Your plain-English guide to the key tax changes, new deductions, trust reforms and property rules coming out of Treasurer Chalmers’ 2026 Budget — and how they affect you.

Latitude Thoughts: Our Team Reacts to the 2026–27 Budget

We gathered the team at Latitude Accountants straight after Budget night to share our honest first impressions. Watch our video above for the full conversation, then read on for the details.

In short, our accountants gave the Budget three thumbs down and one thumbs up. The overall feeling was that the government is genuinely trying to create a fairer tax system — but whether taking wealth away from investors and business owners actually helps working Australians is a debate our team is still having.

Here are some of the standout reactions:

• The 30% minimum tax on discretionary trusts caught everyone off guard — and not in a good way.
• The return to CGT indexation (replacing the 50% discount) was actually welcomed by one of our senior accountants as economically logical.
• The business loss carry-back was a highlight — a practical tool that helped during COVID and is back on the table.
• The $1,000 instant tax deduction got a nod for helping everyday wage earners get a little more back.
• Concerns were raised about whether Treasury’s economic modelling aligns with the RBA’s forecasts — a legitimate question worth watching.

Keep reading for a full breakdown of every major measure and what it means for you.

The 2026–27 Federal Budget at a Glance

On Tuesday, 12 May 2026, Treasurer Jim Chalmers handed down the Labor government’s 2026–27 Federal Budget. It’s one of the most structurally significant budgets in years — touching income tax, capital gains, negative gearing, discretionary trusts, superannuation, small business, and first home buyers.

Whether you’re a PAYG worker hoping for a tax break, a small business owner, a property investor, or someone with a family trust, this Budget has something that affects you — and in some cases, something that will cost you.

This guide breaks down every major announcement in plain English, answers the questions we’re already hearing from clients, and explains what steps you should be taking right now.

⚠️  Note: These are proposed measures announced on Budget night. They are not yet law. Legislation must pass through Parliament before they take effect. Dates and details may change. Speak to a registered tax adviser before making any decisions.

1. What’s in It for Everyday Australians?

The $1,000 Instant Tax Deduction

From the 2026–27 income year (1 July 2026), Australian tax residents who earn income from work will be able to claim an automatic $1,000 tax deduction — without needing to keep receipts or itemise individual work-related expenses.

This applies Australia-wide, regardless of which state or territory you live in, as income tax is a federal matter.

You can still choose to itemise and claim your actual expenses if they exceed $1,000 — you just can’t do both. The ATO will apply whichever method gives you the better outcome if you don’t specify.

Who qualifies for the $1,000 instant tax deduction?

Any Australian tax resident who earns income from employment — wages, salary, or similar — can claim the $1,000 deduction automatically from the 2026–27 income year onward, without needing receipts. You must be a tax resident of Australia (not just living here temporarily on a visa that excludes residency).

Can I claim both the $1,000 deduction AND my actual work expenses?

No. You choose one method: either the automatic $1,000 deduction or itemising your actual work-related expenses. You cannot combine both. If your actual expenses are higher than $1,000, it’s worth tracking them and claiming the higher amount.

What if I work from home? Does this affect my home office deduction?

The $1,000 instant deduction replaces — not supplements — work-related expense claims. If your home office costs, union fees, uniforms and other work expenses total more than $1,000, you’re better off itemising as usual. Your tax agent can help you work out which method gives you a better result.

The $250 Working Australians Tax Offset

From the 2027–28 income year (starting 1 July 2027), a Working Australians Tax Offset of $250 will be available. This is a direct reduction in the tax you owe — not just a deduction — for working Australians.

Full details of income thresholds and phase-out rules are still being legislated, but the intention is to put more money in the pockets of lower and middle-income workers.

Is $250 a tax deduction or money back?

It’s a tax offset, which means it directly reduces the amount of tax you owe — dollar for dollar. Unlike a deduction (which reduces your taxable income), a $250 offset means $250 less tax payable. However, if your tax liability is already below $250, you may not receive the full benefit.

Medicare Levy Low-Income Thresholds — Already in Effect

The Medicare levy low-income thresholds for singles, families, and seniors and pensioners increased by 2.9% from 1 July 2025. This is retrospective — it already applies to the 2024–25 income year.

This means more lower-income Australians will be exempt from paying the Medicare levy, or will pay a reduced amount. This applies uniformly across all states and territories as Medicare is a federal scheme.

What is the Medicare levy threshold?

If your income is below a certain threshold, you don’t have to pay the Medicare levy (which is 2% of your taxable income). The threshold was increased by 2.9% from 1 July 2025, meaning more Australians on lower incomes will avoid the levy or pay less of it. Check your 2025 tax return to confirm whether you now fall below the updated threshold. 

2. Small Business: More Support and New Tools

$20,000 Instant Asset Write-Off — Now Permanent

The $20,000 instant asset write-off for small businesses has been made permanent for businesses with an annual turnover of up to $10 million. Previously, this was extended on a year-by-year basis, creating uncertainty. Making it permanent gives small business owners the confidence to invest in equipment, tools and technology.

This applies across all states and territories as it is a federal income tax measure.

What is the instant asset write-off?

The instant asset write-off allows eligible small businesses to immediately deduct the full cost of a business asset in the year it’s purchased, rather than depreciating it over several years. From the 2026–27 Budget, businesses with a turnover of less than $10 million can immediately write off assets costing up to $20,000. This can significantly reduce your tax bill in the year you invest.

What kinds of assets qualify for the $20,000 write-off?

Generally, any business asset costing up to $20,000 that is used in your business can qualify — think tools, equipment, computers, machinery, and vehicles (subject to car cost limits). The asset must be first used or installed, ready for use in Australia. Speak to your accountant to confirm an asset qualifies before purchasing.

Does the $20,000 instant asset write-off apply in all states?

Yes. It is a federal tax deduction, so it applies to all eligible small businesses in every state and territory — NSW, VIC, QLD, WA, SA, TAS, ACT, and NT. However, individual state governments may have separate state-based grants or incentives that complement this. Check with your state’s small business authority as well.

Loss Carry-Back for Companies

From 1 July 2026, companies with an aggregated annual global turnover of less than $1 billion will be able to carry back tax losses to offset against prior years’ taxable income. This means if your company made a profit (and paid tax) in a previous year but has a loss this year, you may be able to claim a refund of some tax previously paid.

This was introduced during COVID-19 as a temporary measure and worked very well for many businesses. It’s now being reintroduced as a structural tool.

What is loss carry-back, and how does it help my business?

Loss carry-back allows a company to apply a current-year tax loss against profits from a prior year, potentially generating a tax refund. For example, if your company paid $50,000 in tax in 2025 and then made a $40,000 loss in 2026–27, the carry-back could result in a refund of tax previously paid. This improves cash flow during tough times and rewards businesses that paid tax when they were profitable.

Does loss carry-back apply to sole traders and partnerships?

No. Loss carry-back is specifically for companies (Pty Ltd). Sole traders, partnerships and trusts have different rules for how losses are treated. If you operate through one of these structures and want to understand how losses affect you, speak to your accountant.

Instant Tax Deduction Benefit for Contractors and Self-Employed

If you earn income from work as a contractor or self-employed person, the $1,000 instant deduction also applies to you — provided you are an Australian tax resident earning income from work. This could mean fewer receipts to track for smaller deductions.

Loss Refundability for Start-Up Companies — From 2028

From 1 July 2028, start-up companies with an aggregated annual turnover of less than $10 million that generate a tax loss in their first two years of operation will be able to claim a cash refund for those losses. This is designed to reduce the financial risk of starting a new business.

Rollover Relief to Restructure Out of Trusts

From 1 July 2027 and for 3 years, small businesses and other entities will have access to rollover relief if they want to restructure out of a discretionary trust into another entity type, such as a company or fixed trust. Given the 30% minimum tax on discretionary trusts (see below), this may be very relevant for many business owners.

Can I move my business from a trust to a company without paying capital gains tax?

From 1 July 2027, rollover relief will be available to allow restructuring from a discretionary trust to another entity type — such as a company or fixed trust — without triggering CGT. This is a significant planning tool, especially in light of the new 30% minimum tax on trust distributions. However, this is complex territory, and professional advice is essential before restructuring.

3. Property Investors and Capital Gains: Major Changes Ahead

This is arguably the most significant section of the 2026–27 Budget for people with property or investments. Two long-standing tax concessions are being fundamentally overhauled.

Negative Gearing Limited to New Builds — From 1 July 2027

From 1 July 2027, negative gearing deductions for residential property will only be available for new builds. If you borrow money to invest in an existing property (one that has already been built and lived in), you will no longer be able to deduct the rental loss against your other income.

This applies to all Australian residential property investors regardless of which state the property is located in, as negative gearing is a federal tax concession.

Properties already held and negatively geared before 1 July 2027 are expected to be grandfathered — meaning existing arrangements should not be affected. However, the legislative details must be confirmed once the bills are drafted.

What is negative gearing?

Negative gearing occurs when the cost of owning an investment property — including loan interest, property management fees, repairs and other expenses — exceeds the rental income you earn. The shortfall (the ‘loss’) can currently be deducted against your other income, such as your salary, reducing your overall tax bill. From 1 July 2027, this will only be permitted for new builds.

If I already own a negatively geared investment property, am I affected?

Based on what has been announced, existing negatively geared properties held before 1 July 2027 are expected to be grandfathered and not affected. However, you should confirm this with your accountant once legislation is released, as the exact terms of any grandfathering provisions will determine how this applies to your specific situation.

Does this apply in all states equally?

Yes. Negative gearing is determined by federal income tax law, not state law. The restriction will apply equally to residential investment properties in NSW, VIC, QLD, WA, SA, TAS, ACT, and NT. Note that different states have their own land tax and stamp duty rules, which are separate matters entirely.

Will the negative gearing changes affect property prices?

This is widely debated. Some economists argue that removing negative gearing from existing properties will reduce investor demand and slow price growth, potentially helping first home buyers. Others argue it may reduce rental supply and push up rents. Our team at Latitude has mixed views — as reflected in our video discussion. The true impact will depend on how markets respond.

Capital Gains Tax: The 50% Discount Is Going — From 1 July 2027

Currently, if you hold an asset for more than 12 months and sell it, you only pay tax on 50% of the capital gain. This 50% CGT discount is being replaced from 1 July 2027 with a return to cost base indexation — the system used before September 1999.

Under indexation, your cost base is adjusted for inflation (CPI), and you pay tax on the real gain after accounting for the erosion of money’s purchasing power. A 30% minimum tax on net capital gains will also apply.

This applies to all Australian taxpayers regardless of state, as CGT is a federal tax.

What is the difference between the CGT 50% discount and indexation?

Under the 50% discount (current rule), if you make a $200,000 capital gain on a property held for more than a year, you only include $100,000 in your taxable income. Under indexation (new rule from 1 July 2027), your original cost is adjusted upward for inflation (CPI), so you only pay tax on the gain above inflation — but you pay tax on 100% of that real gain, with a 30% minimum tax rate. For assets that have risen sharply in value relative to inflation, indexation will likely result in a higher tax bill.

Does the CGT change affect shares as well as property?

Yes. CGT applies to most assets, including shares, investment properties, business assets, and more. The change from the 50% discount to indexation affects all CGT assets held for more than 12 months, not just real estate.

Should I sell my investment property before 1 July 2027 to use the 50% discount?

This is a question many investors are asking. Whether selling before 1 July 2027 makes financial sense depends on your overall tax position, the size of your gain, your other income, transaction costs, and market conditions. There is no universal answer. Book a consultation with Latitude Accountants to model the numbers for your specific situation before making any decision.

⚠️  Important: The CGT changes apply from 1 July 2027. Any asset sold before this date will still access the current 50% discount rules, provided the other CGT conditions are met. Assets sold from 1 July 2027 onward will use the new indexation approach and 30% minimum tax.

Foreign Buyers Ban Extended

The ban on foreign purchasers of established (existing) dwellings has been extended to 30 June 2029. This is a continuation of the existing policy, intended to prioritise housing for Australian residents and citizens.

4. Discretionary Trusts: A 30% Minimum Tax Is Coming

This was arguably the biggest surprise of the Budget — and the one our team reacted to most strongly. From 1 July 2028, a 30% minimum tax will apply to income distributed from discretionary trusts.

What Is a Discretionary Trust?

A discretionary trust (sometimes called a family trust) is a legal structure widely used by Australian family businesses, professionals, and investors to hold assets and distribute income flexibly to family members. The trustee decides each year how to distribute income, allowing families to direct income to members in lower tax brackets, reducing the overall family tax bill.

This flexibility has historically been one of the main tax planning advantages of a discretionary trust. The new 30% minimum tax significantly reduces — but does not eliminate — that advantage.

What does the 30% minimum tax on trusts mean?

From 1 July 2028, any income distributed from a discretionary (family) trust will be subject to a minimum tax rate of 30%. Even if the income is distributed to a beneficiary whose personal income tax rate is lower than 30% — for example, an adult child earning little other income — at least 30% tax must be paid on the distribution.

Does this affect all trusts?

The 30% minimum tax specifically targets discretionary trusts (family trusts where distributions are at the trustee’s discretion). Fixed trusts, unit trusts and superannuation funds are generally treated differently under the tax law, though the specifics will depend on how the legislation is drafted. If you have a trust structure, speak to your accountant to understand how this affects your particular arrangement.

Will people still use trusts after this change?

Trusts will still offer legitimate benefits — asset protection, estate planning, and some income splitting — but the pure tax benefit of directing income to lower-bracket family members will be significantly reduced. Some families may choose to restructure into companies or other entities. The rollover relief available from 1 July 2027 (see above) may assist with this.

Can I still distribute income to my children from a trust?

Yes, but a 30% minimum tax will apply from 1 July 2028. One of our accountants noted in the video that this may simply encourage more distributions to be made to adult children, but at a 30% tax rate, this is less advantageous than before. Additionally, existing rules around distributing to minors (children under 18) apply different penalty tax rates under Division 7A and Section 102AC, which remain unchanged.

5. Superannuation: Governance and Oversight Strengthened

The Budget did not include dramatic changes to superannuation contribution caps or tax rates — but it did include funding to strengthen governance of managed investment schemes and the broader super system.

Are superannuation contribution limits changing in 2026–27?

No changes to the concessional (before-tax) or non-concessional (after-tax) contribution caps were announced in this Budget. The current general concessional cap is $30,000 per year, and the non-concessional cap is $120,000 per year (or up to $360,000 using the bring-forward rule), subject to your total superannuation balance. Confirm the exact figures for your situation with your adviser as these are indexed and can change.

Funding has been allocated for a new Counter Fraud Strategy to modernise fraud detection across the tax and super systems. This signals increased ATO scrutiny of super-related transactions, particularly managed investment schemes.

6. Private Health Insurance: Small But Meaningful Change

Age-Based Uplift Removed — From 1 April 2027

Currently, the Private Health Insurance Rebate is calculated differently based on your age, with higher rebates for older Australians. From 1 April 2027, this age-based uplift will be removed, and the rebate will be standardised regardless of age.

This simplifies the system but may reduce the rebate amount for older Australians who previously received a higher age-based uplift.

Will I pay more for private health insurance after 1 April 2027?

Possibly. If you currently benefit from the age-based uplift in the Private Health Insurance Rebate, removing it from 1 April 2027 means the government will contribute less toward your premium, effectively increasing your out-of-pocket cost. How much depends on your age, income and level of cover. Review your policy before 1 April 2027 to understand the impact.

7. Electric Vehicles: FBT Discount Coming in 2029

From 1 April 2029, a permanent 25% discount on the Fringe Benefits Tax (FBT) will apply to all electric cars valued up to and including the fuel-efficient luxury car tax threshold. This applies nationally across all states and territories.

What does the electric car FBT discount mean for my business?

If your business provides an electric vehicle to an employee (or to yourself as a director), from 1 April 2029, a permanent 25% reduction in the FBT payable will apply, provided the vehicle’s value doesn’t exceed the fuel-efficient luxury car tax threshold (currently $91,387 for the 2025–26 income year, though this is indexed annually). This is separate from the existing FBT exemption for low-emission vehicles, which has different eligibility criteria. Speak to your accountant to understand which incentive is most advantageous for your situation.

8. Other Measures Worth Knowing

Fuel Excise Reduction — Already in Effect

A temporary reduction in fuel excise and the heavy vehicle road user charge was introduced for three months from 1 April 2026. If you run a business with vehicles or a fleet, this reduction was already in effect from April — check your fuel receipts.

Venture Capital Tax Incentives Expanded

From 1 July 2027, venture capital tax incentives will be expanded to support investment in Australian start-up companies and innovation. If you invest in, or are considering launching, an early-stage company, updated rules may provide better tax concessions.

Pillar Two — Global Minimum Tax Already in Effect

Australia’s implementation of the Global Anti-Base Erosion Rules (Pillar Two) — the OECD’s global 15% minimum tax on multinational corporations — took effect from 1 January 2026. This applies to large multinational groups and is unlikely to affect most small-to-medium Australian businesses directly.

Research & Development Tax Incentive — Reformed From 2028

From 1 July 2028, the Research and Development Tax Incentive (R&DTI) will be reformed. If your business currently claims R&D tax concessions, watch for updates to the eligibility rules and rates. We’ll provide a dedicated update when the legislation is released.

Monthly PAYG Instalments — Optional From 2027

From 1 July 2027, small and medium businesses will be able to opt in to paying PAYG income tax instalments monthly rather than quarterly. This gives businesses the flexibility to manage cash flow more frequently, rather than facing larger quarterly payments.

Should I opt in to monthly PAYG instalments?

Monthly instalments mean smaller, more frequent payments — which can help with budgeting and avoiding a large year-end tax bill. However, it also requires more regular cash management. Whether monthly or quarterly instalments suit you depends on your cash flow cycle and accounting systems. Discuss this with your accountant before opting in when it becomes available from 1 July 2027.

9. First Home Buyers: Could You Benefit?

While the Budget did not announce a specific new grant program for first home buyers, several of the measures above indirectly affect the housing market:

• Limiting negative gearing to new builds from 1 July 2027 may reduce investor competition for established homes.
• Extending the ban on foreign purchasers of existing dwellings until 30 June 2029 maintains the market for Australian residents.
• The $1,000 instant tax deduction and Working Australians Tax Offset may help workers save faster for a deposit.

It’s worth noting that first home buyer grants and stamp duty concessions remain state-based matters, and differ significantly across jurisdictions:

• Queensland: First Home Owner Grant of $30,000 for new builds. Stamp duty concessions available.
• NSW: First Home Buyer Assistance Scheme with stamp duty exemptions. Separate First Home Owner Grant for new builds in some areas.
• Victoria: First Home Owner Grant of $10,000. Stamp duty concessions and First Home Buyer Duty Exemption available.
• Western Australia: First Home Owner Grant of $10,000. Stamp duty rebates available.
• South Australia, Tasmania, ACT, NT: Each has its own scheme — contact your state revenue office or speak to your accountant.

⚠️  State grants and concessions change regularly. Always verify the current amounts and eligibility criteria directly with your state revenue office or your accountant before proceeding.

As a first home buyer, what federal Budget measures help me most?

The indirect benefits include: the $1,000 instant tax deduction (keeps more money in your pocket now), the $250 Working Australians Tax Offset from 2027–28, and the negative gearing changes, which may reduce investor competition for established homes from 1 July 2027. There is no new dedicated first home buyer grant from the federal government in this Budget, but existing programs through the National Housing Finance and Investment Corporation (NHFIC) — including the First Home Guarantee — remain in place. Speak to a mortgage broker and your accountant about combining all available support.

10. Key Dates at a Glance

Here’s a summary of when each major measure is proposed to take effect. Remember: these are proposed dates — all measures require parliamentary approval.

• Already in effect (2025): Medicare levy threshold increases (from 1 July 2025), fuel excise reduction (from 1 April 2026).
• 2026–27 income year (from 1 July 2026): $1,000 instant tax deduction; $20,000 instant asset write-off (permanent); loss carry-back for companies; Counter Fraud Strategy; Pillar Two global minimum tax (from 1 January 2026).
• From 1 July 2027: Negative gearing limited to new builds; CGT 50% discount replaced by indexation with 30% minimum tax; rollover relief to restructure out of trusts; Working Australians Tax Offset; monthly PAYG instalment opt-in; expanded venture capital incentives.
• From 1 July 2028: 30% minimum tax on discretionary trusts; R&DTI reforms; loss refundability for eligible start-ups.
• From 1 April 2027: Private health insurance age-based rebate uplift removed.
• From 1 April 2029: Permanent 25% electric car FBT discount.
• Until 30 June 2029: Foreign buyer ban on established dwellings.

11. What Should You Do Right Now?

With so many changes — some already in effect, others landing over the next three financial years — the risk of doing nothing is real. Here’s how to approach it:

• Review your trust structure. If you use a discretionary trust, understand how the 30% minimum tax from 2028 affects your distributions and whether restructuring makes sense.
• Check your investment property strategy. If you have negatively geared established properties, model your position before and after 1 July 2027. If you’re considering selling, understand the CGT implications under both old and new rules.
• Maximise your write-offs this financial year. The $20,000 instant asset write-off is now permanent, so plan your business equipment purchases strategically.
• Don’t rush major decisions. Many changes don’t start until 2027 or 2028. You have time to plan — but not forever.
• Check your 2025 tax return for the Medicare levy threshold update — you may be entitled to a reduced levy.
• Speak to your accountant. Every client’s situation is different. What applies to one investor may not apply to another.

Need Help Understanding the Impact of the 2026–27 Federal Budget?

If you are unsure how these changes may affect your business, investments, trust structure, or personal tax position, speak with Latitude Accountants.

Our team helps Australian individuals, small business owners, investors, and families cut through complex Budget changes, stay compliant with ATO requirements, and make confident financial decisions. We deliver accounting “The Latitude Way”—practical, proactive, and focused on real-world outcomes that help you plan ahead with clarity.

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📞 1300 706 597
📧 info@latitudeaccountants.com.au

Disclaimer

This blog post is intended as general educational information only and does not constitute financial, tax or legal advice. The measures described are proposals announced on Budget night (12 May 2026) and have not yet been legislated. Details may change. Individual circumstances vary. You should seek personalised advice from a registered tax adviser or financial planner before making any decisions based on this information.