Budget 2026-27: Major Tax Changes and Business Measures at a Glance

Measures and start date at a glance

Budget measure	Application date
Major tax reform
Negative gearing for residential homes will be limited to new builds – losses from established residential properties will only be deductible against rental income or the capital gains from residential properties Established residential properties acquired prior to 7:30 pm (AEST) on 12 May 2026 will be fully grandfathered	From 1 July 2027
Capital gains tax – the 50% CGT discount will be replaced by cost base indexation for assets held for more than 12 months, with a 30% minimum tax on net capital gains – changes apply to all CGT assets, including pre-CGT assets, held by individuals, trusts and partnerships.	From 1 July 2027
Trusts – Trustees will pay a minimum tax of 30% on the taxable income of discretionary trusts.	From 1 July 2028
Individuals
Introduce a $250 Working Australians Tax Offset	2027–28 income year
Introduce a $1,000 instant tax deduction for work-related expenses	2026–27 income year
Remove the age-based uplift of the Private Health Insurance Rebate	From 1 April 2027
Increasing the Medicare levy low-income thresholds	From 1 July 2025
Business
Making tax simpler for businesses – Instant asset write-off threshold permanently increased to $20,000. – Small and medium businesses will be able to opt in to reporting and paying PAYG instalments monthly	From 1 July 2026From 1 July 2027
Expand the venture capital tax incentives, by: – Increasing the cap on the asset size of the investee business at the time of investment in venture capital limited partnership (VCLP) to $480 million and early stage venture capital limited partnership (ESVCLP) to $80 million – Increasing the ESVCLP tax incentive cap on the asset size of the investee business, at which investment returns can be fully tax exempt to $420 million – Increasing the maximum fund size of ESVCLPs to $270 million	From 1 July 2027
Support for small business by extending funding to the: – Small Business Debt Helpline financial counselling program and – New Access for Small Business Owners’ mental health coaching program	Funding over three years from 2025–26
Funding for second tranche of improvements to Australian business register, including – synchronising director information with the ACNC’s Charities Register – linking Director IDs to the Companies Register – uplifting ABN authentication, and – completing the transition of ABN and superannuation lookup functions to the ATO.	Over 2 years from 2026–27
Companies
Loss carry back and loss refundability: – Reintroduce the loss carry back, for revenue losses only, for companies with aggregated annual global turnover of less than $1 billion – Introduce loss refundability for small start-up companies with aggregated annual turnover of less than $10 million.	For tax years commencing on or after 1 July 2026 For tax years commencing on or after 1 July 2028
Reform the R&D Tax Incentive, including: – Increasing the offset for core R&D expenditure by around 25 to 50% – Reducing the intensity threshold from 2% to 1.5% – Removing eligibility for expenditure that only supports R&D – Increasing the turnover threshold for the refundable offset to $50 million – Increasing the maximum expenditure cap to $200 million – Increasing the minimum expenditure threshold to $50,000	2028–29 income year
Fringe benefits tax
Transitioning to a permanent 25% discount on FBT for electric vehicles	From 1 April 2029
International
Strengthening the Foreign Resident CGT regime, transitional arrangements Time-limited, targeted concession in the foreign resident CGT regime for investment in the renewables sector	First day of the next quarter after Royal Assent, until 30 June 2030
Implement the side-by-side package agreed by the OECD/G20 Inclusive Framework on Base Erosion and Profit Shifting	1 January 2026
Extending the ban on foreign investors purchasing established homes	Until 30 June 2029

Budget measures

Major tax reform

2026-27 Federal Budget – Reforming negative gearing and capital gains tax

Key Points

The Government has announced that it is reforming negative gearing and capital gains tax (CGT) arrangements from 1 July 2027.

Negative gearing for residential property will be limited to new builds.
- Losses from established residential properties will only be deductible against rental income or the capital gains from residential properties. Excess losses will be carried forward and able to be offset against residential property income in future years.
- Established residential properties acquired prior to 7:30pm (AEST) on 12 May 2026 will be fully grandfathered – meaning that the limitation on negative gearing will only apply to established residential properties purchased after this time.
The 50% CGT discount will be replaced by cost base indexation for assets held for more than 12 months, with a 30% minimum tax on net capital gains.
- These changes will apply to all CGT assets, including pre-CGT assets, held by individuals, trusts and partnerships.
- Investors in residential new builds will be able to choose the 50% CGT discount or the new arrangements.

As part of the 2026–27 Federal Budget, the Government announced that it will reform negative gearing and capital gains tax (CGT) arrangements.

From 1 July 2027, the Government will:

limit negative gearing for residential property investments to new builds, and
replace the 50% CGT discount for individuals, trusts and partnerships with cost base
indexation and a 30% minimum tax rate on capital gains.

START DATE: From 1 July 2027

Note

Properties held before the announcement (7:30pm AEST 12 May 2026) will be exempt from the negative gearing changes. The CGT reforms will only apply to gains accruing after 1 July 2027.

Background

Negative gearing

Negative gearing is the common practice where the income derived from an investment, usually a rental property, is less than the deductible outgoings. These outgoings are principally interest, but may also include council rates, land tax, real estate agent fees and repair costs. It is important to note that a range of investments can be negatively geared, not only housing.

The resulting net loss can be claimed against other income, such as salary and wages or business income. Where the other income is not sufficient to absorb the loss, it is carried forward to the next tax year.

This strategy has become attractive to property investors, as they can deduct the tax loss against other income while holding the investment. When the property is later sold, they may also be able to use the CGT discount to achieve a tax-effective outcome.

Critics of negative gearing argue that it disproportionately benefits high-income earners and contributes to higher property prices by increasing investor demand, making it harder for first-home buyers to enter the market.

In 1985, following a Government White Paper, the then Government amended the ITAA 1936 to effectively abolish the negative gearing of property in Australia. The impact of the amendment was that any losses made on rental properties purchased after 17 July 1985 could only be deducted against future rental income.

In 1987, the then Government removed the quarantine measure, effective from 1 July that year. Following that reversal, negative gearing has been permitted on all forms of investment in Australia.

In 2019, the Labour Government at the time flagged tax reform to remove negative gearing. The proposed changes would have come into effect from 1 January 2020 and would have only applied to assets purchased, or investments made, after that date. The reform was not pursued after Labour lost the Federal election.

Capital gains tax

The capital gains tax (CGT) regime was introduced into the Australian taxation system with effect from 20 September 1985. It applies to realised gains and losses on assets acquired after 19 September 1985.

As a general rule, a capital gain or loss is the difference between the capital amount received from a CGT event, known as capital proceeds, and the total costs associated with that event, known as the CGT cost base or reduced cost base.

Depending on the date the asset was acquired, and provided the asset was held for at least 12 months, concessions may be available when working out net capital gains.

Indexation

Indexation aimed to ensure that only real gains were taxed by adjusting the capital gain in line with the consumer price index (CPI).

Indexation:

was only available for CGT assets acquired at or before 11.45 am on 21 September 1999
required each element of the cost base, except the third element, cost of ownership, to be indexed in line with the CPI
was only relevant where there was a capital gain. It did not apply to the reduced cost base.

Discount capital gains

Indexation was abolished and replaced with the CGT discount. The discount was designed to promote more efficient asset management and improve capital mobility by reducing the tax bias towards asset retention. It was also intended to make Australia’s capital gains tax internationally competitive.

Discount capital gains are capital gains that arise from CGT events happening after 11.45 am on 21 September 1999 to an individual, complying superannuation entity, trust or life insurance company.

The discount percentage is:

50% for a gain made by an individual or trust
33% for a gain made by a complying superannuation fund, or a life insurance company from a CGT asset that is a complying superannuation asset.

Certain CGT events are excluded from being treated as discount capital gains. Generally, foreign residents are denied the discount to the extent that the capital gain accrued while they were a foreign resident or temporary resident.

Taxation of net capital gains

Net capital gains made by a taxpayer in an income year are included in their assessable income. A net capital loss for an income year cannot be deducted from assessable income, but it can be applied against capital gains made in later income years.

The net capital gain is included in the taxpayer’s assessable income and taxed at their marginal tax rate.

Negative gearing to be limited to new builds

From 1 July 2027, losses related to existing residential investment properties purchased from 7:30 pm AEST on 12 May 2026 will only be deductible against other income from residential properties, including capital gains.

Where an investor has excess losses, they will be able to carry forward that excess to offset against residential property income in future years.

These changes will apply to established residential properties acquired from 7:30 pm AEST on 12 May 2026.

Properties acquired before this time, including contracts entered into but not yet settled, will be exempt from the changes until they are disposed of.

Exemptions will apply for:

eligible new builds
properties in widely held trusts, such as most managed investment trusts, and superannuation funds, including SMSFs.

Targeted exemptions will also apply for build-to-rent developments and private investors supporting government housing programs.

This means the changes will apply to individuals, partnerships, companies and most trusts.

Transitional arrangements

New builds can continue to be negatively geared before and after 1 July 2027.

For established residential properties:

Properties held at announcement, including where a contract has been entered into but not yet settled, will be allowed to be negatively geared in future years until sold. This ensures that arrangements for taxpayers who have already made investment decisions based on the existing negative gearing rules will not change.
Properties purchased between announcement and 30 June 2027 may be negatively geared during this period, but not from 1 July 2027.
Properties purchased from 1 July 2027 will not be able to be negatively geared.

Capital gains tax reform

Cost base indexation

From 1 July 2027, the 50% CGT discount will be replaced by cost base indexation for assets held for more than 12 months, with a 30% minimum tax on net capital gains.

These changes will apply to all CGT assets, including pre-CGT assets, held by individuals, trusts and partnerships.

To maintain incentives for new housing supply, investors in new residential properties will be able to choose either the 50% CGT discount, or cost base indexation and the minimum tax.

Minimum tax on capital gains

A minimum tax rate of 30% will apply to real capital gains accruing from 1 July 2027, with no impact until the income is realised.

This will not affect people whose capital gains are already taxed at rates of at least 30%.

Recipients of means-tested income support payments, such as the Age Pension or JobSeeker, will be exempt from the minimum tax if they receive any payment in the financial year in which they realise the capital gain.

Transitional arrangements

For eligible CGT assets other than new residential properties:

Assets purchased and sold before 1 July 2027 will not be affected by the changes.
Assets purchased after 1 July 2027 will be treated wholly under the new arrangements.
Assets owned before 1 July 2027 and sold after 1 July 2027 will be treated under the current arrangements for gains made before 1 July 2027, and under the new arrangements for gains made after that date. There will be no impact until the gains are realised.

The 50% CGT discount will apply to the difference between the asset’s cost base and its value at 1 July 2027.

Indexation and the minimum tax will be used to calculate CGT on gains accruing from 1 July 2027, using the asset’s value at 1 July 2027 as the asset’s cost base.

Example – Impact on existing property investors

Michael owns an investment property that was purchased before 12 May 2026 and is negatively geared.

He can continue to negatively gear this property in future years by using losses from the investment property against his other income.

Michael sells the property two years after the policy commences for $560,000. He still receives the 50% CGT discount for the capital gain made on the property between the purchase date and 1 July 2027.

Michael uses ATO tools to determine that the property’s value on 1 July 2027 was $500,000.

After adjusting for two years of inflation at 2.5%, his taxable capital gain for the period after 1 July 2027 is $34,688. This is slightly higher than if he had applied a 50% discount, which would have resulted in a taxable capital gain of $30,000.

Assuming a 47% tax rate, the tax on his gain since 1 July 2027 is $16,303, instead of $14,100 under the 50% discount.

Michael does not pay any tax on the capital gain until he sells the property.

Source: Budget 2026–27 Fact Sheet: Negative Gearing and Capital Gains Tax Reform.

The Team

The Fortis Accounting Partners team are available to assist you to capitalise on any of the Budget measures or minimise your risk.

As always, the detail is important so please let us know if we can assist.

Henry Zhao, Partner
02 9267 0108
henry@fortisap.com.au

John Kalachian, Partner
02 9267 0108
john@fortisap.com.au

2026–27 Federal Budget – Minimum tax of 30% on taxable income of discretionary trusts

Key points

The Government has announced that, from 1 July 2028, trustees will pay a minimum tax of 30% on the taxable income of discretionary trusts.

Beneficiaries, other than corporate beneficiaries, will receive non-refundable credits for the tax payable by the trustee.

The minimum tax will not apply to other types of trusts, such as:
- fixed and widely held trusts, including fixed testamentary trusts
- complying superannuation funds
- special disability trusts
- deceased estates
- charitable trusts.
The following types of income will be excluded from the tax:
- primary production income
- certain income relating to vulnerable minors
- amounts to which non-resident withholding tax applies
- income from assets of discretionary testamentary trusts existing at 12 May 2026.

Roll-over relief to restructure into a company or fixed trust will be available for 3 years from 1 July 2027.

Background

As Treasurer Jim Chalmers noted in a pre-Budget interview with Australian Financial Review economics editor John Kehoe, debate about proposals to tax trusts, reduce the CGT discount and limit negative gearing “has been raging for decades”. On that basis, the tax on trust income is neither a surprise nor a shock.

In 2019, Bill Shorten proposed a similar tax as part of his broader policy agenda, but Labor lost the Federal election.

That was then. Now, post-pandemic, with ongoing conflict in the Middle East and strong global share markets, there may be greater acceptance that tax reform is inevitable. It is never a good time for tax change, but the Government’s position is that the time has come.

APPLICATION DATE: From 1 July 2028
Roll-over relief to restructure from 1 July 2027 for 3 years

Example – Comparison of tax outcomes of different business structures

In 2028–29, Kurt and Loretta each earn $300,000 from operating small businesses.

Loretta provides her services through a company. She pays herself a salary of $100,000 as an employee and retains the remaining income in the company to build the business.

The company pays the small business tax rate of 25% on this profit. Overall, $72,002 of tax will be paid.

Kurt provides his services through a family discretionary trust, with himself as the trustee. The trust pays Kurt a salary of $100,000 as an employee and has remaining taxable income of $200,000.

Kurt makes four of his extended family members, who have no other income, each entitled to $50,000, while retaining the money in the trust to build the business.

In total, Kurt’s family will pay $42,010 in tax.

With a minimum tax in place, the trust would pay 30% tax on the $200,000 of income not paid as wages, regardless of how this income was distributed.

Overall, $86,002 of tax will be paid if Kurt does not change the distributions made to his family members.

Once the minimum tax is in place, Kurt would pay less tax by operating through a company rather than a trust, by accessing the small business tax rate.

Source: Budget 2026–27 Fact Sheet: Minimum tax on discretionary trusts.

Roll-over relief to restructure

Expanded roll-over relief will be available for three years from 1 July 2027.

This will support small businesses and others that wish to restructure out of discretionary trusts into another entity type, such as a company or fixed trust.

Individuals

2026–27 Federal Budget – Working Australians $250 Tax Offset

Key points

The Government has announced that it will introduce a $250 Working Australians Tax Offset (WATO) from the 2027–28 income year.
The WATO will increase the effective tax-free threshold by nearly $1,800, to $19,985. For workers eligible for the Low Income Tax Offset, the effective tax-free threshold may increase to up to $24,985.
The WATO will also be available to sole traders running their own business.

As part of the 2026–27 Federal Budget, the Government announced that it will introduce the Working Australians Tax Offset.

The WATO will provide a permanent annual tax offset for income earned by Australian workers, such as wages, salaries and business income earned by sole traders.

The Government estimates that more than 13 million Australian workers will benefit from the WATO for income earned from 1 July 2027.

The WATO will be available automatically after workers lodge their tax returns.

START DATE: From 1 July 2027

2026–27 Federal Budget – Introducing a $1,000 instant tax deduction

Key points

The Government has announced that the tax law will be amended to introduce an instant tax deduction of up to $1,000. This is intended to make the tax system simpler while also delivering cost-of-living relief.
The effect of this change is that Australian tax residents who earn income from work will be eligible for the instant tax deduction. They will not need to itemise and claim work-related expenses if they are claiming less than $1,000.
The measure is proposed to commence from the 2026–27 income year.

In the lead-up to the 2026–27 Federal Budget, the Government released exposure draft legislation for comment, titled Treasury Laws Amendment Bill 2026: standard deduction for work-related expenses.

The draft Bill sets out the proposed framework for the new standard deduction for work-related expenses.

START DATE: 2026–27 income year

Background

On 13 April 2025, the Government announced the proposed measure as a 2025 election commitment. The measure was intended to make the tax system simpler and deliver more cost-of-living relief by introducing a $1,000 instant tax deduction from the 2026–27 income year.

On 20 April 2026, the Government released exposure draft legislation for comment, titled Treasury Laws Amendment Bill 2026: standard deduction for work-related expenses, together with accompanying explanatory material.

The draft Bill proposes to amend the ITAA 1997 from the 2026–27 income year to:

introduce a $1,000 standard deduction for work-related expenses for individuals who are Australian residents and derive assessable labour income
amend existing substantiation, capital allowance and CGT rules to align with the new standard deduction.

The draft Bill also proposes to amend the FBTA Act to include integrity rules to avoid misuse of the standard deduction to obtain a double benefit. These rules would apply for FBT years starting on or after 1 April 2027.

Instant tax deduction

The Government will amend the tax law to introduce an instant tax deduction of up to $1,000 from the 2026–27 income year. The measure is intended to make the tax system simpler while also delivering more cost-of-living relief.

Australian tax residents who earn income from work will be eligible for the instant tax deduction. They will not need to itemise and claim work-related expenses if they are claiming less than $1,000.

Individuals who incur work-related expenses greater than the instant tax deduction can continue to claim their deductions in the usual way.

Charitable donations, union and professional association membership fees, and other non-work-related deductions can still be itemised separately and claimed on top of the instant tax deduction.

2026–27 Federal Budget – Modernising Private Health

Key points

The Government has announced that it will remove the age-based uplift of the Private Health Insurance Rebate, known as the PHI Rebate, from 1 April 2027.
The savings from this measure will be invested in the aged care sector to deliver more residential aged care beds and improve affordability and access to home care supports.

Background

Under the current law, entitlement to the Private Health Insurance Rebate depends on the taxpayer’s circumstances, income and policy.

The rate of the rebate also depends on the age of the oldest person covered by the policy. The rate is currently uplifted if the oldest person covered by the policy is over 65 years of age.

	Base tier	Tier 1	Tier 2	Tier 3
Income thresholds 2025–26
Singles	Up to $101,000	$101,001–$118,000	$118,001–$158,000	$158,001 or more
Couples/families	Up to $202,000	$202,001–$236,000	$236,001–$316,000	$316,001 or more
Rate of Private Health Insurance Rebate: 1 April 2026 – 30 June 2026
Under 65 years	24.18%	16.079%	8.038%	0%
65–69 years	28.139%	20.098%	12.058%	0%
70 years and over	32.158%	24.118%	16.079%	0%

Announcement

As part of the 2026–27 Federal Budget, the Government announced that it will remove the age-based uplift of the Private Health Insurance Rebate, known as the PHI Rebate, from 1 April 2027.

The savings from this measure will be invested in the aged care sector to deliver more residential aged care beds, and improve affordability and access to home care supports.

The Government will also provide $3.2 million over two years from 2025–26 for implementation and consultation on further reforms to improve the private healthcare system.

APPLICATION: From 1 April 2027

2026–27 Federal Budget – Increased Medicare levy low-income thresholds

Key points

The Government has announced that the Medicare levy low-income thresholds will be increased for singles, families, seniors and pensioners from 1 July 2025.
The effect of this change is that low-income individuals will continue to be exempt from paying the Medicare levy, or will pay a reduced levy rate.

As part of the 2026–27 Federal Budget, the Government announced that the Medicare levy low-income thresholds will increase for singles, families, seniors and pensioners from 1 July 2025.

Individuals and families will not have to pay the Medicare levy if their individual or family taxable income is below the relevant low-income threshold.

START DATE: From 1 July 2025

Medicare low-income threshold changes

The changes to the Medicare levy low-income thresholds are as follows:

Medicare low-income threshold	Threshold as at 30 June 2025	Threshold from 1 July 2025
Singles	$27,222	$28,011
Families	$45,907	$47,238
Single, seniors and pensioners	$43,020	$44,268
Family, seniors and pensioners	$59,886	$61,623
Family, for each dependent child or student⁷¹	$4,216	$4,338

The increase to the thresholds ensures that low‑income individuals continue to be exempt from paying the Medicare levy or pay a reduced levy rate.

Business

2026–27 Federal Budget – Making tax simpler for small and medium businesses

Key points

The Government has announced that:

from 1 July 2026, the $20,000 instant asset write-off for small businesses with turnover of up to $10 million will be permanently extended
the provisions that prevent small businesses from re-entering the simplified depreciation regime for five years after opting out will continue to be suspended until 30 June 2027
from 1 July 2027, small and medium businesses will be able to opt in to reporting and paying pay as you go (PAYG) instalments monthly.

START DATE: Instant asset write-off, from the 2026–27 income year.
PAYG instalments, from 1 July 2027.

As part of the 2026–27 Federal Budget, the Government announced that:

From 1 July 2026, the $20,000 instant asset write-off for small businesses with turnover of up to $10 million will be permanently extended.
The provisions that prevent small businesses from re-entering the simplified depreciation regime for five years after opting out will continue to be suspended until 30 June 2027.
From 1 July 2027, small and medium businesses will be able to opt in to reporting and paying pay as you go (PAYG) instalments monthly.

Background

Instant asset write-off

Under the current law, section 328-180 of the ITAA 1997 allows small business entities (SBEs) to claim an immediate deduction for depreciating assets that cost less than $1,000 in the income year in which the asset is first used, or installed ready for use.

The relevant threshold for claiming an immediate deduction has changed a number of times in recent years. This applies to the cost of a depreciating asset, or an amount included under the second element of cost for that asset, and has been effected through amendments to section 328-180 of the ITTP Act.

Since 7:30 pm on 12 May 2015, the threshold has been temporarily increased each year, with a $20,000 threshold applying since 30 June 2023.

Announcement

The Government will amend the tax law to simplify the tax system for small and medium businesses in relation to assets and PAYG instalments, as set out below.

Instant asset write-off

From 1 July 2026, the Government will permanently extend the $20,000 instant asset write-off for small businesses with turnover of up to $10 million.

Assets valued at $20,000 or more can continue to be placed into the small business simplified depreciation pool.

The provisions that prevent small businesses from re-entering the simplified depreciation regime for five years after opting out will continue to be suspended until 30 June 2027.

PAYG instalments

From 1 July 2027, small and medium businesses will be able to opt in to:

reporting and paying PAYG instalments monthly
using an ATO-approved calculation embedded in accounting software to calculate and vary their instalments.

This measure will support businesses by allowing tax instalments to better reflect real-time business activity.

Taxpayers with a demonstrated history of non-compliance will be required to report and pay PAYG instalments monthly.

The Government will also provide $10.9 million to the ATO to expand its pilot of dynamic pay as you go (PAYG) instalment calculations.

2026–27 Federal Budget – Expanding venture capital tax incentives

Key points

The Government has announced that, from 1 July 2027:

the venture capital limited partnership (VCLP) cap on the asset size of the investee business at the time of investment will increase from $250 million to $480 million
the early-stage venture capital limited partnership (ESVCLP) cap on the asset size of the investee business at the time of investment will increase from $50 million to $80 million
the ESVCLP tax incentive cap on the asset size of the investee business, at which investment returns can be fully tax exempt, will increase from $250 million to $420 million
the maximum fund size of ESVCLPs will increase from $200 million to $270 million.

START DATE: From 1 July 2027

As part of the 2026–27 Federal Budget, the Government announced that it will expand the venture capital tax incentives.

The measure is intended to better facilitate venture capital investment and support early-stage and growth businesses.

Background

Under the current law, the Government offers tax incentives to:

venture capital limited partnerships (VCLPs)
early-stage venture capital limited partnerships (ESVCLPs).

To be eligible for the tax incentives:

a VCLP must register and remain registered under the VCLP program, which is administered jointly by the ATO and the Department of Industry, Innovation and Science (DIIS)
an ESVCLP must register and remain registered under the ESVCLP program, which is administered by Innovation Australia.

VCLP

Key registration requirements for a VCLP are summarised below.

The partnership must be a limited partnership established in Australia, or in a country with which Australia has a double taxation agreement.
All general partners must be residents of Australia, or residents of a country with which Australia has a double taxation agreement.
The partnership must have at least $10 million in committed capital.

To maintain registration, a VCLP must meet reporting requirements and only make investments that are eligible venture capital investments (EVCIs).

A number of conditions must be met for an investment to be treated as an EVCI. The investment must:

be in a company or unit trust, known as the investee
not be, or cease to be, a listed investment
not represent more than 30% of the VCLP’s committed capital
be at risk regarding the value and earnings from the investment
be in an investee that has:
- a total value of assets, before the investment is made, of no more than $250 million
- more than 50% of its employees and more than 50% of its assets located in Australia
- a predominant activity that is not property development, land ownership, construction or acquisition of infrastructure, finance, insurance or making passive-type investments. Its predominant activity may be developing technology for use in finance, insurance or making passive-type investments.

ESVCLP

An ESVCLP must meet the registration requirements for VCLPs, as well as additional and altered requirements, including the following:

The partnership must have between $10 million and $200 million in committed capital.
Investments made by the partnership must be in accordance with an approved investment plan.
The investee entity must not be listed when the partnership makes its first investment in the entity.
Any investments acquired from existing investors must add to an investment already held in the entity, or be issued in connection with that acquisition, and must not in total exceed 20% of the partnership’s committed capital.
The total asset value of the investee entity before the investment is made must not be more than $50 million.

Expanding venture capital tax incentives

From 1 July 2027:

the VCLP cap on the asset size of the investee business at the time of investment will increase from $250 million to $480 million
the ESVCLP cap on the asset size of the investee business at the time of investment will increase from $50 million to $80 million
the ESVCLP tax incentive cap on the asset size of the investee business, at which investment returns can be fully tax exempt, will increase from $250 million to $420 million
the maximum fund size of ESVCLPs will increase from $200 million to $270 million.

The increases will apply to new and existing funds, and to new investments they make. This includes where funds make further investments in businesses they already hold.

ESVCLPs must remain compliant with their existing investment plans or seek approval for a replacement plan.

The eligible venture capital investor program will be closed to new applications from 7:30 pm AEST on 12 May 2026.

2026–27 Federal Budget – Support for small business

Key points

The Government has announced that it will provide $8.2 million over three years from 2025–26 to extend support for small business owners. This funding will extend the Small Business Debt Helpline financial counselling program and the NewAccess for Small Business Owners mental health coaching program to 30 June 2027.

As part of the 2026–27 Federal Budget, the Government announced that it will provide $8.2 million over three years from 2025–26 to extend the Small Business Debt Helpline and the NewAccess for Small Business Owners (NASBO) mental health coaching program.

Both programs will be extended to 30 June 2027.

START DATE: From 2025-26 income year over three years

NASBO was launched in 2021 to support small business owners nationwide with free and confidential mental health assistance. The program is delivered by trained coaches who have small business experience.

The Small Business Debt Helpline provides free, independent and confidential financial counselling to small businesses experiencing financial hardship. The helpline supports business owners to manage cash flow pressures, negotiate with lenders and suppliers, and make informed decisions about their future.

2026–27 Federal Budget – Second tranche of improvements to Australian business registers

Key points

The Government has announced that it will provide $136.1 million over two years from 2026–27 to complete the second tranche of stabilisation and uplift of Australia’s business registers.

This includes:

synchronising director information with the Australian Charities and Not-for-profits Commission’s Charities Register
linking Director IDs to the Companies Register
uplifting Australian Business Number (ABN) authentication
completing the transition of ABN and superannuation lookup functions to the ATO.

As part of the 2026–27 Federal Budget, the Government announced that it will provide $136.1 million over two years from 2026–27 to complete the second tranche of stabilisation and uplift of Australia’s business registers.

The improvements include synchronising director information with the Australian Charities and Not-for-profits Commission’s Charities Register, linking Director IDs to the Companies Register, uplifting ABN authentication, and completing the transition of ABN and superannuation lookup functions to the ATO.

Companies

2026–27 Federal Budget – Loss carry back for some companies and loss refundability for small start-up companies

Key points

The Government has announced that it will:
- reintroduce the loss carry back, for revenue losses only, for companies with aggregated annual global turnover of less than $1 billion
- introduce loss refundability for small start-up companies with aggregated annual turnover of less than $10 million.
The loss carry back will allow revenue losses for tax years commencing 1 July 2026 to be carried back and offset against tax paid up to two years earlier. This will be subject to a limit equal to the company’s franking account balance.
Small start-up companies that generate a tax loss in their first two years of operation, for tax years commencing on or after 1 July 2028, will be able to use the loss to generate a refundable tax offset. The refundable tax offset will be limited to the value of fringe benefits tax and withholding tax on wages paid in respect of Australian employees in the loss year.

Background

The last time Australian corporate tax entities could choose to carry back a tax loss was for the income years from 2019–20 to 2022–23. Those losses could be carried back against the income tax liability the corporate tax entity had for income years from 2018–19 to 2021–22.

The rules for the loss carry back are still contained in Division 160 of Part 3-5 of the ITAA 1997.

Refunds of tax paid in earlier years were available only up to the amount of the entity’s franking account balance, and only for years in which the entity’s turnover was less than $5 billion.

Announcement

As part of the 2026–27 Federal Budget, the Government announced that:

the loss carry back will be reintroduced for corporate tax entities with aggregated annual global turnover of less than $1 billion
loss refundability will be introduced for small start-up companies.

Loss carry back

For tax years commencing on or after 1 July 2026, companies with aggregated annual global turnover of less than $1 billion will be able to carry back a tax loss and offset it against tax paid up to two years earlier.

Loss carry back will apply to revenue losses only and will be limited by a company’s franking account balance.

START DATE: For tax years commencing on or after 1 July 2026.

Small business example – Instant asset write-off and loss carry back

Dining Co runs a local restaurant with $1 million in turnover.

In 2025–26, it generated $50,000 in taxable profits and paid $12,500 in tax, based on the 25% company tax rate.

In 2026–27, Dining Co decides to supply ready-cooked meals to local supermarkets. It purchases new equipment totalling $65,000, with each item costing less than $20,000.

Due to the instant asset write-off, these items can be immediately deducted.

Without these new investments, Dining Co would have reported a $50,000 profit in 2026–27. After applying the instant asset write-off deductions, it instead reports a $15,000 tax loss and pays no tax.

Dining Co will also be able to carry back that tax loss to the previous year’s tax paid, generating a $3,750 tax refund, calculated as $15,000 × 25%.

This provides timely cash flow support as the company seeks to expand.

Loss refundability

For tax years commencing on or after 1 July 2028, start-up companies with aggregated annual turnover of less than $10 million that generate a tax loss in their first two years of operation will be able to use the loss to generate a refundable tax offset.

The offset will be limited to the value of fringe benefits tax and withholding tax on wages paid in respect of Australian employees in the loss year.

START DATE: For tax years commencing on or after 1 July 2028.

2026–27 Federal Budget – Better targeting the Research and Development Tax Incentive

Key points

The Government has announced that it will reform the Research and Development Tax Incentive (R&DTI) to simplify and better target Government support for business R&D.
The proposed measures include:
- increasing the offset for core R&D expenditure by around 25% to 50%
- reducing the intensity threshold from 2% to 1.5%
- removing eligibility for expenditure that only supports R&D
- increasing the turnover threshold for the refundable offset to $50 million
- increasing the maximum expenditure cap to $200 million
- increasing the minimum expenditure threshold to $50,000.
The measure is proposed to commence from the 2028–29 income year.

As part of the 2026–27 Federal Budget, the Government announced that it will reform the Research and Development Tax Incentive.

The measure forms part of the first stage of the Government’s response to the Ambitious Australia: Strategic Examination of Research and Development Final Report.

START DATE: 1 July 2028

Background

The Research and Development Tax Incentive (R&DTI) provides tax offsets for eligible R&D.

For income years starting on or after 1 July 2021, entities engaged in R&D may be entitled to:

a refundable offset equal to their company tax rate plus 18.5 percentage points for eligible entities with aggregated turnover of less than $20 million
a non-refundable tax offset for eligible entities with aggregated turnover of more than $20 million, equal to the entity’s company tax rate plus a two-tiered premium.

The two-tiered premium is determined by the entity’s notional R&D expenditure as a proportion of total expenditure for the income year, as follows:

5% for R&D expenditure up to 2% of total expenditure
5% for R&D expenditure above 2% of total expenditure.

The rate of the R&D tax offset is reduced to the company tax rate for the portion of an entity’s notional R&D deductions that exceed $150 million for an income year.

The R&DTI currently supports both core R&D activities and R&D supporting activities.

Core R&D activities are uncertain, experimental activities undertaken to generate new knowledge. R&D supporting activities are activities that are directly related to core R&D activities.

The R&DTI is open to all industry sectors and company sizes. Any company that meets the definition of an R&D entity can apply.

Reform of the R&D Tax Incentive

From 1 July 2028, the Government will:

increase the offset for core R&D expenditure by around 25% to 50%, through a 4.5 percentage point increase in core R&D offset rates
reduce the intensity threshold from 2% to 1.5%, allowing more firms that engage in substantial core R&D to qualify for higher offset rates
remove eligibility for supporting R&D expenditure under the R&DTI
enable growing firms to retain access to the refundable tax offset for longer by increasing the turnover threshold for the highest offset rate from $20 million to $50 million
for firms below the $50 million turnover threshold, maintain older firms’ eligibility for the higher offset rate while limiting refundability to firms under 10 years of age
lift the maximum R&DTI expenditure threshold from $150 million to $200 million
improve assurance on smaller claims by lifting the minimum expenditure threshold from $20,000 to $50,000.

Research activities valued below $50,000 will need to be undertaken with a registered Research Service Provider or Cooperative Research Centre to be eligible for the R&DTI.

Fringe benefits tax

2026–27 Federal Budget – Electric car discount

Key points

The Government has announced that, from 1 April 2029, a permanent 25% discount on FBT will be available for all electric cars valued up to and including the fuel-efficient luxury car tax threshold. This will be implemented through a 15% rate in the FBT statutory formula.
Transitional arrangements will ensure that:
- all eligible electric cars will retain the FBT discount rate that was in place when the arrangement commenced
- all electric cars valued up to and including $75,000 that are provided before 1 April 2029 will continue to be eligible for a 100% discount
- electric cars valued above $75,000 and up to and including the fuel-efficient luxury car tax threshold, provided between 1 April 2027 and 1 April 2029, will be eligible for a 25% discount.

In the lead-up to the 2026–27 Federal Budget, Treasurer Jim Chalmers and the Minister for Climate Change and Energy announced on 5 May 2026 that the Government will make changes to the FBT exemption for electric vehicles.

The measure will transition the current arrangements to a permanent 25% discount on FBT for eligible cars.

APPLICATION: For FBT years commencing 1 April 2027 and 1 April 2028, the full discount will be limited to electric vehicles costing $75,000 or less.
For FBT years from 1 April 2029, a 25% discount will apply for all eligible electric vehicles below the luxury car tax threshold.

Background – Electric car discount

The FBT exemption for electric vehicles was introduced in the 2022–23 year.⁷²

Currently, the exemption applies if an employer provides private use of an electric car that meets all of the following conditions:

The car is a zero or low-emissions vehicle. This means it is designed to carry a load of less than one tonne and fewer than nine passengers, and is either a battery electric vehicle or a hydrogen fuel cell electric vehicle.⁷³
The first time the car is both held and used is on or after 1 July 2022.
The car is used by a current employee or their associates, such as family members
Luxury car tax (LCT) has never been payable on the importation or sale of the car.

More sustainable FBT treatment of electric cars

From 1 April 2029, a permanent 25% discount on FBT will be available for all electric cars valued up to and including the fuel-efficient luxury car tax threshold.

This will be implemented through a 15% rate in the FBT statutory formula.

The following transitional arrangements will be put in place:

All eligible electric cars will retain the FBT discount rate that was in place when the arrangement commenced.
All electric cars valued up to and including $75,000 that are provided before 1 April 2029 will continue to be eligible for a 100% discount on FBT. This will be implemented through a 0% rate in the FBT statutory formula.
Electric cars valued above $75,000 and up to and including the fuel-efficient luxury car tax threshold, provided between 1 April 2027 and 1 April 2029, will be eligible for a 25% discount on FBT. This will be implemented through a 15% rate in the FBT statutory formula.

The existing 20% statutory rate will continue to apply for all other cars, including electric cars costing more than the fuel-efficient luxury car tax threshold.

Reportable fringe benefits will continue to be determined for eligible electric cars as if a 20% FBT statutory formula rate or cost basis method applied.

Eligible EVs will continue to be exempt from import tariffs on an ongoing basis.

This measure is estimated to increase receipts by $1.9 billion and increase payments by $200 million over the five years from 2025–26.

International

2026–27 Federal Budget – Strengthening the Foreign Resident CGT regime, transitional arrangements

Key points

The Government has announced that it will:
- provide a time-limited, targeted concession in the foreign resident CGT regime for investment in the renewables sector, as part of the implementation of the 2024–25 Budget measure, Strengthening the foreign resident capital gains tax regime
  - The transitional arrangement will apply to foreign investors disposing of certain renewable energy infrastructure assets from the first day of the next quarter after Royal Assent until 30 June 2030.
- ensure the concept of “real property” in Australia is determined by Commonwealth legislation rather than state and territory laws, with effect from 12 December 2006, when the regime was introduced.

As part of the 2026–27 Federal Budget, the Government announced that it will provide a time-limited, targeted concession in the foreign resident CGT regime for investment in the renewables sector.

This forms part of the implementation of the 2024–25 Budget measure, Strengthening the foreign resident CGT regime.

APPLICATION: From the first day of the next quarter after Royal Assent until 30 June 2030.

Background

As part of the 2024–25 Federal Budget, the Government announced a measure to strengthen the foreign resident CGT regime.

The measure is intended to ensure Australia can tax gains made by foreign residents on direct and indirect sales of assets with a close economic connection to Australian land and/or natural resources.

Treasury released a consultation paper on the implementation details of the 2024–25 measure in July 2024.

On 10 April 2026, the Government released exposure draft legislation for comment, titled:

Treasury Laws Amendment Bill 2026: Strengthening the foreign resident CGT regime
- The proposed amendments broaden and clarify the definition of taxable Australian real property (TARP). They also introduce a definition of “real property” into the ITAA 1997, which forms part of the definition of TARP.
Treasury Laws Amendment Bill 2026: Renewable energy asset discount capital gains for foreign residents
- The proposed amendments insert a new Division 855 into the ITTP Act to provide a 50% CGT discount for foreign residents for CGT events relating to Australian renewable energy (RE) assets. The CGT discount will apply to CGT events happening from commencement until 30 June 2030.

Strengthening the foreign resident CGT regime

As part of the 2026–27 Federal Budget, the Government announced that it will amend the tax law to provide a time-limited, targeted concession in the foreign resident CGT regime for investment in the renewables sector.

This forms part of the implementation of the 2024–25 Budget measure, Strengthening the foreign resident capital gains tax regime.

The transitional arrangement will apply to foreign investors disposing of certain renewable energy infrastructure assets from commencement, being the first day of the next quarter after Royal Assent, until 30 June 2030.

The measure will also ensure that the concept of “real property” in Australia is determined by Commonwealth legislation rather than state and territory laws, with effect from 12 December 2006, when the regime was introduced.

2026–27 Federal Budget – Global Anti-Base Erosion Rules (Pillar Two) Side-by-Side Package Implementation

Key points

The Government has announced that it will amend Australia’s global and domestic minimum tax legislation, introduced in 2024, to implement the side-by-side package agreed by the OECD/G20 Inclusive Framework on Base Erosion and Profit Shifting on 5 January 2026.
This measure continues to advance the Government’s multinational tax reform agenda by supporting a globally coordinated minimum tax framework. The aim is to ensure large multinationals pay their fair share of tax.
The measure is proposed to commence from 1 January 2026.

As part of the 2026–27 Federal Budget, the Government announced that it will amend Australia’s global and domestic minimum tax legislation, introduced in 2024, to implement the side-by-side package agreed by the OECD/G20 Inclusive Framework on Base Erosion and Profit Shifting.

START DATE: 1 January 2026

Background

Under the current law, the Global Anti-Base Erosion (GloBE) rules operate to ensure that multinational enterprise groups (MNE groups) with annual global revenue of at least EUR 750 million are subject to a global minimum effective tax rate (ETR) of at least 15% in each jurisdiction where they operate.

Implementing the side-by-side package

The Government will implement the side-by-side package to ensure Australia’s global minimum tax rules are consistent with those of other implementing jurisdictions.

The measure will also deliver on the Government’s commitment to support OECD/G20 efforts to reform the international corporate tax system.

This measure continues to advance the Government’s multinational tax reform agenda by supporting a globally coordinated minimum tax framework that ensures large multinationals pay their fair share of tax.

2026–27 Federal Budget – Extending the ban on foreign purchases of established dwellings

Key points

The Government has announced that it will extend the temporary ban on foreign purchases of established residential dwellings by two years and three months, until 30 June 2029.

Background

Under the current law, from 1 April 2025 to 31 March 2027, foreign persons, including temporary residents and foreign-owned companies, cannot apply to buy an established dwelling in Australia unless an exception applies.

Limited exceptions include:

investments that significantly increase housing supply or support the availability of housing supply, such as new dwellings, off-the-plan properties and vacant residential land
an established dwelling for a foreign company that employs workers under the Pacific Australia Labour Mobility (PALM) scheme.

APPLICATION: Extended to 30 June 2029

Announcement

As part of the 2026–27 Federal Budget, the Government announced that it will extend the temporary ban on foreign purchases of established residential dwellings by two years and three months, until 30 June 2029.

The extension of the ban will allow Australians to buy homes that would otherwise have been bought by foreign persons, while maintaining incentives to invest in additional housing supply.

The current limited exceptions to the ban for purchases of established dwellings will continue.

General exemptions from foreign investment screening will also continue to apply for purchases of established dwellings, including for permanent residents and New Zealand citizens.

Other measures

2026–27 Federal Budget – Temporary reduction of fuel excise and heavy vehicle road user charge

Key points

The Government has temporarily reduced the excise and excise-equivalent customs duty rates applying to most fuel products, as well as the road user charge for heavy vehicles. The reduction applies for three months from 1 April 2026.
The effect of this change is that excise rates have been reduced by a total of 60.9%, equating to a 32 cent-per-litre reduction for petrol and diesel.

In the lead-up to the 2026–27 Federal Budget, Prime Minister Anthony Albanese announced on 2 April 2026 that the Government would temporarily reduce the excise and excise-equivalent customs duty rates applying to most fuel products.

The road user charge for heavy vehicles has also been reduced for the same three-month period from 1 April 2026.

The excise rates have been reduced by a total of 60.9%, equating to a 32 cent-per-litre reduction for petrol and diesel.

States and territories agreed to provide the Commonwealth up to $400 million to allow increased GST revenue to be returned through lower excise. This equates to 5.7 cents per litre of the cut for petrol and diesel.

The road user charge for heavy vehicles has also been reduced from 32.4 cents per litre to zero.

APPLICATION: Three months from 1 April 2026

2026–27 Federal Budget – Protecting the tax system against fraud

Key points

The Government has announced funding of $86.3 million over four years from 1 July 2026, and $9.7 million per year ongoing from the 2030–31 income year, to deliver Phase 2 of the Counter Fraud Strategy. This funding will support the modernisation of fraud prevention and detection across the tax and superannuation systems.
The Government will also strengthen the ATO’s ability to combat fraud by tax agents and other intermediaries.
Further targeted exceptions to tax secrecy and enhancements to tax regulators’ information-gathering powers will be progressed.
The ATO will also undertake additional targeted compliance activities to further address fraud.

As part of the 2026–27 Federal Budget, the Government announced that it will provide $86.3 million over four years from 1 July 2026, and $9.7 million per year ongoing from the 2030–31 income year, to deliver Phase 2 of the Counter Fraud Strategy.

This will enhance the ATO’s ability to detect and prevent fraud in real time, provide additional fraud protections for individuals, and expand live monitoring of fraudulent account access to tax agents, businesses and high-risk superannuation changes.

The ATO will also be given powers to pause the recovery of tax debts for taxpayers who are victims of fraud by tax agents and other intermediaries. It will also be able to waive those debts in appropriate circumstances and recover the debts from the relevant tax intermediaries.

Existing garnishee powers will also be expanded to include jointly held assets where such arrangements are being used to frustrate recovery actions.

The ATO will undertake additional targeted compliance activities over the two years from 2026–27 to further address fraud in the system, including in relation to the Research and Development Tax Incentive.

The Government will also progress further targeted exceptions to tax secrecy and enhancements to tax regulators’ information-gathering powers to support integrity, compliance and effective administration of the tax system.

START DATE: Over four years from 1 July 2026, and ongoing from the 2030–31 income year

2026–27 Federal Budget – Protecting investors and strengthening the superannuation system

Key points

The Government has announced that it will provide $17.8 million over four years from 2026–27, and $1.4 million per year ongoing, to strengthen governance requirements, supervision and enforcement in relation to managed investment schemes.
The Government is also publicly consulting on options to strengthen the superannuation performance test. This is intended to remove any unintended barriers to investment and ensure the test remains fit for purpose.

As part of the 2026–27 Federal Budget, the Government announced that it will provide $17.8 million over four years from 2026–27, and $1.4 million per year ongoing, to strengthen governance requirements, supervision and enforcement in relation to managed investment schemes.

This includes:

$10.3 million in 2026–27 for ASIC to enhance its ability to use data in its supervision of the managed investment scheme sector
$7.6 million over four years from 2026–27, and $1.4 million per year ongoing, for ASIC, the Office of the Australian Auditing and Assurance Standards Board, and Treasury to strengthen governance requirements for managed investment schemes
public consultation on new data collection powers in relation to managed investment schemes.

The Government is also publicly consulting on options to strengthen the superannuation performance test, to remove any unintended barriers to investment and ensure it remains fit for purpose.

Free Consultation.

For a free 15 minute consultation – Speak to an accountant today to see how we can help you.

Budget 2026-27: Major Tax Changes and Business Measures at a Glance

Measures and start date at a glance

Budget measures

Major tax reform

2026-27 Federal Budget – Reforming negative gearing and capital gains tax

The Team

2026–27 Federal Budget – Minimum tax of 30% on taxable income of discretionary trusts

Individuals

2026–27 Federal Budget – Working Australians $250 Tax Offset

2026–27 Federal Budget – Introducing a $1,000 instant tax deduction

2026–27 Federal Budget – Modernising Private Health

2026–27 Federal Budget – Increased Medicare levy low-income thresholds

Business

2026–27 Federal Budget – Making tax simpler for small and medium businesses

2026–27 Federal Budget – Expanding venture capital tax incentives

2026–27 Federal Budget – Support for small business

2026–27 Federal Budget – Second tranche of improvements to Australian business registers

Companies

2026–27 Federal Budget – Loss carry back for some companies and loss refundability for small start-up companies

2026–27 Federal Budget – Better targeting the Research and Development Tax Incentive

Fringe benefits tax

2026–27 Federal Budget – Electric car discount

International

2026–27 Federal Budget – Strengthening the Foreign Resident CGT regime, transitional arrangements

2026–27 Federal Budget – Global Anti-Base Erosion Rules (Pillar Two) Side-by-Side Package Implementation

2026–27 Federal Budget – Extending the ban on foreign purchases of established dwellings

Other measures

2026–27 Federal Budget – Temporary reduction of fuel excise and heavy vehicle road user charge

2026–27 Federal Budget – Protecting the tax system against fraud

2026–27 Federal Budget – Protecting investors and strengthening the superannuation system

Recent Posts

Archives

Free Consultation.

Online Enquiry

Reshika Kumar