Federal Budget 2026 tax changes: what individuals, investors and businesses need to know
Updated: 5 days ago
The 2026–27 Australian Federal Budget was delivered on 12 May 2026, and tax was one of its biggest stories. There is relief for workers and businesses, but there are also major changes for property investors, people who make capital gains and families using discretionary trusts.
The most important point is simple: a Budget announcement is not automatically the law. Some of the measures have since been legislated, some have only a framework in law with more technical rules to come, and others remain proposals. In this overview, we separate those categories so you can see what deserves action now and what should stay on your watchlist.
Overview at 27 August 2026; business-law update 6 September 2026: The Working Australians Tax Offset, $1,000 standard work deduction, core capital gains and negative-gearing reforms, and Medicare levy thresholds have been enacted. Update: the Treasury Laws Amendment (Tax Reform No. 2) Act 2026 received Royal Assent on 26 August 2026. Its permanent $20,000 instant asset write-off and company loss carry-back provisions commence on 1 October 2026, with application to the 2026–27 income year. Assent, commencement and the first applicable income year are different dates. Other proposal summaries below retain this overview’s 27 August cut-off; use the linked individual guides and recheck before acting.
The quick version
Measure | Main start date | Status (business measures updated 6 September) | Who should pay attention? |
|---|---|---|---|
$1,000 standard work deduction | 1 July 2026 | Law | Employees and other eligible workers |
$250 Working Australians Tax Offset | 1 July 2027 | Law | Australian residents with net labour income above the tax-free threshold |
Medicare levy low-income thresholds | 1 July 2025 | Law | Low-income individuals, families, seniors and pensioners |
Negative gearing restriction for affected established homes | 1 July 2027 | Law; detailed rules still developing | Residential property investors |
CGT indexation and 30% minimum tax | 1 July 2027 | Core framework is law; technical rules still developing | Individuals, investors, trusts and business owners |
30% discretionary trust minimum tax | 1 July 2028 | Proposed | Family trusts and private groups |
Permanent $20,000 instant asset write-off | 1 July 2026 | Enacted 26 August; provisions commence 1 October 2026 | Small businesses with turnover under $10 million |
Two-year company loss carry-back | 1 July 2026 | Enacted 26 August; provisions commence 1 October 2026 | Eligible companies with recent profits and a current revenue loss |
Start-up loss refundability | 1 July 2028 | Proposed | Young companies with employees |
Dynamic monthly PAYG instalments | 1 July 2027 | Dynamic-method pilot uses existing law; broader monthly option not yet law | Small and medium businesses using compatible software |
R&D Tax Incentive redesign | 1 July 2028 | Proposed | Companies conducting eligible R&D |
Venture capital incentive changes | 1 July 2027 | Proposed | VCLPs, ESVCLPs, founders and investors |
EV FBT transition | 1 April 2027 | Proposed | Employers and employees using EV salary packaging |
Private health rebate age uplift removal | 1 April 2027 | Bill before Parliament | Policyholders aged 65 and over |
Tax changes for workers
A new $250 Working Australians Tax Offset
From the 2027–28 income year, an individual may qualify if they are an Australian resident at some time during the year and their net labour income exceeds the tax-free threshold. The non-refundable offset is the lesser of $250 and the basic income-tax liability calculated on that net labour income. It is aimed at income earned from work, including salary and wages and some sole-trader or personal services income; it is not a general offset for passive investment income.
The offset reduces tax payable; it is not a deduction from taxable income and it cannot create a cash refund on its own. It also does not begin until the 2027–28 tax return.
You may have heard the Government describe this as part of “five tax cuts.” That broader figure also counts income-tax rate reductions starting on 1 July 2026 and 1 July 2027. Those rate cuts were legislated before the May 2026 Budget, so they are useful context rather than a new Budget-night announcement.
A $1,000 standard deduction for work expenses
From 1 July 2026, eligible workers can receive a standard deduction of up to $1,000 for covered work-related expenses. This should make tax time easier for people whose covered expenses are below $1,000.
The name can be misleading. It is not a $1,000 refund, and it is not an extra $1,000 deduction on top of the same actual work expenses. In broad terms, the rule tops covered work-related deductions up to $1,000. If your actual covered deductions are more than $1,000, you can continue claiming the actual amount under the normal rules and keep the necessary records.
Other eligible deductions outside the covered category can still be claimed separately. Good records remain valuable because they help your accountant compare the standard amount with your actual claim and support deductions that sit outside it.
Higher Medicare levy low-income thresholds
The Medicare levy low-income thresholds increased by 2.9% for the 2025–26 income year. The changes are designed to prevent low-income taxpayers from paying more Medicare levy simply because incomes moved with inflation.
The new base thresholds include $28,011 for singles, $47,238 for families, $44,268 for single seniors and pensioners, and $61,623 for senior and pensioner families. Family thresholds can increase for dependent children or students. These are levy thresholds, not ordinary income-tax thresholds, and the calculation can depend on family circumstances.
Big changes for property investors and capital gains
Negative gearing will be restricted for some established homes
For established residential property acquired after 7:30 pm AEST on 12 May 2026, new limits apply from 1 July 2027. An affected rental loss will no longer be available to reduce unrelated income such as salary or ordinary business income.
That does not mean the loss disappears. It may be used against certain residential property income or gains, and any excess can generally be carried forward. Properties acquired before the Budget-night cut-off are grandfathered, and eligible new residential builds can continue to access broader negative-gearing treatment.
The contract and acquisition facts matter. If you bought, inherited, transferred or are developing property around the cut-off, take advice before assuming which side of the line you fall on.
The 50% CGT discount is being replaced for future gains
For affected gains accruing from 1 July 2027, the existing 50% CGT discount will be replaced with cost-base indexation for inflation. A 30% minimum tax will also apply to certain relevant capital gains of Australian resident individuals.
This is not a tax on 30% of the sale price. It is a minimum tax mechanism applied after the relevant capital-gain calculations. The main-residence exemption remains, small-business CGT concessions continue to matter, and eligible new residential builds and affordable housing receive special treatment.
The law protects the pre-1 July 2027 part of gains on existing assets, but valuations, apportionment and record-keeping will become more important. The core framework is enacted; further technical legislation was still being finalised at our editorial cut-off.
Discretionary trusts: a major proposal, not yet law
The Government proposes a 30% minimum tax for discretionary trusts from 1 July 2028. The trustee would pay enough tax to bring covered trust income to a 30% minimum, with eligible non-corporate beneficiaries receiving a non-refundable credit. Proposed exceptions apply to various trusts and protected income categories, and three years of restructuring rollover relief is proposed from 1 July 2027.
This is not a ban on trusts and it is not yet law. Trusts can still have sound commercial, asset-protection and succession-planning reasons. The sensible response is to model the possible effect and review the structure once the final legislation is available—not to rush into a restructure based only on an announcement.
Small-business and company tax changes
Permanent $20,000 instant asset write-off
The permanent threshold has been enacted in Schedule 2 of the Treasury Laws Amendment (Tax Reform No. 2) Act 2026. The provisions commence on 1 October 2026 and apply from the 2026–27 income year. Eligible small businesses with aggregated turnover below $10 million can immediately deduct the business-use portion of qualifying assets costing less than $20,000, subject to the timing and simplified-depreciation rules. The threshold applies per asset.
An instant write-off is a deduction, not a Government reimbursement. Buying an item only to obtain a tax deduction rarely makes commercial sense. Start with the business need, cash flow and finance cost, then consider the tax timing.
Two-year company loss carry-back
Company loss carry-back has been enacted in Schedule 1 of the same Act. The provisions commence on 1 October 2026 and apply to income years starting on or after 1 July 2026. Eligible corporate tax entities that are not significant global entities may carry a qualifying revenue tax loss back against tax liabilities for either or both of the previous two income years. Statutory limits and eligibility conditions apply. A standard 30 June-balancing company’s first loss-year claim is through its 2026–27 company tax return; this is not an immediate refund claim in September 2026.
This can be valuable when a previously profitable company has a temporary downturn or invests heavily and moves into a tax loss. It does not apply to sole traders or ordinary trusts merely because they run a business, and capital losses are not included.
Innovation and tax administration proposals
The Budget also proposes:
a limited refund for tax losses made by eligible start-up companies in their first two years, from 2028–29;
broader access to dynamic monthly PAYG instalments from 1 July 2027;
a redesign of the R&D Tax Incentive from 1 July 2028; and
increased investment and fund thresholds for venture capital concessions from 1 July 2027.
These proposals may influence future funding, hiring and R&D decisions, but detailed eligibility and final law matter. Businesses should model scenarios and retain clean records without booking a tax benefit that is not yet enacted.
EV salary packaging and private health cover
The proposed EV FBT transition would preserve the current full concession through 31 March 2027, then use vehicle-value and commencement-date bands before moving to a permanent 25% FBT discount from 1 April 2029. Existing eligible arrangements are intended to keep the discount that applied when they began. Because the change is not yet law and an “arrangement” can be fact-sensitive, check the final rules before signing or refinancing a lease primarily for tax reasons.
Separately, a Bill proposes removing the additional age-based private health insurance rebate for policyholders aged 65 and over from 1 April 2027. The income-tested base rebate would remain, but affected older policyholders could pay more. That Bill was still before Parliament at our editorial cut-off.
What should you do now?
Here is the friendly-accountant version of the action plan:
Do not treat every announcement as law. Use the status table above and recheck before acting.
Keep records. Work expenses, asset dates, property contracts, valuations, trust resolutions and franking-account records may all matter.
Review asset and property decisions early. The 12 May 2026 property cut-off and 1 July 2027 CGT start date can create very different outcomes.
Model before restructuring. This is especially important for discretionary trusts, companies and SMSFs.
Bring commercial reality first. A deduction or offset should support a good decision, not create one.
At Regans Accountants, we can help you work out which changes apply, model the likely tax and cash-flow effect, and create a practical plan before the key dates arrive. We work with individuals and businesses across Gregory Hills, Camden, Campbelltown, the wider Macarthur region and beyond.
Frequently asked questions
Are all the May 2026 Budget tax changes already law?
No. Several major measures have been enacted, but others remain proposals or Bills. Parts of the capital-gains and negative-gearing framework are law while further technical details are still being developed.
Did the Budget abolish negative gearing?
No. The change targets established residential property acquired after the Budget-night cut-off and limits how affected losses can be used from 1 July 2027. Existing holdings are grandfathered, eligible new builds receive different treatment, and affected losses can generally be carried forward.
Is the $1,000 standard deduction a $1,000 tax refund?
No. It is a deduction from taxable income, not a cash payment. The actual tax saving depends on the person's circumstances and marginal tax rate.
Call to action: If you would like a plain-English review of how the Federal Budget 2026 tax changes affect you or your business, contact Regans Accountants before making a property, investment, structure or major asset decision.
Updated reading and sources
General information only. Business-law status clarified on 6 September 2026; other overview sections retain their stated editorial cut-off. Speak with us about your circumstances.
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