Editor: The Federal Government handed down the Federal Budget on 12 May 2026, with some of the biggest changes to the tax system in years.
Some of the main proposed changes include:
- Delivering a new Working Australians Tax Offset (‘WATO’) to provide a permanent annual $250 tax offset to all eligible Australian workers. This applies to eligible income earned from 1 July 2027 (i.e., from the 2027/28 income year).
- Introducing a $1,000 instant tax deduction to allow workers to deduct up to $1,000 of work-related expenses without keeping receipts from 1 July 2026.
- Limiting negative gearing for residential property to new builds from 2027/28. Arrangements will remain unchanged for all existing investments made before 7:30pm AEST on 12 May 2026.
- Replacing the 50% CGT discount with inflation‑adjusted indexation from 1 July 2027 to “restore the taxation of real gains”, with a minimum tax rate of 30% on realised gains. This will apply to all assets (including pre-CGT assets) except new builds of residential properties (where taxpayers can choose either the old or the new CGT rules to apply). It will be prospective, with gains accrued on existing investments prior to the start date to retain the 50% discount (where eligible).
- Applying a minimum 30% tax rate on discretionary trusts from 2028/29 to “bring tax outcomes for trusts closer to the rates that apply to the vast majority of Australian workers.”
Some of the other proposed Budget changes affecting businesses include:
- Making the $20,000 instant asset write‑off permanent to “give businesses more certainty to invest”.
- Delivering a permanent two‑year loss carry back for companies with turnover of up to $1 billion from 1 July 2026.
- Introducing loss refundability for start‑ups from 1 July 2028, to help new businesses invest and grow in their first two years.
