2026-27 Federal Budget

What It Really Means For You

The 2026-27 Federal Budget, handed down on 12 May 2026, contains some of the most significant structural tax changes we've seen in the last 25 years. Some measures are already law, others are still working their way through Parliament, but the direction of travel is clear enough that planning needs to start now. Here's a breakdown by who's affected.

For individuals and salary earners

• The lowest marginal tax rate has dropped from 16% to 15% from 1 July 2026

• A new $1,000 standard deduction lets workers reduce their taxable income for work-related expenses without keeping receipts, from 1 July 2026

• From 1 July 2027, the 50% CGT discount will be replaced for individuals, partnerships and trusts with cost base indexation (calculated using CPI, similar to the pre-1999 regime) plus a 30% minimum tax on net capital gains

• This applies to assets held at least 12 months, and only to gains arising after 1 July 2027 — nothing retrospective

  
  

For property investors

• For established residential properties acquired from 7:30pm AEST on 12 May 2026 (Budget night), negative gearing losses can only be offset against rental income or residential property capital gains — not salary or other income

• Excess losses carry forward rather than reducing your current year tax bill

• Properties bought before Budget night (including signed but unsettled contracts) are grandfathered under the old rules until you sell

• New residential builds are not affected by this change, which is deliberately designed to steer investment toward new housing supply

  
  

For small business owners

• The $20,000 instant asset write-off has been made permanent, rather than needing to be renewed each Budget — see this month's update for the detail

• It's worth reviewing PAYG instalment options and timing major asset purchases with this certainty in mind

• Employers should also review EV salary packaging arrangements and FBT exposure given other changes flagged in the Budget papers

• Start-ups and companies should check eligibility for loss carry-back, start-up loss refundability, and R&D or venture capital incentives, some of which are being expanded from 1 July 2027

  
  

For family businesses and trust structures

This is the area with the most far-reaching change for clients using discretionary trusts.

• From 1 July 2028, a 30% minimum tax will apply to discretionary trust income

• The trustee pays the tax initially; beneficiaries (other than companies) receive a non-refundable tax offset for tax already paid at the trust level

• The aim is to curb income splitting to lower-taxed family members and "bucket company" arrangements that retain income at the 30% corporate rate

• Exemptions are proposed for fixed and widely held trusts, super funds, special disability trusts, deceased estates, charitable trusts and primary production income

• Existing testamentary trusts (from deceased estates) are largely exempt, provided they were established for genuine testamentary purposes before Budget night — but new testamentary trusts established from 1 July 2028 face tighter conditions

• Combined with the CGT minimum tax above, this materially changes the value of the classic discretionary trust plus bucket company structure — asset protection benefits remain, but the tax deferral and income-splitting benefits are significantly reduced

  
  

For high net worth individuals and large super balances

• Division 296 is now law and commences 1 July 2026, applying an additional 30% tax on superannuation earnings attributable to balances above $3 million, and 40% above $10 million

• This is a personal tax assessed on the individual, not the super fund — thresholds apply per person, so a couple can hold up to $6 million combined without triggering it

• The first Total Superannuation Balance measurement is 30 June 2027, with the first assessments expected in the 2027-28 year

• SMSF trustees can elect to reset the cost base of fund assets to market value as at 30 June 2026 — a time-limited planning opportunity to quarantine historical gains from the calculation, but the election needs to be made by the due date for lodging the 2026-27 tax return

• As a partial offset, the low income superannuation tax offset is increasing from $500 to $810, with the eligibility threshold rising from $37,000 to $45,000

  
  

What to do now

• Individuals: factor the rate cut and standard deduction into your 2026-27 tax planning, and understand how the CGT changes will affect any assets you're planning to sell after 1 July 2027

• Property investors: check whether a planned purchase falls before or after Budget night, and factor the new negative gearing limits into your numbers if it's an established dwelling

• Small business owners: build the permanent write-off into your ongoing equipment planning and review your entity structure with the changing trust and company settings in mind

• Trust clients: start modelling what the 30% minimum tax could mean for your family group's distribution strategy well ahead of the 1 July 2028 start date

• High balance super members and SMSF trustees: get advice on the cost base reset election before the 30 June 2026 deadline, and model your likely Division 296 exposure now rather than waiting for the first assessment

  
  

Many of these measures are still moving through Parliament and the details can change before they become final law. If you want to understand how the Budget applies to your specific situation, Apex Tax Advisory can assist.