Australian 2026-27 Federal Budget: tax cuts, business changes and investor reforms
Treasurer Jim Chalmers delivered the 2026-27 Federal Budget on 12 May 2026. The real story is not just cost-of-living relief — it is a major tax reform package affecting workers, small businesses, property investors, share investors and discretionary trusts.
Important accuracy note
Several Budget items are proposals and still need legislation, consultation or final ATO guidance. This guide separates announced measures from existing settings where possible.
Table of contents
Executive summary
Budget at a glance
The Budget combines worker tax cuts, small business simplification and major investor tax reforms. The most important point: not every measure is already law.
$31.5b deficit
The 2026-27 Budget forecasts a $31.5 billion deficit, not a surplus.
15% then 14%
The lowest non-zero tax rate reduces from 16% to 15% from 1 July 2026, then 14% from 1 July 2027.
$1,000
Eligible workers can claim an instant deduction from the 2026-27 income year.
$20,000
The instant asset write-off becomes permanent from 1 July 2026 for eligible small businesses.
Income tax cuts from 1 July 2026
$1,000 instant tax deduction
$250 Working Australians Tax Offset
Permanent $20,000 instant asset write-off
Negative gearing limited to new builds
CGT discount reform
Discretionary trust minimum tax
Super mostly unchanged
Workers and individuals
Income tax cuts from 1 July 2026
From 1 July 2026, the 16% tax rate on income between $18,201 and $45,000 reduces to 15%. From 1 July 2027, it reduces again to 14%.
Resident tax rates — 2026-27
Medicare levy not included.
| Taxable income | Tax payable |
|---|---|
| $0 - $18,200 | Nil |
| $18,201 - $45,000 | 15c for each $1 over $18,200 |
| $45,001 - $135,000 | $4,020 plus 30c for each $1 over $45,000 |
| $135,001 - $190,000 | $31,020 plus 37c for each $1 over $135,000 |
| $190,001 and over | $51,370 plus 45c for each $1 over $190,000 |
Plain-English impact
The tax cut benefits every resident taxpayer with taxable income above $18,200, while keeping the broader marginal tax bracket structure in place.
Tax simplification
$1,000 instant tax deduction for workers
From the 2026-27 income year, eligible workers can claim an instant deduction of up to $1,000 for work-related expenses without itemising smaller claims.
Less paperwork for smaller work-related claims
The instant deduction allows eligible employees to reduce taxable income by up to $1,000 without itemising smaller work-related deductions.
Important
Taxpayers with more than $1,000 in work-related deductions can still claim actual expenses in the usual way. Charitable donations, union fees, professional association fees and other non-work deductions can still be claimed separately.
Worker support
$250 Working Australians Tax Offset
From 1 July 2027, the Budget introduces a $250 Working Australians Tax Offset. It is separate from the tax rate cut and the $1,000 instant deduction.
Who benefits?
How is it applied?
When does it start?
Small business
Permanent $20,000 instant asset write-off
From 1 July 2026, the $20,000 instant asset write-off becomes permanent for eligible small businesses with aggregated annual turnover under $10 million.
What changes?
Why it matters?
Business loss reforms
The Budget also includes business tax reforms such as loss carry-back and loss refundability measures to support companies, start-ups and early-stage businesses through investment cycles and temporary losses.
Property investors
Negative gearing changes from 1 July 2027
From 1 July 2027, the Government proposes limiting negative gearing for residential property investments to new builds. Existing arrangements remain unchanged for properties held before Budget night.
Negative gearing limited to new builds from 1 July 2027
This is one of the biggest investor measures
For established residential properties purchased from 7:30pm AEST on 12 May 2026, rental losses will generally only be deductible against other residential property income or residential property capital gains. Excess losses can be carried forward.
Existing properties
New builds
Shares and ETFs
Investors
Capital gains tax reform from 1 July 2027
From 1 July 2027, the Budget proposes replacing the 50% CGT discount for individuals, trusts and partnerships with cost-base indexation and a 30% minimum tax on real capital gains.
50% CGT discount
Eligible individuals and trusts may reduce a capital gain by 50% when the asset has been held for more than 12 months.
Indexation plus 30% minimum tax
The cost base is adjusted for inflation, and a 30% minimum tax applies to real capital gains accruing from 1 July 2027.
Existing assets are not treated as one single gain
For eligible CGT assets owned before 1 July 2027 and sold after that date, the gain is split. Gains accrued before 1 July 2027 remain under current rules, including the 50% discount where eligible. Gains accrued from 1 July 2027 fall under the new system.
What remains protected?
The Budget explainer says the main residence exemption continues, and the four small business CGT concessions are unchanged.
Family groups and business structures
30% minimum tax on discretionary trusts
From 1 July 2028, the Government proposes a 30% minimum tax on discretionary trusts. This is designed to reduce the tax advantage of distributing income to beneficiaries on lower marginal tax rates.
How the tax works
Rollover relief
Exclusions and special cases
The Budget explainer indicates the minimum tax will not apply to fixed trusts, widely held trusts, complying superannuation funds, special disability trusts, deceased estates and charitable trusts. Some income types are also excluded, including primary production income and certain income relating to vulnerable minors.
Payroll and super
Superannuation: SG remains 12%
Superannuation is not the main reform area in this Budget. The Super Guarantee rate remains 12% for the 2026-27 financial year.
Payroll should already be using 12%
Employers should ensure payroll systems apply the 12% Super Guarantee rate and stay ready for payday super administration changes.
Timeline
Key dates
These are the practical dates workers, small businesses, accountants and investors should keep in mind.
Budget night cut-off for grandfathering existing residential property under the negative gearing reforms.
Medicare levy low-income thresholds increase by 2.9% for the 2025-26 income year.
The 16% tax rate reduces to 15%; permanent $20,000 instant asset write-off starts.
$1,000 instant tax deduction starts for eligible workers. Eligible companies may access loss carry-back measures.
The 15% tax rate reduces to 14%; $250 Working Australians Tax Offset starts; negative gearing and CGT reforms commence.
Three-year rollover relief begins for eligible restructures out of discretionary trusts.
30% minimum tax on discretionary trusts commences, subject to exclusions and final legislation.
Practical review list
What individuals, businesses and investors should review
The Budget creates different action points depending on whether you earn salary income, run a business, hold investments, own property or use a trust structure.
Individuals and workers
- Estimate the 2026-27 and 2027-28 tax cut impact.
- Decide whether the $1,000 instant deduction or actual deductions are better.
- Check whether Medicare levy low-income threshold changes affect you.
Small businesses
- Plan equipment and technology purchases.
- Review eligibility for the permanent $20,000 instant asset write-off.
- Consider whether loss carry-back or loss refundability reforms may apply.
Property investors
- Confirm whether existing properties are grandfathered.
- Review new build versus established property strategy.
- Prepare for possible carried-forward residential property losses.
Trusts and family groups
- Review discretionary trust distributions.
- Model the impact of a 30% minimum trustee-level tax.
- Consider whether rollover relief may support a future restructure.
Questions
Frequently asked questions
Need help applying the Budget to your tax position?
The biggest risk is not missing one headline — it is making a decision before understanding how tax cuts, negative gearing, CGT and trust reforms interact with your personal circumstances.
Sources and methodology
This guide is based on official 2026-27 Australian Government Budget papers, Budget fact sheets and ATO published superannuation rates. It is general information only and does not constitute tax, legal or financial advice. Some measures require legislation, consultation or final ATO guidance before taxpayers can rely on the detailed operation of the rules.
Disclaimer: This article is for general information only. It does not take into account your objectives, financial situation or needs. Tax laws can change and final rules may differ from Budget announcements. Speak with a qualified tax adviser before making tax, investment, property or business structure decisions.