Federal Budget 2026-27

Federal Budget 2026-27

The 2026-27 Federal Budget has landed with some of the most significant structural tax changes in a generation. Treasurer Jim Chalmers has overhauled the rules for property investors, winding back negative gearing to new builds only and replacing the long-standing 50% capital gains tax discount with inflation-indexed gains and a 30% minimum tax rate. Family trusts face a new 30% minimum tax from 2028, while workers get a $250 permanent tax offset and an immediate $1,000 work-related deduction. For motorists, fuel excise has been temporarily halved and the electric vehicle FBT exemption is being phased out over three years. Here is what it all means for your finances.

The 2026-27 Federal Budget has been delivered, bringing significant changes to how Australians manage their wealth. Rather than standard incremental updates, the government has introduced structural shifts affecting property investment, family trusts, and daily transport costs.

Direct Support for Workers

The budget offers both immediate and long-term tax relief for wage earners. A key feature is the new $250 Working Australians Tax Offset. This permanent annual offset will take effect from 1 July 2027, meaning the financial benefit will be seen in tax returns lodged in July 2028. It effectively raises the tax-free threshold by nearly $1,800.

For more immediate relief, an instant tax deduction of up to $1,000 for work-related expenses, beginning in the 2026-27 income year. This allows workers to claim up to $1,000 without needing to itemise receipts, simplifying the tax process significantly.

A Shift in Property Investment Rules

The government is altering the incentives for property investors to address housing supply.

  • Negative Gearing: Negative gearing will be abolished for established residential properties purchased after 7:30 pm on 12 May 2026. From 1 July 2027, these tax benefits will be strictly limited to new builds. Existing properties held before the budget announcement are grandfathered, meaning current arrangements remain unchanged.
  • Capital Gains Tax (CGT): The familiar 50% discount on capital gains is ending. From 1 July 2027, the discount will be replaced with an inflation-indexed cost base and a new minimum tax rate of 30%. This will require investors to rethink their long-term growth strategies.
  • Housing Infrastructure: Separately, the government has committed $2 billion to a Local Infrastructure Fund. This is designed to support the construction of 65,000 new homes by funding essential services like water and roads.

Changes for Businesses and Family Trusts

For business owners and those utilising trust structures, the compliance environment is tightening.

The government is introducing a 30% minimum tax on discretionary trusts from 1 July 2028. Official Budget Fact Sheets clarify that this is not a flat tax on all distributions. Instead, the trustee will pay a minimum 30% tax on the taxable income of the trust, and beneficiaries will receive non-refundable credits. This aims to align trust tax rates more closely with the taxes paid by regular wage earners.

In positive news for small enterprises, the $20,000 instant asset write-off has been made permanent from 1 July 2026, offering reliable cash flow support for hardware and equipment upgrades.

Healthcare Adjustments for Seniors

There is challenging news regarding private health insurance for older Australians. From 1 April 2027, the age-based uplift of the Private Health Insurance Rebate will be removed. For people aged 65 and over who currently receive this additional rebate, the practical outcome will be a higher net premium, leading to increased out-of-pocket costs.

Transport and Motoring

The budget also outlines changes to transport costs, affecting both traditional and electric vehicles.

  • Fuel Excise Relief: To ease immediate cost-of-living pressures, the fuel excise has been temporarily halved. For the period between 1 April and 30 June 2026, the operative excise rate drops to 20.6 cents per litre.
  • Electric Vehicle FBT Changes: The Fringe Benefits Tax (FBT) exemptions for EVs are being scaled back over time. Vehicles costing up to $75,000 will maintain a full FBT exemption if the financial arrangement starts before 1 April 2029. However, eligible EVs priced over $75,000 will move to a 25% FBT discount earlier, starting 1 April 2027. By April 2029, a permanent 25% discount will apply to all eligible electric cars.

These budget measures represent a clear change in fiscal policy. Understanding how these new rules apply to your specific financial situation will be an essential part of planning for the years ahead.