Federal Budget 2026–27

Individuals & Employees

Income tax cuts continue
The Government has confirmed the next stage of personal income tax cuts, with the tax rate applying to income between $18,201 and $45,000 reducing:
•    to 15% from 1 July 2026
•    then to 14% from 1 July 2027

Proposed $1,000 standard deduction
From 1 July 2026, employees may have the option to claim a standard $1,000 deduction for work-related expenses without needing to retain receipts or substantiate claims.

Individuals with deductible expenses above this amount would still be able to claim actual expenses under the existing rules.

Medicare levy threshold increases
The low-income Medicare levy thresholds are proposed to increase from 1 July 2025, providing some additional relief for eligible taxpayers, families and pensioners.

Property & Investment Changes

Negative gearing reforms
One of the most widely discussed announcements is the proposed reform to negative gearing arrangements.

From 1 July 2027:
•    negative gearing concessions for residential property would generally be limited to new builds
•    losses relating to newly acquired established residential properties would no longer offsetother forms of income such as salary and wages

Existing investments are proposed to be grandfathered, which means the current negative gearing tax rules will continue to apply.

Capital gains tax reform
The Government has also proposed replacing the current 50% CGT discount with a CPI indexation system from 1 July 2027, alongside the introduction of a proposed minimum 30% tax rate on capital gains.

These changes may have broad implications for long-term investment strategies, particularly for individuals and family groups holding appreciating assets.

For clients considering asset sales, acquisitions or restructuring activity over the coming years, early planning may become increasingly important.

Business Measures

Permanent instant asset write-off
From 1 July 2026, the instant asset write-off threshold is proposed to permanently increase to $20,000 for eligible small businesses with turnover below $10 million.

This measure is expected to provide greater certainty around equipment purchases and capital investment decisions.

Company loss carry-back
Eligible companies may once again be able to carry tax losses back up to two years and offset them against previously paid tax.

PAYG instalment changes
The ATO is expected to expand dynamic PAYG instalment calculations integrated within accounting software, with optional monthly reporting proposed from 1 July 2027.

Trusts & Stucturing

The Budget also includes a proposed 30% minimum tax applying to discretionary trust distributions from 1 July 2028.

While further detail is still to come, this announcement may have significant implications for family groups and business structures currently utilising discretionary trusts.
The Government has also flagged transitional rollover relief to assist certain restructures into alternative entity types.

Economic Outlook

The Budget has been delivered amid ongoing global uncertainty, inflationary pressure and continued housing affordability concerns.

Economic growth is expected to soften in the short term, while inflation is forecast to gradually ease through 2027.

At the same time, the Government has forecast continued deficits and increasing debt levels over the coming years.

Final Thoughts

While not all measures announced in the Budget will necessarily become law, this year’s announcements reinforce the importance of proactive advice and forward planning.

Changes relating to investment property, CGT and trust structures in particular may warrant review well before their proposed commencement dates.

If you would like to discuss how these announcements may impact your position, please contact the Luma Advisors team.

We’re here to help you plan with clarity and confidence.