-vehicle road user charge cut from 32.4c/litre to zero.
R&D incentive reform
A higher core offset rate, the intensity threshold cut from 2% to 1.5%, the top-rate turnover threshold lifted from $20m to $50m, and supporting R&D expenditure removed.
Small Business Debt Helpline
$8.2 million to extend free financial counselling and the NewAccess mental-health coaching program for small business owners.
The electric-car FBT concession is being scaled back.
A permanent 25% FBT discount (a 15% statutory rate) will apply to electric cars valued up to the fuel-efficient luxury car tax threshold. Transitional rules keep the current 100% discount for cars up to $75,000 provided before 1 April 2029; cars between $75,000 and the threshold provided from 1 April 2027 to 1 April 2029 get the 25% discount.
Key dates at a glance
Most measures are staged over the next three years. Here is when each is proposed to take effect.
| Date | Measure |
|---|---|
| 1 Apr 2026 | Temporary fuel excise & heavy-vehicle road-user-charge cut (three months) |
| 7:30pm, 12 May 2026 | Negative gearing trigger — established rentals acquired after this time are affected |
| 1 Jul 2026 | Tax rate 16% → 15%; permanent $20,000 instant asset write-off; loss carry back returns; $1,000 standard deduction (draft) |
| 1 Apr 2027 | Private health insurance age-based rebate uplift removed |
| 1 Jul 2027 | Tax rate 15% → 14%; new CGT regime; negative gearing changes; monthly PAYG option; trust restructure rollover opens |
| 2027-28 | $250 Working Australians Tax Offset begins |
| 1 Jul 2028 | 30% minimum tax on discretionary trusts; start-up loss refundability; R&D incentive reforms |
| 1 Apr 2029 | Electric-car FBT concession reduced |
| 30 Jun 2029 | Foreign-purchase ban on established homes extended to this date |
Also announced
Foreign-purchase ban extended
The temporary ban on foreign purchases of established homes is extended by two years and three months, to 30 June 2029.
Counter-fraud strategy
$86.3 million over four years for Phase 2 of the ATO's Counter Fraud Strategy — real-time detection, stronger protections for fraud victims, and expanded powers against dishonest intermediaries.
Global minimum tax & renewables CGT concession
Australia's global and domestic minimum tax laws will be amended to match the OECD/G20 side-by-side package. A time-limited foreign-resident CGT concession will also apply to certain renewable-energy infrastructure assets, to 30 June 2030.
How we help
The measures that matter most — the CGT changes, negative gearing and the trust minimum tax — carry trigger dates and choices that reward planning ahead. We can model how they affect your investments, structure or business, weigh up whether to restructure while rollover relief is available, and keep you across each measure as it moves from announcement to law.
Glossary of terms
- CGT
- Capital gains tax — tax on the gain you make when you sell or dispose of an asset such as property or shares.
- Cost base indexation
- Adjusting an asset's cost for inflation before working out the gain, so only the real (above-inflation) gain is taxed.
- Negative gearing
- Where the costs of a rental investment (such as interest) exceed the income, producing a loss that can reduce other taxable income.
- Discretionary trust
- A trust (often a family trust) where the trustee decides each year how income is shared among the beneficiaries.
- Franking account
- A running record of the tax a company has paid, which sets how much it can pass to shareholders as franking (imputation) credits.
- PAYG instalments
- Regular pre-payments of tax on business and investment income during the year, credited against your end-of-year tax.
This summary contains general information only, drawn from the 2026-27 Federal Budget announced on 12 May 2026. The measures described are Government announcements and, unless stated as already legislated, are not yet law — the detail may change or may not proceed. This material does not take into account your circumstances and is not a substitute for advice. Please consult Kristy Pan & Co. about your situation before acting.