What is the year ahead going to look like from a financial sense?
Well, the new Federal Budget has just been announced, so we’ve got a bit of an inkling.
Said to be one of the most significant and reform-focused budgets Australia has seen in decades, it’s important to know how the changes might affect you or your business.
There were many things to consider when setting this budget. Global instability, inflation pressures, fuel price shocks, and ongoing housing affordability are all major concerns for Australians. That’s why the Government has introduced a range of measures aimed at easing cost-of-living pressures while reshaping key parts of the Australian tax system.
So, what is in store for us? Let’s find out.
Property And Investment Tax Changes
The biggest headline in this year’s budget would have to be the changes to property investment taxation. These changes form part of a broader strategy to improve housing affordability and rebalance the tax system for younger Australians.
Here’s what we can expect:
Negative Gearing Changes
To encourage investment in new housing supply, rather than existing dwellings, negative gearing concessions will be limited to newly constructed residential properties.
For established residential properties acquired after 7:30 pm on 12 May 2026, rental losses after 1 July 2027 will no longer be deductible against salary or other personal income. Instead, losses will only be offset against future residential property income or capital gains.
The following still applies:
- Negative gearing is still allowable for all types of property until 30 June 2027
- Existing property holdings are grandfathered and unaffected
- Commercial properties are not impacted
- Managed investment trusts and superannuation funds are excluded from the changes
Capital Gains Tax Reform
The capital gains tax system will see a major overhaul from 1 July 2027 onwards.
These are some of the key changes:
- The 50% capital gains discount will be replaced with a CPI indexation method
- A new minimum 30% tax rate will apply to future capital gains
- Pre-capital gains tax asset exemptions will effectively end from 1 July 2027
Transitional rules will apply to preserve any gains accrued before the changes commence.
These are some of the largest structural tax changes we have seen in recent years, and they will likely impact many long-term investment planning strategies. If you are concerned about how they might affect your own investments, then you can get in touch with our Cadenze team for clarification.
Family Trust Tax Changes
Discretionary trusts are also under the spotlight.
From 1 July 2028, a minimum 30% tax rate will apply to discretionary trust distributions. While non corporate beneficiaries may receive credits for tax already paid, the changes are expected to reduce the effectiveness of income-splitting strategies commonly used by family groups and small businesses.
Transitional rollover relief will be available for businesses restructuring away from discretionary trusts.
Cost-Of-Living Relief
Right now, many Australians are struggling to get ahead. A central focus of this year’s budget is providing targeted relief for Aussie households dealing with rising living costs.
This is what you can expect:
Tax Offset
From 1 July 2027, the Working Australians Tax Offset will be introduced. Eligible workers will receive a permanent $250 tax offset. This simple measure has been introduced to increase the effective tax-free threshold for working Australians, while providing a little bit of ongoing tax relief for employees and sole traders.
While modest, the tax offset is the Government’s way of rewarding participation in the workforce and helping to negate inflationary pressures.
Tax Deductions
You can breathe a sigh of relief because you no longer need to keep that shoebox of receipts under the bed! One of the most practical changes announced in the Budget is a $1000 instant deduction for work-related expenses from 1 July 2026.
If you are using the standard deduction calculation method, you no longer need to supply receipts as proof. This will simplify tax returns for millions of Australians and will reduce compliance burdens.
If you feel you are going to incur more than $1,000 in deductible expenses, you can still choose to claim actual expenses by using the existing rules.
Income Tax Cuts
If you are hanging out for the tax cuts announced in last year’s budget, you’ll be pleased to hear these will still go ahead. The 16% marginal tax rate will reduce to 15% from 1 July 2026 and to 14% from 1 July 2027.
Providing additional support to low and middle-income earners, the reductions apply to taxable income between $18,201 and $45,000.
Medicare Levy Threshold Increases
The Medicare levy thresholds continue to increase. From 1 July 2025, singles, families, seniors, and pensioners will all have their thresholds increased. This will reduce the amount many Australians pay, or you may even avoid the need to pay a levy altogether.
Business And Employer Measures
While investors might be facing some tighter rules, the news is not all bad for businesses. There are some positive announcements in this Budget.
Instant Asset Write-Off
One of the most welcomed measures for small businesses is the permanent increase of the instant asset write-off threshold. This will be permanently set to $20,000 from 1 July 2026 for eligible businesses with a turnover below $10 million.
This is good news for businesses as it provides greater certainty around investing in things like equipment, technology, and operational improvements.
Loss Carry Back Returns
If your company has a global turnover below $1 billion, you will once again be able to carry back tax losses and offset them against profits from the two previous income years. Many Australian businesses have experienced difficult trading periods in recent months. This measure is aimed at supporting business cash flow at this time.
Start-Up Support
Start-ups may also be eligible for tax relief. If your company meets the criteria and has a turnover below $10 million, you will be able to access refundable tax offsets. These are linked to your payroll and fringe benefit obligations, where losses are incurred during the first two years of operation.
These measures have been introduced to help encourage entrepreneurship and innovation in our economy.
PAYG Instalment Reform
Recent updates to software integrations with the ATO mean that small and medium businesses will gain access to more dynamic PAYG instalment calculations from 1 July 2027. Intended to help businesses better manage cash flow and reduce unexpected tax liabilities, you’ll have greater visibility over your PAYG installments.
Electric Vehicle FBT Concessions
This one is not a benefit, but as it could impact a number of Australian businesses, it is essential to note. Fringe benefit tax exemptions for electric vehicles will gradually be scaled back from 1 April 2027. While the exemption remains fully available until March 2027, tighter thresholds and reduced concessions will apply in future years, particularly for higher-value vehicles.
If you are an employer considering EV salary packaging arrangements, it is important to review your plans before these changes come into effect.
Economic Outlook
Unfortunately, the economic outlook is not looking any better than last year. Conditions still remain hard for everyday Aussies and businesses. Global and local pressures are contributing to a challenging environment.
The budget doesn’t bring much economic good news, but it does prepare us for what to expect. These are the forecasts:
- Inflation is projected to peak at 5% in mid-2026
- Economic growth will slow to 1.75% in 2026-27
- Unemployment will rise modestly to 4.5%
- Gross debt will exceed $1 trillion by June 2027
It isn’t all doom and gloom! The Government has announced its intentions to increase spending on defence, healthcare, fuel security, and housing infrastructure to build a stronger Australia for us all.
What Does The Budget Mean For You?
The substantial tax and structural reforms announced in this year’s Federal Budget will impact individuals, investors, and businesses differently. There’s some good news and some bad!
For employees and families, there is expected relief through tax cuts, offsets, and simplified deductions. For businesses, there is some certainty in this challenging economic environment with permanent asset write-off measures and improved loss provisions.
That’s the good news. Investors and family groups will unfortunately face significant changes to long-standing tax concessions, particularly around property investment and discretionary trusts. This is the not-so-good news.
However, it is important to keep in mind that many of these measures are still proposals and will require legislation before becoming law.
With reforms of this scale, it’s vital that you understand how the changes may impact your personal or business circumstances. The best thing to do is to seek advice from your accountant now so that you are well prepared for what is to come.
The Cadenze team would welcome the opportunity to help you. We can provide tailored advice on how the 2026-27 Federal Budget may affect you or your business. Don’t spend time stressing about how the changes will impact you. Reach out to us now for peace of mind and trusted advice.