2026/27 FEDERAL BUDGET OVERVIEW

On Tuesday the 12th of May 2026, Jim Chalmers handed down the 2026/2027 Federal Budget which included several tax changes. Overall, there were changes announced that will impact small businesses and individual taxpayers.

We have highlighted the areas below that we feel will be of most value to you. Please note, until legislated these Federal Budget announcements are only proposed changes until noted otherwise.

It is important to note that many of these measures are proposals only and must still pass through Parliament before becoming law.

Negative Gearing Reform
The Government aims to reform residential investment property negative gearing. The proposed changes are to start from 1st July 2027, and the following amendments have been proposed:

  • Losses from residential properties can only offset rental income or residential property capital gains.  

  • Rental property losses can be carried forward.

These changes will apply to rental properties purchased after 7pm on 12th May 2026.
Eligible new builds, properties in superannuation funds and properties in widely held trust will be excluded from these changes.

Discretionary Trust Tax Reform
The Government will introduce a minimum 30% tax on discretionary trusts. The proposed tax will start from 1st July 2028 and will require trustees to pay the minimum 30% tax on the taxable income of the discretionary trusts.
Individuals will receive non-refundable tax credits for the tax payable by the trustee.
The new tax will not apply to other types of trusts and to some types of income such as primary production.
The Government will provide a three-year rollover relief from 1st July 2027 to allow for restructuring out of discretionary trusts into another type of entity.  

CGT Reform
From 1 July 2027, the current 50% CGT discount for individuals, trusts and partnerships is proposed to be replaced with cost base indexation and a 30% minimum tax on net capital gains. This will not impact companies as they are not eligible for the 50% discount.

No changes have been proposed to complying superannuation funds, which currently receive a one-third CGT discount.

For assets held before 1 July 2027, the current CGT rules, including the 50% general discount, are expected to apply to gains made up to that date. The new rules are expected to apply only to capital gains accruing after that date.

The changes are not intended to apply retrospectively to gains that have accrued prior to 1 July 2027.

Medicare Levy Low-Income Thresholds
Increased Medicare levy low-income thresholds will be implemented from 1st July 2025, raising the threshold at which no Medicare levy is payable for the following:

  • For non-senior individuals to $28,011;

  • For single senior individuals eligible for SAPTO to $44,268; 

  • For families not eligible for the senior and pensioners tax offset to $47,907; and

  • For families eligible for the seniors and pensioners tax offset to $61,623.

  • The family income thresholds will increase by $4,338 for each dependent child.

Working Australian Tax Offset
From 1st July 2027 the Government will introduce a new permanent $250 Working Australian Tax Offset. This offset will apply to Australians who have earned income from work such as salary and wages and sole trader business income.

$1,000 Standard Work-Related Deduction
The Government will introduce a standard tax deduction for up to $1,000 for work-related expenses from 1st July 2026. Work-related expenses up to $1,000 will not need to be itemised or substantiated.

Permanent Instant Asset Write-Off
From 1st July 2026 the Government will permanently extend the $20,000 instant asset write off for small businesses with turnover less than $10 million.
Assets over $20,000 can continue to be placed into the small business depreciation pool.
The Government will continue to suspend the provisions preventing small businesses who have opted out of the simplified depreciation rules from re-entering for 5-years, until 30 June 2027.
 
Other Budget Measures
Several additional measures have been announced:

  • The Government will assist the ATO in the extension of their dynamic PAYG instalment calculation pilot and the expansion of this pilot to monthly payments.

  • The Government will also assist the ATO with its continued efforts to modernise the ATOs fraud prevention and detection systems.

  • Reforms to the R&D tax incentives to simplify and better target Government support of R&D businesses.

  • Extension of Small Business Debt Helpline and New Access for Small Business Owners programs until 30th June 2027.

  • The Government will introduce a permanent 25% FBT discount on all electric cars up to the fuel-efficient luxury car tax threshold. This will start on 1st April 2029.

  • The Government will extend the ban on foreign purchases of established residential properties until 30th June 2029.

Please note, important information is still being released as the government consults with industry experts and explanatory papers are issued.

Key Budget timeline — proposed dates of effect
 
2026–27 income year
From 1 July 2026

  • Permanent extension of the $20,000 instant asset write-off for small businesses with turnover up to $10 million.

  • Reintroduction of loss carry-back rules for eligible companies with aggregated annual global turnover of less than $1 billion.

From the 2026–27 income year

  • Proposed $1,000 instant tax deduction for work-related expenses.

From 1 April 2027

  •  Removal of the age-based uplift of the Private Health Insurance Rebate.


2027–28 income year
From 1 July 2027

  • Negative gearing reform — negative gearing for residential property is proposed to be limited to new builds (unless grandfathered).

  • CGT reform — the 50% CGT discount for individuals, trusts and partnerships is proposed to be replaced with cost base indexation and a 30% minimum tax on real capital gains.

  • Working Australians Tax Offset — proposed $250 tax offset from the 2027–28 income year.

  • Monthly PAYG instalments — small and medium businesses may be able to opt in to monthly PAYG instalment reporting and payments.

  • Trust restructuring rollover relief — proposed three-year rollover relief period begins for those wishing to restructure out of discretionary trusts.

  • Venture capital tax incentives — proposed expansion of venture capital tax incentives.


2028–29 income year
From 1 July 2028

  • Discretionary trusts — proposed 30% minimum tax on taxable income of discretionary trusts.

  • Loss refundability — proposed loss refundability for eligible start-up companies with aggregated annual turnover of less than $10 million.

  • R&D Tax Incentive — proposed reforms to better target the Research and Development Tax Incentive.

  • Foreign purchaser ban — extension of the ban on foreign purchasers of established dwellings to 30 June 2029.


From 1 April 2029

  • Electric vehicle FBT discount — proposed permanent 25% FBT discount for eligible electric cars valued up to and including the fuel-efficient luxury car tax threshold.

Important note: These dates are based on the Budget announcements. Many measures remain proposals and may change as legislation is drafted, debated and passed.
 
As always, if you have any questions about any of the above, please don't hesitate to contact our office to discuss on 08 8523 0999 (Gawler Office), 08 8299 9444 (Northgate Office) or admin@milaneseco.com.au.

Milanese & Co Accountants