Federal Budget 2026: Key Tax Updates You Need To Know
Updated: 10 minutes ago
The Federal Budget 2026–27 contains significant tax changes for Australian workers, small businesses, companies, property investors and discretionary trusts. Some changes apply from the 2026–27 financial year, while major reforms to Capital Gains Tax, negative gearing and trust taxation are scheduled for later years.
For business owners and investors, the important question is not simply what changed? It is when does it apply, and what should you do about it? This guide breaks down the key Budget measures and the tax planning issues worth reviewing now.
What Are the Key Federal Budget 2026–27 Tax Changes?
Key update | When it applies |
Personal tax rate reduced from 16% to 15% | 1 July 2026 |
Proposed standard work related deduction of up to $1,000 | 2026–27 income year |
Permanent $20,000 instant asset write off announced | From 1 July 2026 |
Capital Gains Tax reforms | 1 July 2027 |
Negative gearing reforms | 1 July 2027 |
Working Australians Tax Offset of up to $250 | 2027–28 income year |
Minimum 30% tax for discretionary trusts announced | 1 July 2028 |
The Budget material confirms this staged timetable, with several major measures commencing after the current financial year.
What Changes For Individual Taxpayers In 2026–27?
One measure already legislated is the personal income tax reduction.
From 1 July 2026, the tax rate applying to taxable income between $18,201 and $45,000 falls from 16% to 15%. It is legislated to reduce again to 14% from 1 July 2027.
The Government has also proposed a standard deduction of up to $1,000 for work related expenses from the 2026–27 income year. Importantly, the attached Budget material notes that draft legislation had been released for consultation. It should therefore be described as a proposed measure rather than an existing entitlement until enacted.
Under the proposed rules, eligible Australian residents claiming no more than $1,000 of work related deductions would not need to itemise or substantiate those expenses. Taxpayers with higher eligible expenses could continue using the existing deduction rules.
The Government has also announced a Working Australians Tax Offset of up to $250 from the 2027–28 income year.
Check the current legislated personal tax rates before planning remuneration or deductions. View The ATO Tax Changes.
What Changes For Small Businesses And Companies?
Two Budget measures are particularly relevant to businesses: the $20,000 instant asset write off and company loss carry back.
The Government announced that the $20,000 instant asset write off will be made permanent from 1 July 2026 for eligible small businesses with aggregated turnover below $10 million. Eligible assets costing less than $20,000 may qualify for an immediate deduction, while assets costing $20,000 or more can continue to enter the small business depreciation pool.
This does not mean businesses should purchase assets purely for the deduction. Commercial need, cash flow and eligibility should come first.
Loss carry back will also return for income years commencing on or after 1 July 2026. The attached Budget material specifies that companies with aggregated annual global turnover below $1 billion may be able to carry back a revenue loss against tax paid up to two years earlier. The benefit will be limited by the company’s franking account balance.
That detail is important for companies reviewing losses after previously profitable years.
Consider the tax and cash flow impact before committing to a major business decision. Plan Ahead With Sageon.
How Is Negative Gearing Changing?
The negative gearing reforms are scheduled to begin on 1 July 2027, but the acquisition date of a property matters.
Under the announced changes, losses from established residential properties will generally only be deductible against rental income or capital gains from residential property. Excess losses can be carried forward for use against residential property income in future years.
The reforms are intended to apply to established residential properties acquired from 7:30 pm AEST on 12 May 2026.
Properties acquired before that time, including qualifying contracts entered into before the deadline but not yet settled, are intended to remain under the existing arrangements until disposal. Eligible new builds are excluded from the restrictions, along with specified categories such as properties held through superannuation funds and widely held trusts.
What Is Changing With Capital Gains Tax?
From 1 July 2027, the Government proposes to replace the existing 50% CGT discount with cost base indexation for assets held for more than 12 months, together with a 30% minimum tax on net capital gains.
The proposed rules apply to individuals, trusts and partnerships, but transitional arrangements are intended to protect gains that accrued before 1 July 2027. The existing 50% CGT discount will continue to apply to gains accrued before that date.
For pre CGT assets, capital gains accrued before 1 July 2027 are intended to remain exempt.
There is also special treatment proposed for new residential property. Investors in qualifying new residential properties may be able to choose between the existing 50% CGT discount and the new indexation and minimum tax model.
This makes accurate purchase records, improvement costs and valuations increasingly important.
Discuss the timing of a property sale or restructure before taking action. Explore Sageon CGT Planning.
What Is Changing For Discretionary Trusts?
The Government has announced a minimum 30% tax on discretionary trusts from 1 July 2028.
Under the announced model, trustees would pay a minimum 30% tax on taxable income. Individual beneficiaries would generally receive non refundable credits for tax paid by the trustee. Different treatment would apply to corporate beneficiaries.
The attached Budget material also identifies exclusions for certain trusts and types of income, including fixed trusts, fixed testamentary trusts, complying superannuation funds, special disability trusts and deceased estates.
The Government has also announced expanded rollover relief for three years from 1 July 2027 for eligible businesses and others restructuring out of discretionary trusts into structures such as companies or fixed trusts.
The announcement does not mean every discretionary trust should be restructured. CGT, transfer duty, asset protection, succession planning, financing and compliance consequences all need to be considered first.
Are There Other Budget Changes Businesses Should Watch?
Yes. The attached Budget material also highlights several measures that may become relevant to different clients.
The Government proposes to allow small and medium businesses to opt into monthly PAYG instalments from 1 July 2027, alongside expanded use of dynamic instalment calculations through approved accounting software.
Changes to the R&D Tax Incentive are proposed from 1 July 2028, including changes to offset rates, intensity thresholds, turnover limits and expenditure thresholds.
Electric vehicle FBT concessions are also being reshaped. The Budget material outlines transitional rules from 1 April 2027 and a permanent 25% FBT discount for eligible electric cars from 1 April 2029, subject to vehicle values and commencement dates.
See how Sageon supports growing businesses across tax, accounting and compliance. Discover Sageon SMB Services.
What Should Individuals And Businesses Do Now?
The Budget creates different timelines, so the right response is to focus on the measures relevant to your circumstances.
Consider reviewing your 2026–27 tax forecast, planned asset purchases, prior company tax and losses, property records, trust structures and longer term investment decisions.
Avoid changing structures or selling assets purely because of a headline. Several reforms have future commencement dates, transitional rules or implementation details that need to be considered.
Frequently Asked Questions
Is The $1,000 Work Related Deduction Already Law?
The attached Budget material states that draft legislation had been released for consultation. It should therefore be treated as a proposed measure until enacted.
Is The $20,000 Instant Asset Write Off Permanent?
The Government announced that it will permanently extend the $20,000 threshold from 1 July 2026 for eligible small businesses with turnover below $10 million.
Can Every Company Carry Back A Tax Loss?
No. The announced measure applies to eligible companies with aggregated annual global turnover below $1 billion, relates to revenue losses and is limited by the company’s franking account balance.
When Do The Negative Gearing And CGT Changes Start?
The main reforms are scheduled for 1 July 2027, with transitional and grandfathering rules applying in relevant circumstances.
Does The 30% Trust Tax Apply From 2026–27?
No. The announced minimum 30% tax for discretionary trusts is scheduled to commence from 1 July 2028, subject to exclusions and implementation details.
Turn The Budget Changes Into A Practical Tax Plan
Federal Budget announcements do not affect every taxpayer in the same way. The right response depends on your income, business structure, investments, cash flow and longer term objectives.
Sageon’s Taxation Planning team takes a proactive approach to legislative change, helping businesses and individuals understand the implications before decisions are made.
This article provides general information only and does not constitute tax, legal, financial or investment advice. Several Federal Budget measures described above are announced or proposed measures and may require legislation before taking effect. Tax outcomes depend on individual circumstances. Seek professional advice before acting.
