2026 Federal Budget

2026 Federal Budget – Tax-related topics:

(Below is new policy announcement – not yet legislated as law)

Personal Income Tax:

From 1 July 2026, the tax rate for income between $18,201 and $45,000 drops from 16% to 15%, then to 14% from 1 July 2027.
From 2027-28 FY, the new Working Australians Tax Offset kicks in being a $250 offset (tax credit) which directly reduces the amount of tax you owe.
From 2027 FY, many people will be able to claim a flat $1,000 deduction without keeping receipts (replacing $300 in the past).

Negative gearing (properties):

Negative gearing (where rental losses are deducted from taxable income) will be limited to new builds only.
Existing properties owned before Budget night (12 May 2026) are not affected.
Held property before the Budget night as a main residence and subsequently changing the property to rental, negative gearing will still be applicable.

Capital Gains Tax (CGT)

The Capital Gains Tax (CGT) discount will move from a flat 50% discount to an inflation-based model with a minimum effective tax of 30% on gains (waived in years you receive means-tested support, e.g. Age Pension, JobSeeker).
Assets held before July 1, 2027 and sold before 30 June 2026 will still have the old rules applied.
Assets include real estate, shares, managed funds, cryptocurrencies and most businesses.
Assets owned before 1 July 2027 get split treatment: 50% discount on the pre-2027 portion, indexation + 30% minimum on the post-2027 portion.
A legitimate valuation report is required for 1/7/2027. The ATO should be giving more guidelines for acceptable valuation reports at a later date.
Share prices and crypto prices published on 1/7/2027 by trusted online resources can be used.
New build election: Investors who buy a qualifying new residential build can elect either the old 50% discount or the new indexation + 30% minimum tax – whichever produces a better outcome. A subsequent buyer of the same property will lose this election.
A granny flat is not a treated as a new built home.
Knock down house and rebuild is not treated as a new built home as there is still one home on the same block of land. Exceptions apply to multiple dwellings (e.g. duplex or units).

Small businesses:

From 1 July 2026, the $20,000 (GST inclusive) instant asset write-off will become permanent, making it easier to immediately deduct the cost of business essentials like tools, equipment or vehicles.
The 50% capital gains tax discount for small businesses will be extended to those with a turnover of up to $10 million instead of $2 million.