On 12 May 2026, the Federal Government handed down its 2026–27 Budget. It includes some of the biggest tax changes in over 25 years. There are changes that affect businesses, investors, and individuals. We’ve broken it down into plain English below.
The Federal Budget for Business
You can now permanently write off assets under $20,000 immediately
If your business turns over less than $10 million, you can claim an immediate tax deduction for any asset purchased under $20,000 – from 1 July 2026, permanently. You no longer need to depreciate these items over several years.
Example: You buy an $18,500 piece of equipment in 2026. You claim the full deduction in this year’s tax return. At the 25% small business tax rate, that’s a $4,625 tax saving straight away.
If your company makes a loss, you may be able to get a tax refund
If your company makes a tax loss, you can now offset that loss against tax you paid in either of the previous two years and receive a cash refund from the ATO. This is particularly useful for businesses that had a good year followed by a tough one, or that spend heavily on equipment.
Example: Your company paid $10,000 in tax last year. This year it makes a loss after buying new equipment. You can claim back up to $3,750 of that tax as a cash refund.
Family trusts will be taxed differently from 1 July 2028
This is the biggest change for business clients who use a family trust. Right now, the trust itself pays no tax – income is split between family members who each pay tax at their own rate. From 1 July 2028, the trust will pay a minimum 30% tax on its income before any distributions are made.
The tax paid by the trust flows through as a credit to beneficiaries, but the credit cannot be refunded. This means that splitting income to a family member on a low income will no longer deliver the same tax saving it does today.
Sending income to a company (bucket company) will also no longer work the way it used to – the company receives no credit for the tax already paid by the trust, meaning the same income could effectively be taxed twice.
A special window opens from 1 July 2027 that allows trusts to restructure into a company or other structure without triggering a capital gains tax (CGT) bill. This window is only open for three years, so planning needs to start now.
Example: A family trust earns $120,000 and currently splits it between two family members on low incomes, resulting in around $13,000 total tax. Under the new rules, the trust pays $36,000 in tax upfront. The family cannot get back the overpayment. The tax bill has nearly tripled on the same income.
The capital gains tax discount is changing – this affects business owners too
If you are thinking about selling your business, retiring, or disposing of significant business assets in the coming years, the CGT changes from 1 July 2027 are relevant to you.
Currently, if you sell an asset held for more than 12 months, only half the capital gain is taxed. From 1 July 2027, this 50% discount is being replaced with an inflation adjustment plus a minimum 30% tax on any real gain remaining. Gains built up before 1 July 2027 are still protected under the current rules – only growth after that date falls under the new system.
It is worth noting that there are existing small business CGT concessions and exemptions that may still apply to your situation and could significantly reduce or even eliminate any CGT on a business sale. Whether these apply depends on your specific circumstances – it is something we would need to work through with you.
The key message is this: if you are thinking about selling your business or any major assets in the next few years, speak to us now. We can assess your position, determine what concessions may be available to you, and help you work out whether the timing of a sale makes a difference to your after-tax outcome.
The tax break for electric vehicles is being reduced
The current arrangement, where employees pay no Fringe Benefits Tax (FBT) on an electric vehicle provided by their employer, is being phased out. From 1 April 2029, a 25% discount applies instead of the full exemption. If you are already in an arrangement, you are protected. If you are thinking about setting one up, acting before 1 April 2027 locks in the full exemption.
Action Required Now – Business
- If you operate through a family trust, please contact us. The 30% trust tax doesn’t start until 2028, but the window to restructure without a CGT bill opens in 2027 and proper planning takes time. We need to review your situation now to work out the best path forward.
- If you are thinking about selling your business or any significant business assets in the next few years, talk to us now. We can assess whether any CGT concessions apply to your situation and model the impact of the new rules. For some clients, timing the sale before 1 July 2027 will produce a meaningfully better after-tax result.
- If you or an employee are considering an electric vehicle through a novated lease, act before 1 April 2027 to lock in the full FBT exemption.
The Federal Budget for Investors
Existing investment properties – fully protected
If you already own an investment property, or had a contract in place before 7:30 PM on 12 May 2026, nothing changes for you. You can keep claiming your rental losses against your salary or other income for as long as you own the property — regardless of how many properties you hold.
Purchasing an established property between 12 May 2026 and 30 June 2027 – transition period
If you purchase an existing residential property after 7:30 PM on 12 May 2026, your property is not grandfathered under the old rules. While current law technically still applies until 30 June 2027, once the new rules commence on 1 July 2027 your rental losses will be quarantined — meaning you won’t be able to offset them against your salary or other income going forward. Anyone considering purchasing an established investment property should factor this in, as the long-term negative gearing benefit will not be available.
Purchasing an established property after 1 July 2027 – restricted deductibility
For existing residential properties acquired after 1 July 2027, rental losses will no longer be deductible against wages or other income. Instead, losses are quarantined and can only be offset against rental income from other properties, or against a capital gain on eventual sale. Unused losses carry forward each year until applied.
Where an investor holds multiple properties, losses from a newly acquired property can still be offset against net rental income from existing holdings — the restriction applies only to non-property income such as wages.
Purchasing a newly built property from 1 July 2027 – negative gearing preserved
New builds are treated differently under the proposed changes. If you purchase a newly constructed residential property, negative gearing is fully preserved — rental losses can continue to be offset against your salary or other income regardless of when you buy. This is a deliberate policy choice to encourage investment in new housing supply. If you are considering buying an investment property, a new build will give you access to the same tax treatment that all investors have enjoyed historically.
The capital gains tax discount is changing from 1 July 2027
This is one of the most significant changes in this Budget and it affects anyone who holds investment assets – property, shares, managed funds, or any other asset held outside of superannuation.
Currently, if you sell an investment asset you have held for more than 12 months, only half the gain is taxed. From 1 July 2027, this 50% discount is being replaced. Instead, your cost base will be adjusted for inflation, and you will pay a minimum of 30% tax on whatever real gain remains after that adjustment.
For assets that have grown roughly in line with inflation, the change may not make a significant difference. For assets with large gains well above inflation – particularly long-held properties or share portfolios – you will likely pay more tax under the new rules.
Gains you have already built up before 1 July 2027 are protected – the 50% discount still applies to that portion. Only growth after that date falls under the new rules.
Your main residence is not affected. The small business CGT concessions are not affected. Super funds and SMSFs are also not affected – the CGT discount within superannuation remains unchanged.
Example 1: You bought an investment property in 2010 for $450,000. By 1 July 2027 it is worth $820,000. You sell in 2030 for $950,000. The gain built up before 1 July 2027 is still assessed under the current 50% discount rules. Only the gain from 1 July 2027 to the date of sale falls under the new rules. The overall tax outcome will depend on timing, inflation, and your marginal rate — contact us to model your specific situation.
Example 2: You hold a share portfolio currently worth $300,000 that you bought for $80,000 ten years ago. Under the current rules, selling today results in a taxable gain of $110,000 (half of $220,000). Under the new rules from 1 July 2027, the gain attributable to post-2027 growth is subject to a minimum 30% tax after an inflation adjustment. If you were already considering selling, the timing matters.
Action Required Now – Investors
- If you hold investment assets with large, unrealised gains – particularly long-held properties, share portfolios, or managed funds – please contact us now. We can model whether it makes more sense to sell before 1 July 2027 under the current rules or hold under the new ones. This analysis takes time and the deadline will come around quickly.
- If you are thinking about buying another investment property, the tax treatment of established properties versus new builds has shifted meaningfully. We can help you compare the after-tax position of each before you commit.
- If your investments are held inside a family trust, the trust tax changes from 2028 add another layer to consider alongside the CGT changes. Please raise this with us.
- If you are an existing investor with a grandfathered property – no action is needed to protect your negative gearing position.
- SMSFs are not affected by either the negative gearing changes or the CGT discount changes. If you hold property or shares inside your SMSF, the current rules continue to apply.
The Federal Budget for Individuals
Your income tax is being reduced
The tax rate on income between $18,201 and $45,000 is dropping from 16% to 15% from 1 July 2026, and then again to 14% from 1 July 2027. This is already law and applies automatically. If you earn above $18,200, you will pay less tax without doing anything.
Most people earning around $75,000 will save approximately $268 in the first year, rising to around $536 once both cuts are in place.
You can claim a $1,000 tax deduction without keeping receipts
From the 2026–27 tax year, you can claim up to $1,000 in work-related expenses without needing to keep receipts or substantiate the amount. If your actual expenses are higher than $1,000, you can still claim the larger amount the normal way.
This is on top of other deductions like charitable donations and union fees – those are still claimable separately.
A new $250 tax offset for workers – from 2027–28
From the 2027–28 tax year, a new $250 tax offset will apply automatically to anyone who earns income from work – whether as an employee or running their own business. It applies at tax time and reduces your tax bill by up to $250.
Medicare levy – fewer people will pay it
The income thresholds below which you don’t pay the Medicare levy have been increased. This is already in effect from the 2025–26 year. If you are a single person earning under $28,011, or a family earning under $47,238, you may no longer have a Medicare levy liability. This will be applied automatically in your tax return.
Super balances over $3 million – higher tax from 1 July 2026
This was announced previously and is now law. If your total superannuation balance exceeds $3 million, earnings above that threshold will be taxed at 30% instead of the usual 15%. This includes unrealised gains – meaning paper gains on assets you haven’t yet sold can trigger a tax liability. If this applies to you, please speak to us before 30 June 2026.
Action Required Now – Individuals
- For most people, the changes in this Budget are positive and happen automatically – no action needed.
- If your superannuation balance is above $3 million, or getting close, contact us before 30 June 2026. The new tax is live from 1 July 2026 and the unrealised gains component in particular can create an unexpected tax bill if you haven’t planned for it.
- If you hold investment assets – shares, managed funds, or an investment property in your own name – and you were already thinking about selling in the next couple of years, it may be worth bringing that conversation forward. The CGT rules change on 1 July 2027 and for some clients the current rules will produce a better outcome. We can run the numbers for you.
This article is general information only and does not constitute tax advice. Several measures mentioned are proposed and not yet law. Please contact Business + Numbers to discuss how any of these changes apply to your personal situation.
