The Federal Budget 2026 introduces significant proposed tax reforms affecting individuals, investors, discretionary trusts and businesses. Key measures include changes to capital gains tax (CGT), negative gearing, discretionary trust taxation, small business tax concessions and personal income tax relief.
For taxpayers and business owners, understanding these proposed changes early can help with tax planning, business structuring and investment decisions.
What Are The Major Tax Changes Announced In Federal Budget 2026?
The Federal Budget 2026 contains several significant tax measures, including:
- Reform of the capital gains tax regime
- Changes to negative gearing rules
- A new minimum tax for discretionary trusts
- Previously legislated personal income tax cuts in 2027 and 2028
- A permanent $20,000 instant asset write-off
- Reintroduction of loss carry back for companies
- Loss refundability for eligible start-up companies
- Additional support for the Small Business Debt Helpline
- Changes to electric vehicle FBT concessions
- Medicare levy threshold increases and Private Health Insurance rebate changes
These measures have different commencement dates and may affect taxpayers differently depending on their circumstances.
How Will Capital Gains Tax And Negative Gearing Change?
The Budget proposes significant changes to property and investment taxation from 1 July 2027.
Under the proposed CGT reforms:
- The current 50% CGT discount would be replaced by cost base indexation for eligible assets held longer than 12 months
- A minimum 30% tax on net capital gains would apply
- Transitional rules would preserve the current CGT discount on gains accrued before 1 July 2027
- Investors in new residential properties may be able to choose between the existing discount and the new indexed approach
The Government has also announced changes to negative gearing.
For established residential properties acquired after 12 May 2026:
- Rental losses would generally only be deductible against residential rental income or residential property capital gains
- Excess losses would be carried forward
- Eligible new builds would remain exempt
- Existing property owners would generally be grandfathered under transitional arrangements
Property investors should carefully review how these proposed measures may affect future investment decisions and cash flow.
How Will The Taxation Of Discretionary Trusts Change?
The Government proposes introducing a minimum 30% tax on discretionary trusts from 1 July 2028.
Under the proposal:
- Trustees would pay a minimum tax of 30% on taxable income
- Individual beneficiaries would receive non-refundable tax credits
- Corporate beneficiaries would generally not receive credits for tax paid by trustees
- Certain trusts and income categories would be excluded
The Government also proposes expanded rollover relief from 1 July 2027 for small businesses wishing to restructure from discretionary trusts into alternative entities such as companies or fixed trusts.
Business owners operating through discretionary trusts should consider reviewing their current structures before these measures commence.
How Will Personal Income Tax Change In 2027 And 2028?
The Budget confirms previously legislated tax cuts.
The personal tax rate applying to income between $18,201 and $45,000 will reduce:
- From 16% to 15% from 1 July 2026
- From 15% to 14% from 1 July 2027
These reductions are intended to provide ongoing tax relief to Australian workers and increase disposable income.
What Changes Apply To Medicare Levy Thresholds And Private Health Insurance Rebates?
The Government will increase Medicare levy low-income thresholds from 1 July 2025.
Key threshold increases include:
- Singles: $27,222 to $28,011
- Families: $45,907 to $47,238
- Single seniors and pensioners: $43,020 to $44,268
- Senior and pensioner families: $59,886 to $61,623
These changes may reduce Medicare levy liabilities for eligible low-income Australians.
The Budget also proposes removing the age-based uplift for the Private Health Insurance (PHI) Rebate from 1 April 2027.
Currently, Australians aged 65 and over may qualify for a higher rebate percentage. Under the proposed changes, this age-based enhancement would cease.
What Support Is Available For Small Businesses?
Several measures aim to support business growth, investment and cash flow.
What Is The Permanent $20,000 Instant Asset Write-Off?
From 1 July 2026, the $20,000 instant asset write-off would become permanent for eligible small businesses with turnover under $10 million.
This allows qualifying businesses to immediately deduct eligible asset purchases costing less than $20,000 rather than depreciating them over several years.
How Will Loss Carry Back Rules Return?
The Government proposes reintroducing loss carry back for companies from 1 July 2026.
Eligible companies with aggregated global turnover below $1 billion would be able to:
- Carry back eligible revenue losses
- Offset losses against tax paid in the previous two years
- Generate cash flow benefits through tax refunds
The measure remains subject to franking account limitations.
What Is Loss Refundability For Start-Up Companies?
From 1 July 2028, eligible start-up companies with turnover below $10 million may be able to convert tax losses generated during their first two years into refundable tax offsets.
The refundable offset would be limited to the value of:
- Fringe Benefits Tax paid
- PAYG withholding tax on Australian employee wages
This measure aims to improve early-stage business cash flow.
How Is The Government Supporting Small Business Owners?
The Budget provides additional funding to continue:
- The Small Business Debt Helpline
- The NewAccess for Small Business Owners mental health coaching program
These services provide practical support for business owners facing financial pressure and operational challenges.
How Will The Electric Vehicle FBT Concession Change?
The Government proposes reducing the current Fringe Benefits Tax concession available for electric vehicles.
From 1 April 2029:
- Eligible electric vehicles would generally receive a permanent 25% FBT discount
- Existing transitional arrangements would apply for vehicles provided before the commencement date Higher-value electric vehicles may receive reduced concessions compared with current settings
- Employers considering salary packaging arrangements involving electric vehicles should monitor these changes closely.
What Should Taxpayers And Business Owners Do Next?
While many measures remain subject to legislation, the Federal Budget 2026 signals significant tax reform over the coming years.
Individuals should review:
- Investment strategies
- Property ownership structures
- Retirement and tax planning arrangements
Business owners should assess:
- Entity structures
- Asset acquisition plans
- Tax loss utilisation opportunities
- Cash flow forecasting
Early planning can help minimise unexpected tax consequences and maximise available opportunities.
How Can Professional Tax Advice Help?
Federal Budget measures often create both risks and opportunities.
Our experienced accountants and tax advisers can help you understand how these proposed changes may affect your personal finances, investment portfolio or business structure. We provide practical, tailored advice designed to help you remain compliant while achieving the best possible tax outcomes.
Make an enquiry today to discuss how the Federal Budget 2026 tax changes may impact your situation and what strategies may be available to you.
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