The 2026 Federal Budget promised tax relief for Australian workers, support for housing and changes designed to make the tax system fairer. But as the details have emerged, many taxpayers, investors and small business owners are left asking a simple question: how will these changes actually affect them?

In this episode of The Account Rant, Latitude Accountants CEO John Saade sits down with Leigh Morris, founder of SFP Financial and the voice behind Financial Leigh, to break down the major tax changes announced in the 2026 Federal Budget.

From the personal tax rate reduction and the new $1,000 standard work deduction to capital gains tax changes, discretionary trusts, negative gearing, SMSF borrowing and the $20,000 instant asset write-off, John and Leigh examine who could benefit, who could lose and why some of the changes are creating more uncertainty than clarity.

The overall verdict from Leigh? Two thumbs down.

What Are the Major 2026 Federal Budget Tax Changes?

The 2026 Federal Budget introduces or proposes a broad range of tax changes affecting individuals, investors and businesses.

Some of the major measures include:

• A reduction in the personal income tax rate from 16% to 15% from 1 July 2026
• A further reduction to 14% from 1 July 2027
• A proposed $1,000 standard deduction for eligible work-related expenses
• A new Working Australians Tax Offset of up to $250
• Major changes to capital gains tax
• Changes to negative gearing arrangements
• A proposed 30% minimum tax on discretionary trusts from 1 July 2028
• Changes to small business CGT concessions
• Restrictions on new SMSF residential property borrowing
• Restoration of company loss carry-back provisions
• A $20,000 instant asset write-off

On paper, some of these measures sound straightforward. However, the practical consequences can be considerably more complicated.

Personal Tax Cuts: Helpful, But Not a Game Changer

One of the more straightforward measures is the reduction in the personal income tax rate.

From 1 July 2026, the 16% tax rate applying to taxable income between $18,201 and $45,000 will fall to 15%. It is scheduled to fall again to 14% from 1 July 2027.

This means Australian taxpayers will receive a tax saving, but John and Leigh question how significant the change will actually feel for most workers.

The reduction is certainly a move in the right direction, but it is unlikely to fundamentally change the financial position of most taxpayers.

The $1,000 Standard Work Deduction Is Not $1,000 Cash Back

One of the biggest areas of confusion discussed in the episode is the proposed $1,000 standard work deduction.

From the 2026–27 income year, eligible Australian tax residents earning income from work will be able to claim a standard deduction of up to $1,000, subject to the rules.

But there is an important distinction:

A $1,000 deduction does not mean $1,000 back in your bank account.

A tax deduction reduces taxable income. The actual tax saving depends on the taxpayer’s marginal tax rate.

For some workers, the simplified system could make claiming work-related expenses easier. However, people who already claim more than $1,000 in legitimate deductions may need to consider whether using the standard deduction actually leaves them better off.

This creates a potential trade-off:

• Simpler tax returns
• Less record-keeping
• Potentially faster claims
• But potentially fewer deductions for people with higher legitimate work-related expenses

The proposed measure is designed to simplify the tax system, but taxpayers still need to understand what they may be giving up in exchange for that simplicity.

Working Australians Tax Offset: Another Small Tax Saving

The Government is also introducing the Working Australians Tax Offset (WATO) from the 2027–28 income year.

The offset provides an additional tax reduction of up to $250 for eligible working Australians. The Government says around 13 million workers are expected to benefit.

Again, the saving is real, but relatively modest.

The broader issue raised in the discussion is that relatively small tax cuts can become expensive for the Government when applied across millions of taxpayers. That raises an important question about how the Government intends to fund the broader tax reforms.

Capital Gains Tax Changes Could Have a Much Bigger Impact

Capital gains tax is where the Budget becomes significantly more complicated.

The proposed changes include replacing the existing 50% CGT discount with an indexation-based approach for certain assets and introducing a minimum 30% tax rate on certain capital gains.

The impact will depend heavily on the type of asset, how quickly it grows, and how long it is held.

Who Could Benefit From CGT Indexation?

Indexation could potentially benefit investors holding assets that experience relatively modest growth over a long period.

For example, if an asset grows slowly over many years, adjusting its cost base for inflation may reduce the taxable real gain.

Who Could Lose?

Investors holding rapidly appreciating assets could face a different outcome.

This could include:

• Fast-growing investment properties
• Shares
• Businesses
• Cryptocurrency
• Other high-growth assets

As John and Leigh discuss, the uncertainty surrounding future inflation creates another variable for investors trying to plan their long-term tax position.

That makes investment and business structuring more difficult.

Negative Gearing and Grandfathering

Negative gearing is another major area of change.

The Government’s reforms affect the tax treatment of certain property investments, while existing arrangements are subject to grandfathering provisions.

Grandfathering is important because taxpayers who made investment decisions under the previous rules need certainty around investments they have already committed to.

The principle is relatively simple: changing the rules going forward is one thing, but retrospectively changing the tax treatment of existing investments can significantly undermine confidence.

The Budget also addresses inherited property and related grandfathering concerns, including arrangements involving qualifying transfers between spouses.

Small Business CGT Concessions Are Expanding

There is also some positive news for small business owners.

The turnover threshold for accessing certain small business CGT concessions is set to increase from $2 million to $10 million from 1 July 2027.

For business owners who have spent years building a valuable business, CGT concessions can make a substantial difference when they eventually sell or restructure.

However, business owners should not assume that meeting the turnover threshold automatically means they will qualify for every available concession.

The eligibility requirements can be complex, which makes early tax and structural planning important.

SMSF Residential Property Borrowing Restrictions

Another controversial change discussed by John and Leigh involves borrowing through self-managed superannuation funds.

The Government is proposing to prohibit new limited recourse borrowing arrangements for residential property, while grandfathering existing arrangements.

The policy raises questions about consistency.

If the Government wants to encourage investment in new residential property to increase housing supply, restricting a particular investment structure may have consequences for how investors make those decisions.

For SMSF members considering property investment, understanding the rules before entering into a new arrangement will be particularly important.

Company Loss Carry-Back Is Being Restored

One of the more positive measures for companies is the restoration of company loss carry-back.

The measure allows eligible companies to carry certain losses back against tax paid in previous years.

This can be particularly useful for businesses whose profits fluctuate significantly.

For example, a company might have:

• A profitable year
• A subsequent year with a significant loss
• Tax already paid on the earlier profit

The loss carry-back mechanism can potentially allow the company to recover some of the tax previously paid, improving cash flow.

It is not necessarily a permanent reduction in the company’s overall tax burden. Instead, it can provide an important timing and cash-flow benefit.

The $20,000 Instant Asset Write-Off

Small businesses will also have access to a $20,000 instant asset write-off under the announced arrangements.

The measure provides greater certainty for businesses purchasing eligible assets costing $20,000 or less.

However, as John and Leigh point out, an instant write-off is primarily a timing benefit.

Instead of claiming depreciation deductions over several years, the business may be able to claim the eligible amount sooner.

That can improve short-term cash flow, but it does not necessarily mean the business is receiving an additional tax deduction overall.

The 30% Minimum Tax on Discretionary Trusts

Perhaps the most significant concern for many small business owners is the proposed 30% minimum tax on discretionary trusts from 1 July 2028.

Discretionary trusts have traditionally provided flexibility in distributing income among beneficiaries.

The proposed changes are designed to limit the ability to use that flexibility to achieve lower tax outcomes through income splitting.

This could have major implications for:

• Family businesses
• Investment structures
• Business owners using discretionary trusts
• Families planning intergenerational wealth
• Trusts distributing income to lower-tax beneficiaries

The Government has since released draft legislation proposing mechanisms that could allow certain trusts to avoid the minimum tax by moving towards fixed distributions. However, the proposed rules have themselves generated significant concern and debate.

This is a good example of why the 2026 tax reforms are proving difficult to navigate.

The rules are evolving, and structural decisions should not be made based solely on headlines.

Why the 2026 Tax Changes Feel So Complicated

The biggest issue may not be any single tax change.

It is the combination of multiple reforms affecting different parts of the tax system at different times.

For taxpayers and business owners, the challenge is planning when:

• Tax rates are changing
• CGT rules are changing
• Trust taxation is changing
• Property investment rules are changing
• Some existing arrangements are grandfathered
• New legislation is still being developed
• Different structures may produce very different outcomes

As John and Leigh discuss, the more variables there are, the harder it becomes for investors and business owners to make long-term decisions with confidence.

What Should Australian Taxpayers Do Now?

The key takeaway is not to panic or make major structural decisions simply because of a headline.

Instead, consider:

• Reviewing your current investment and business structures
• Understanding whether upcoming changes apply to you
• Checking whether existing arrangements are grandfathered
• Reviewing potential CGT consequences before selling assets
• Assessing whether your discretionary trust remains appropriate
• Reviewing planned business asset purchases
• Considering the tax implications before changing an SMSF investment strategy
• Getting professional advice before restructuring

The right strategy will depend on your individual circumstances.

Understanding the Federal Budget Tax Changes

The 2026 Federal Budget contains genuine tax savings for some Australians, but it also introduces significant changes for investors, businesses and trust structures.

Some measures simplify the system. Others add new layers of complexity.

For John Saade and Leigh Morris, the broader concern is that taxpayers need certainty to make good financial decisions. When the rules continue to evolve, understanding the details becomes more important than ever.

Whether you are an employee, property investor, small business owner or trustee, the most important question is not simply “What changed?”

It is:

“How do these changes affect my specific financial and tax position?”

That is where professional advice can make a meaningful difference.

Frequently Asked Questions About the 2026 Federal Budget Tax Changes

Is the $1,000 work deduction a $1,000 tax refund?

No. A $1,000 deduction reduces your taxable income by up to $1,000. It does not mean you receive $1,000 back in cash.

When does the personal income tax rate change?

The 16% tax rate on taxable income between $18,201 and $45,000 is scheduled to reduce to 15% from 1 July 2026 and to 14% from 1 July 2027.

What is the Working Australians Tax Offset?

The Working Australians Tax Offset provides an additional tax offset of up to $250 for eligible workers from the 2027–28 income year.

What is happening to discretionary trusts?

The Government is introducing a proposed 30% minimum tax on discretionary trusts from 1 July 2028, subject to specified exceptions and rules. Further draft legislation has been released as the Government develops the reform.

Should I change my business or investment structure because of the Budget?

Not without first understanding the specific tax, legal and financial consequences. The most appropriate structure depends on your circumstances, assets, income and long-term objectives.

Talk to Latitude Accountants

Tax rules are changing, and understanding how they apply to your circumstances is more important than ever.

Latitude Accountants provides proactive tax, accounting and business advisory services to individuals and businesses across Australia. Our Chartered Accountants can help you understand the changes, review your current structure, and make informed decisions for the future.

📍 Sydney Olympic Park | Marrickville | Melbourne | Loxton
📞 1300 706 597
📧 info@latitudeaccountants.com.au

Want tailored business advice? Let’s chat.

Disclaimer

This article is general information only and does not constitute financial, legal, tax, mortgage, superannuation, investment or business advice. Tax legislation and proposed reforms can change, and the application of these measures depends on individual circumstances. Speak with a qualified adviser before making financial, investment, tax or business decisions.