Federal Budget 2026/27 - Insights & Analysis

On Tuesday 12  May, Federal Treasurer Hon. Jim Chalmers handed down the Albanese Government’s 2026/27 Federal Budget – it’s fifth Budget updated since the party’s  election in 2022.

Delivered against the backdrop of the conflict in the Middle East & economic volatility and added inflation, the 2026/27 Budget lays out the Government’s plans to allocate spending over the next few years – with a strong  concentration on “spending restraint”, whilst delivering packages towards boosting productivity and improve intergenerational fairness.

Whilst shorter in nature compared to previous years, this year’s Federal Budget sees a number of significant impacts – with a view that many of the announcements going against initial Election promises.

The 2026/27 Federal Budget arrives at a time when many Australia businesses are balancing persistent cost pressures, shifting economic conditions, and an increased need for confident, well-informed decision-making. For business owners, investors, and advisers alike, this year's Budget is more than a policy update - it is a redevelopment of key tax measures and a practical signal of where the Government is looking to shape the broader economic and business environment via
focus on ‘economic savings’, rather than a greater spending.

In this analysis, we unpack the key Budget measures most likely to affect businesses and individuals, with a focus on taxation, compliance, investment, and strategic planning below:

The 2026/27 Federal Budget announcement includes significant proposed tax changes aimed at housing affordability, investment settings, and the taxation of passive income structures.

Negative Gearing Reform & Capital Gains Tax Changes

The Government has announced that negative gearing for residential property will be limited to new builds from 1 July 2027.

Existing arrangements will remain unchanged for properties held before 12 May 2026.

For investors purchasing new builds, losses can still be deducted against other income under current-style treatment. For investors buying established residential property after 12 May 2026, losses will still be deductible against residential property income, but unused losses will need to be carried forward rather than offset against salary or other personal income.

The Budget also proposes replacing the current 50% capital gains tax discount with a model based on inflation-adjusted indexation, together with a minimum 30% tax on gains from 1 July 2027.

These CGT changes are prospective, applying only to gains arising after 1 July 2027. The Budget also highlighted that investors in new builds will be able to choose between the existing 50% CGT discount and the new indexed method.

Discretionary Trusts

For Discretionary Trusts, the Government has announced from 1 July 2028, these will be subject to a minimum tax rate of 30% on trust income at the trustee level. Individual beneficiaries will receive non-refundable tax credit for the tax already paid by the trustee. Beneficiaries on tax rates above 30% will pay additional tax, while those below 30% may lose excess credits.

Additionally, there will be no grandfathering relief that will apply – meaning existing discretionary trust structures will also be captured from 1 July 2028.

To support restructuring, the Budget acknowledges rollover relief for three years from 1 July 2027 for small businesses and others who may wish to change their structure.

Working Australians Tax Offset

The Government will introduce a $250 Working Australians Tax Offset from the 2027–28 income year, which will provide a permanent annual tax offset to individuals earning employment or sole trader income. The measure is intended to increase the effective tax-free threshold for work-related income by nearly $1,800 to $19,985, or up to $24,985 where the Low-Income Tax Offset applies.

Receipt-Free Instant Tax Deduction

In support for individual taxpayers, in effect for the 2027 tax season, over 6 million Australians will be able to claim an instant $1,000 tax deduction without needing to produce a receipt, in relation to work-related expanses.

Individuals with work related expenses exceeding the instant deduction would still be able to claim those expenses under the ordinary deduction rules. Non work-related deductions such as charitable donations and union or professional association fees would remain separately claimable in addition to the instant tax deduction.

Increasing the Medicare Levy Low-Income Thresholds

The Government is proposing to increase the Medicare levy low-income thresholds for low-income individuals, families, seniors and pensioners by 2.9% from 2025–26 income year.

The family income thresholds will increase by $4,338 for each dependent child or student, up from $4,216.

The thresholds will be increased as follows:

For each dependent child or student, the family income thresholds will increase by a further $3,760.

• an increase in the offset for experimental core R&D by around 25 to 50 per cent;
• removal of eligibility for expenditure that only supports R&D rather than constituting core R&D itself;
• a reduction in the intensity threshold to 1.5 per cent, giving higher offsets to businesses undertaking substantial core R&D;
• an increase in the turnover threshold for the higher refundable offset to $50 million, with refundability limited to firms operating for less than ten years;
• an increase in the maximum expenditure cap to $200 million;
• an increase in the minimum expenditure threshold to $50,000, unless the R&D is undertaken with a Research Service Provider or Cooperative Research Centre.

National Fuel Security Package

The 2026/27 Federal Budget announced the establishment of the Australian Fuel Security & Resilience Package, in safeguarding Australia’s fuel supply – responding to recent economic disruptions resulting from the Middle East conflict.

The package outlines more than $10 billion in Government support aimed at improving Australia's fuel security, with concentration given shielding the country from the long-term consequences of the war in Iran.

The package includes:

• $3.7 billion to establish a government-owned fuel security reserve that will hold 1 billion litres of emergency diesel and aviation fuel
  Increasing Australia's minimum stockholding obligation by a further 10 day;
• $7.5 billion in financial support for fuel companies to access loans, insurance and equity to purchase and store more fuel stock

The package emphasises Australia’s mandatory petrol stockpiles increase to about 37 days, while diesel and jet fuel will be about 50 days.

Unlocking New Homes

A $2 billion investment in critical infrastructure — including sewerage, water and power — is aimed at supporting the construction of 65,000 additional homes.

The four-year funding package aims to support housing developments in areas lacking critical infrastructure, with a quarter of the funding reserved for regional Australia.

A further $500 million has been set aside to streamline environmental approvals for new builds, including housing.

For More Information

For more information on anything released as part of the 2023/24 Federal Budget, please contact the Archer Gowland Redshaw team on (07) 3002 26499.