Australian Federal Budget 2026–27

Key taxation measures

As of 1 Jul 2027

Changes to CGT

As foreshadowed in the lead up to the 2026-27 Federal Budget, the Government has announced that it will be removing the ability for taxpayers to discount realised capital gains by 50%.

Instead, the cost base of the asset, if held for more than 12 months, will be indexed in line with CPI to determine the capital gain when the asset is realised. This is a return to the CGT (Capital Gains Tax) calculation methodology used up until 21 September 1999.

However, there is also an unexpected measure. For most taxpayers a 30% minimum tax rate will apply to capital gains under the indexation method that accrue after 1 July 2027.

Recipients of means-tested income support payments, such as the Age Pension or JobSeeker, will be exempted from the minimum tax on capital gains if they receive an income support payment in the financial year in which they realise the capital gain.

Under these changes, there will be three broad categories of CGT assets.

1. Assets acquired and disposed of prior to 1 July 2027 – the existing CGT rules will continue to apply.
2. Assets acquired prior to 1 July 2027 and disposed of on or after 1 July 2027 – the rules will depend on when the asset was purchased.
   1. If acquired prior to 20 September 1985, the value of the asset as at 1 July 2027 will become the new cost base and the gain since 1 July 2027 is calculated using the indexation method, with a 30% minimum tax applying to the resulting net capital gain. This brings previously pre-CGT exempt assets within the CGT regime going forward.
   2. If acquired after 20 September 1985, the 50% CGT discount will remain available for the gain that accumulates from time of purchase until 30 June 2027. The indexation method will then apply to any gain accruing from 1 July 2027, with a minimum with a 30% minimum tax applying to the resulting net capital gain.
3. Assets acquired and disposed of from 1 July 2027 – capital gains will be calculated under the indexation method, with a 30% minimum tax applying to the resulting net capital gain.

Where a 1 July 2027 asset valuation is required, the asset’s value at 1 July 2027 will be determined by taxpayers as part of their tax return in the year the asset is realised. Taxpayers can either:

• Seek a valuation of the asset as at 1 July 2027, which will include using quoted prices for assets such as shares, or
• Use a specified apportionment formula that estimates the asset’s value on 1 July 2027, based on its growth rate over the asset’s holding period.

The ATO will provide tools to estimate this value for taxpayers.

Even if acquired and disposed of on or after 1 July 2027, this change does not apply:

• To superannuation funds including SMSFs (which retain the existing 1/3rd discount);
• To companies (who currently do not receive any CGT discounting benefits);
• To a taxpayer’s principal residence (which retains its CGT exempt status); or 
• To the existing 60 per cent CGT discount applying to qualifying affordable housing will be fully retained to preserve incentives to invest in those assets.

There are also no changes to the small business CGT concessions available for small business owners on the sale of active business assets.

Where the asset is a new residential property build, the taxpayer can choose between applying the 50% discount to the entire gain, or the indexation method, with a 30% minimum tax applying to the resulting net capital gain.

New residential property builds include dwellings constructed on vacant land and existing properties that are demolished and replaced with a greater number of dwellings. Knock-down rebuilds and substantial renovations will not be eligible.

As of 1 Jul 2027

Negative gearing deductions

Quarantining of negative gearing deduction

From 1 July 2027, negative gearing losses (where the level of deductible expenses exceeds the assessable rental income) from residential investment properties will no longer be able to be used to offset assessable income from other sources (such as wages). Instead, any loss will be quarantined and carried forward to future income years and offset against any net positive tax position on those investment returns in future years. In this way the negative gearing loss is not lost, but the timing of its utilisation deferred to future income years.

Importantly, this change applies only to residential investment properties acquired from 7:30pm on 12 May 2026 (Budget night) by individuals, trusts, companies and partnerships. Negative gearing deductions will still be able to offset other income for residential investment properties if:

• Acquired before budget night, or
• Until 30 June 2027 if acquired between budget night and 30 June 2027

The changes also do not impact residential property investments by widely held trusts (such as via managed fund arrangements) or superannuation funds, and also do not apply to commercial property investments and other asset classes, such as shares. They will also not apply where the residential property is regarded as a new build.

Hypothetical example: Ross owns a residential investment property. During the year, the property was rented out, and generated $20,000 of rental income. However, Ross had an interest expense of $25,000 during the year on a loan used to purchase that property. This results in a $5,000 net loss position, which under existing rules would be a net deduction that could reduced other assessable income, thereby reding his overall tax liability.

If Ross had purchased this property before 7:30pm on 12 May 2026, this tax treatment will continue.

If Ross purchased the property after that time, this tax treatment will continue until 1 July 2027. From 1 July 2027, the net $5,000 negative gearing deduction can no longer be offset against other assessable income (such as salary). Instead, it can only be carried forward to offset against future income generated from Ross’ residential property investment.

For example, in the next financial year assume the rental income generated was $22,000 and Ross interest expense fell to $20,000. This would ordinarily result in a net $2,000 being subject to tax. However, Ross can reduce this by his carried forward rental loss from the prior year. As a result, he will have no amount assessed for tax purposes from the property investment, and have $3,000 of negative gearing losses still available to carry forward to future income years.

As of 1 Jul 2028

Discretionary trust distributions

From 1 July 2028, the trustee of a discretionary trust (such as a family trust) will be liable to pay tax at the rate of 30% on the taxable income of the trust, unless a higher tax rate applies (such as for undistributed income). Distributions from the discretionary trust to non-corporate beneficiaries (eg individuals) will carry the value of the 30% tax paid in the form of a non-refundable tax credit. As a non-refundable tax offset, it means that taxable distributions made to beneficiaries whose average tax rate is less than the 30% trust tax will not be entitled to a refund for any excess tax withheld. Beneficiaries whose average tax rate is higher than the amount withheld will be required to pay additional tax to the ensure the distribution is taxed at their average tax rate after taking into account the amount already withheld.

There will be some exclusions from the new taxation arrangements. This includes trusts such as fixed and widely held trusts, complying superannuation funds, special disability trusts, deceased estates and charitable trusts. Some types of income such as primary production income, certain income relating to vulnerable minors, amounts to which non-resident withholding tax applies, and income from assets of testamentary trusts existing on Budget night will also be excluded.

There will also be rollover relief available from 1 July 2027 for a period of three years for affected discretionary trusts that want to restructure to different arrangements, such as a corporate structure.

Hypothetical example: The Blue Family Trust has historically made distributions of its income to Jonathon (who is on the highest marginal tax rate), Belinda (his non-working spouse who has no other income), and their adult child Eliza (who has a marginal tax rate of 32% tax rate including Medicare levy).

Currently, the distributions to Jonathon are taxed at 47% (including Medicare) and to Eliza are taxed at 32%. As Belinda is currently not working and has no other income, she can receive distributions of up to $22,575 and pay no personal income tax. Distributions to George would be taxed at penalty rates (essentially the highest marginal tax rate) as he is a minor.

Under the new proposal, there will be no change to the tax outcome for Jonathon and Eliza, as their personal tax rates are higher than the withholding rate, but there will be cash flow considerations. Using Jonathon as an example, currently he may receive a family trust distribution of $10,000. He would include this in his tax return, and when lodging his tax return will then be liable for $4,700 tax, leaving him with a net income of $5,300.

Under the new proposal, Jonathon would receive a cash distribution of $7,000 after allowing for the $3,000 (or 30%) withhold tax. When he lodges his tax return, he would include the $7,000 cash distribution, but gross it up for the $3,000 withholding tax applied, resulting in $10,000 being taxable. This results in a tax liability of $4,700 on the distribution, but this is reduced by $3,000 for the withholding tax already applied, meaning Jonathon will need to pay the $1,700 differential. He still ends up with $5,300 net, but has a difference in cash flow because of timing differences between when he receives the distributions and when he pays his personal income tax.

For Belinda, her $22,575 distribution, which previously would not have been subject to any tax payment, is now reduced by the 30% withholding tax of $6,772.50, resulting in a net distribution received of $15,802.50. As the tax credit is non-refundable, she cannot claim a refund of this amount when lodging her personal tax return.

As of 1 Apr 2027

FBT for Electric Vehicles

Changes to FBT for Electric Vehicles

There will be a phased adjustment of the fringe benefits tax (FBT) exemption for electric vehicles. Currently, employees can salary package an electric vehicle using a novated lease without their employer incurring FBT if the taxable value is below $91,387.

From 1 April 2027, to receive the full exemption from FBT the taxable value of the electric vehicle will need to be below $75,000. Where it is above this figure ,but below the fuel-efficient luxury car threshold (currently $91,387 for 2025-26), there will only be a 25% exemption.

From 1 April 2029, the exemption will be reduced to 25% for all electric vehicles below the fuel-efficient luxury car threshold.

The reduction in the FBT exemption is outlined in the following table based on the time the arrangement commenced.

Value	Until 31 March 2027	1 April 2027 – 31 March 2029	From 1 April 2029
Above fuel-efficient luxury car threshold ($91,387 for 2025-26)	0%	0%	0%
Between fuel-efficient luxury car threshold and $75,000	100%	25%	25%
Below $75,000		100%

As of 1 Jul 2026

Small business instant write-off

Small business $20,000 instant asset write-off

Initially implemented in the 2023-24 Federal Budget for the year commencing 1 July 2023, and subsequently extended by 12 months in each Federal Budget thereafter, the Government has announced that the $20,000 instant asset write-off available for eligible small businesses will now become a permanent measure. To be eligible, a small business must have aggregate turnover up to $10 million.

Eligible small businesses will be able to immediately deduct the full cost of eligible assets costing less than $20,000 in the income year the asset is first used or installed ready for use. The threshold applies on a per asset basis, meaning a small business can instantly write off multiple assets.

Assets valued over the threshold can continue to be placed into the small business simplified depreciation pool and depreciated at 15% in the first income year and 30% each income year thereafter.

As of 1 Jul 2026

$1,000 instant tax deduction

Taxpayers who earn income from work will have the ability to claim a standard tax deduction up to $1,000 in place of other work-related expenses, without the need to provide receipts to substantiate expenses. Expenses covered by the standard deduction include those related to working from home, car expenses, and depreciation on work related items.

Charitable donations, professional association membership fees, and other non-work related deductions can still be itemised and claimed separately on top of the instant tax deduction.

As of 1 Jul 2027

Working Australians Tax Offset

The Government has announced a permanent annual tax offset of up to $250 to directly reduce the level of tax payable on earned income such as salary and wages, and the business income of sole traders). As a result, it will not be available for anyone who has not generated any earned income, such as those who have retired or those who only income is from investments.

The tax-offset will automatically be applied by the Australian Taxation Office for those eligible when their income tax return is lodged. If there is any amount of the tax offset that is not used, it will not be refunded.

The offset will increase the effective tax-free threshold for income derived from work by nearly $1,800 to $19,985, or up to $24,985 for workers also eligible for the Low Income Tax Offset.

As of 1 Jul 2026

Personal income tax rate changes

Announced in last year’s Federal Budget, the current 16% personal income tax rate will decrease by 1% to 15% from 1 July 2026. It will then decrease a further 1% to 14% from 1 July 2027. The changes are reflected in the following table.

Taxable income thresholds	Rates in 2025-26 (excluding Medicare levy)	Rates in 2026-27 (excluding Medicare Levy)	Rates in 2027-28 (excluding Medicare Levy)
Up to $18,200	Nil	Nil	Nil
$18,201 - $45,000	16%	15%	14%
$45,001 - $135,000	30%	30%	30%
$135,001 - $190,000	37%	37%	37%
$190,001 and over	45%	45%	45%

The following table shows the annual tax saving in 2026-27 and 2027-28 (compared to 2025-26), ignoring any available tax offsets.

Taxable income	2026-27	2027-28
$18,200 and below	Nil	Nil
$20,000	$18	$36
$25,000	$68	$136
$30,000	$118	$236
$35,000	$168	$336
$40,000	$218	$436
$45,000 and over	$268	$536

Key superannuation measures

As of 1 Jul 2026

Tax on large super balances

Originally announced in the 2023-24 Federal Budget and finally legislated earlier this year, a new Division 296 tax will be applied to superannuation earnings of members who have more than $3.0 million accumulated within the superannuation environment.

The new tax will be applied at the rate of 15% to the extent a member has a total super balance in excess of $3.0 million, and a further 10% to the extent their total super balance in excess of $10.0 million. The tax is applied to an amount of earnings in a superannuation fund that the fund has attributed to each particular member of that fund, with that attribution to be done on a fair and reasonable basis.

It is important to remember that under this measure:

• It is the higher of a member’s total super balance at the start or end of the year that is used for the calculation of any Division 296 tax liability, although for 2026-27 (the first year of operation) it is only the closing balance at year end that will be used. In the year a member passes, it is only their total super balance at the start of the year that is measured.
• The Division 296 tax is a personal tax levied to the individual, although they will have the ability to have funds released from the superannuation environment to pay the liability.
• All superannuation savings are taken into account. It does not matter whether the amounts are in accumulation or retirement phase, or in a defined benefit fund.

As of 1 Jul 2026

Pay-day super

Originally announced in the 2023-24 Federal Budget and now legislated, from 1 July 2026 a new regime (referred to as pay-day super) will commence. Under these arrangements, employers will be required to pay superannuation guarantee amounts for their employees on the same day as they pay their salary and wages.

Payments are required to be received by the relevant superannuation fund within 7 business days, and superannuation funds must ensure payments are allocated to the member’s account within 3 days of receipt.

It is important for employers to ensure that their systems are ready to facilitate these more frequent payments from 1 July in order to avoid potential penalties, noting some employers already make payments on this more frequent basis today.

The benefit for employees is that superannuation payments will be made to their accounts on a more frequent basis, allowing for more to accumulate in the tax environment of superannuation at a faster rate.

As of 1 Jul 2026

Threshold and cap indexation

As a result of high inflation and movements in average weekly earnings over the last 12 months, a number of superannuation caps and thresholds will index from 1 July 2026, opening up potential opportunities for clients to accumulate more wealth inside super and start retirement income streams with higher balances. These include the following:

• Indexation of the general transfer balance cap

  Under indexation in existing legislation, the general transfer balance cap will index from $2.0 million to $2.1 million from 1 July 2026.

  The changes to the general transfer balance cap may allow current or future retirees to convert more of their superannuation balances to a retirement income stream. For anyone who has already maximised their personal transfer balance cap, they will not gain any benefit from the indexation. Those who have already commenced a retirement phase pension account but have not fully utilised their personal transfer balance cap, will benefit from partial indexation, whilst those who have not had an amount previously assessed to their transfer balance account will gain the full indexation benefit.

• Indexation of the total super balance threshold

  In line with the indexation of the general transfer balance cap, the total super balance threshold will also index from 1 July 2026 from $2.0 million to $2.1 million.

  This threshold is relevant for determining whether a person can make non-concessional contributions to super, and also whether they are able to utilise the bring forward provisions.

• Indexation of concessional contribution cap

  Under indexation in existing legislation, the concessional contribution cap will index on 1 July 2026 from $30,000 per annum to $32,500 per annum.

  This increase may allow clients to revisit superannuation strategies, such as salary sacrificing, to determine if they can make further contributions into the superannuation system.

• Indexation of non-concessional contribution cap

  Under indexation in existing legislation, the non-concessional contribution cap will index on 1 July 2026 from $120,000 per annum to $130,000 per annum.

  When combined with indexation of the total super balance threshold, this will impact on how much a client can contribute to super from after-tax monies from 1 July 2026.

  Clients with total superannuation balances currently between $2.0 million and $2.1 million will have their opportunity to make additional non-concessional contributions re-opened (provide their total super balance remains below $2.1 million as at 30 June 2026).

  For clients considering the opportunity to utilise the bring forward provisions, the following limits will apply:

  Non-concessional contribution	Bring forward period	Total super balance as at 30 June 2026 (for contribution from 1 July 2026)
  Up to $390,000	3 years	<$1,840,000
  Up to $260,000	2 years	$1,840,000 - $1,969,999
  Up to $130,000	1 year	$1,970,000 - $2,099,999
  Nil	N/A	≥$2,100,000

To be determined

SMSF residency requirements

Relaxing the residency requirements for self-managed superannuation funds

The Government committed in the October 2022 Federal Budget to continue the commitment from the previous Coalition Government to relax residency requirements for self-managed super funds (SMSFs) and small APRA-regulated funds (SAFs) by:

• extending the central management and control temporary absence period for members of SMSFs from the current two years up to five years, and
• removing the active member test.

Whilst there has been no announcement to abandon this measure by the Government, there has also been no additional announcement of it proceeding.

Key Government support measures

As of 20 Sep 2026

Pension supplement changes

Pension supplement changes for overseas recipients

Recipients of the Pension Supplement who travel overseas for longer than 6 weeks but shorter than 12 weeks may receive a higher rate of payment during this time as the full rate of the Pension Supplement will be used to determine their payment for 12 weeks. However, recipients who travel overseas for more than 12 weeks will not receive any Pension Supplement after 12 weeks.

The maximum rate per fortnight is currently $86.50 and $62.50 for a single or a member of a couple respectively.

Currently the Pension Supplement drops to the basic rate and is paid indefinitely after 6 weeks. The basic rate per fortnight is currently $30.10 and $24.80 for a single or a member of a couple respectively.

Pension Supplement recipients who permanently depart Australia will receive a reduction in their payment as they will cease receiving the Pension Supplement. Currently the Pension Supplement drops to the basic rate.

As of 1 Apr 2027

Private health insurance rebate

Uniform private health insurance rebate

The higher private health insurance rebate that applies for older Australians aged 65 and over will be abolished, making private health insurance more expensive for older Australians. For example, for every $100 of private health insurance currently paid by a senior Australian who are single earning less than $105,000 or in a family earning less $210,000, the cost will increase by $5.60 (if age between 65 to 69) or $11.85 (if age 70 and over).

The rebate will no longer be dependent on a client’s age and only depend on whether they are treated as single or part of a family as well as their income for surcharge purposes.

Currently the income thresholds and rebates that apply from 1 July 2026 to 31 March 2027 are based on the following table:

Singles	≤$105,000	$105,001 - $123,000	$123,001 - $164,000	≥$164,001
Families	≤$210,000	$210,001 - $246,000	$246,001 - $328,000	≥$328,001
	Base Tier	Tier 1	Tier 2	Tier 3
< age 65	24.118%	16.079%	8.038%	0%
Age 65 – 69	28.139%	20.098%	12.058%	0%
≥Age 70	32.158%	24.118%	16.079%	0%

For families with multiple children, the income thresholds are increased by $1,500 for the second and subsequent children.

As of 1 October 2026

No contributions for personal care

Personal care services will be reclassified as ‘clinical supports’ under the Support at Home program. These services generally relate to assistance with self-care and activities of daily living (eg help with showering, dressing and eating).

Support at Home participants will not be asked to pay an individual contribution for this type of service that are within their allocated budget. At present participants may contribute up to 50% of the costs of these services as they are classified as ‘independence’ with their contribution depending on their circumstances as detailed in the following table.

Means testing category	Clinical supports	Independence (non-grandfathered)	Independence (grandfathered)
Full pensioner	0%	5%	0%
Part-pensioner and CSHC holder	0%	Between 5% and 50% based on means test	Between 0% and 25% based on income test
Self-funded and non-CSHC holder	0%	50%	25%

As of 1 Jan 2027

Aged care accommodation

Aged care accommodation changes

To increase the number of residential aged care places the Government will provide facilities with the following capital subsidies:

• New Home Payment ($30 per supported resident per day, payable for up to 25 years), a payment for newly constructed homes.
• Significant Improvement Payment ($15 per supported resident per day, payable for up to 15 years), for homes that increase the supply of places by 40% through an extension or significant refurbishment of offline beds.

Supported residents will also benefit from increases to the accommodation supplements paid to providers from 2027. It is also proposed that the more supported residents a home cares for, the more they will receive. Homes that have more than 60% supported residents will get an additional top-up payment from 2028.

By 1 July 2027, the Government also plans to implement changes to accommodation pricing, including replacing the maximum interest rate with an alternative way to convert a daily payment into a refundable deposit.