Budget 2026-27: the tax bits that actually matter for your business

The 2026-27 Federal Budget was handed down on 12 May 2026, and we wish we could handball it back because it's a chunky one so strap yourselves in for a long ride. It has been called the most ambitious tax reform in 26 years, which is either a warning or a promise depending on how you feel about ambition.

We've waded through the papers so you don't have to. Here's what's actually relevant if you run a biz, hold property, or just want to know what your next tax return might look like.

The headline acts for small biz

Instant asset write-off, finally permanent. From 1 July 2026, the $20,000 instant asset write-off becomes a permanent fixture for biz with turnover up to $10 million. No more annual will-they-won't-they. You can plan capital purchases like a grown up, knowing the rules.

Loss carry back is back. If your company makes a loss in 2026-27, you'll be able to claim a refund against tax paid in the previous two income years. This is meaningful cash flow at exactly the moment a biz needs it. When things have gone sideways and the ATO is sitting on tax you already paid, getting some of it back is more than just nice.

Loss refundability for startups. Here's a useful one for any early stage business. From 2028-29, small startups in their first two years of operation can turn their tax losses into actual cash back from the ATO, instead of carrying them forward and hoping to use them when (and if) they're eventually profitable.

The refund is capped at the PAYG withholding and FBT you've already paid on your team's wages, so you're really just getting back some of what you've already paid through payroll, at the point you actually need the cash. If you've ever tried to grow a team while running at a loss, you'll know why this one lands.

Monthly PAYG instalments. From 1 July 2027, you can opt in to monthly PAYG instalments. Smoother cash flow, less of a quarterly cliff.

The big one: discretionary trusts

Brace yourself. From 1 July 2028, discretionary trusts will face a minimum 30% tax rate, paid by the trustee. The trustee pays the tax as a separate liability on the trust's taxable income. Beneficiaries still declare trust income at their marginal rates and receive non-refundable credits for the tax already paid.

The word that matters is non-refundable. If your beneficiary's effective tax rate is below 30%, the difference is lost.

The bucket company rule. Here's the kicker for many small biz clients. Corporate beneficiaries do not receive these non-refundable credits. That means if a trust distributes to a bucket company, the trust pays 30% minimum, the company then pays 25% or 30% on its share, and the individual shareholders pay tax again when dividends flow out. The bucket company strategy effectively stops working under the new rules.

The slightly better news: rollover relief is on the table for three years from 1 July 2027 to help businesses move out of discretionary trusts into companies, fixed trusts, or other entities without triggering income tax or CGT consequences.  This is code for the government really hates trusts and doesn't want you to use this structure anymore. They have been going after them for years and we feel this may be the final nail in the coffin.

CGT and negative gearing: timing matters

From 1 July 2027, the 50% CGT discount for individuals, trusts and partnerships is being replaced with cost base indexation for assets held more than 12 months, plus a 30% minimum tax on real gains. This is a real back to the future moment with indexation returning.

Split treatment for existing assets. Assets you own on 1 July 2027 get split treatment. The portion of gain accrued up to 1 July 2027 keeps the 50% discount. The portion of gain from 1 July 2027 onwards uses the new indexation rules. You can use either an actual valuation at 1 July 2027 or an ATO apportionment formula to work out the split.

Pre-CGT assets are in the net now. This is a quietly significant change. Pre-1985 assets, which have been fully outside the CGT system since the regime started, are now subject to CGT for any gain accruing from 1 July 2027 onwards. Gains accrued before that date remain exempt.

New build option. Investors who buy new residential property after 1 July 2027 can choose between the 50% discount and the new indexation regime, depending on which is more favourable for them.

Negative gearing: limited to new builds, with four very different paths

This is one of the bigger structural shifts in the Budget, and the rules depend almost entirely on when you buy. The cutoff is 7.30pm AEST on 12 May 2026, the moment Chalmers stood up. Where you sit on that timeline determines what tax treatment you get, potentially forever.

Bucket 1: properties held at 7.30pm on 12 May 2026. Nothing changes for you. Full grandfathering, no expiry, no creep. If you owned the property (or had a signed contract) at Budget time, you continue to deduct losses against any income, including your wages, indefinitely.

Bucket 2: properties bought between Budget night and 30 June 2027. You're in the transitional window. Until 30 June 2027, you can still deduct losses against any income. From 1 July 2027 onwards, losses on these properties can only be offset against other residential property income, with unused losses carried forward to future years.

Bucket 3: established residential property bought from 1 July 2027. Rental losses can only be offset against other residential property income. You can't claim them against your salary, your business profit, or anything else. Unused losses carry forward to future years.

Bucket 4: new builds bought from 1 July 2027. Full negative gearing retained, against any income. "New build" includes vacant land construction, off the plan purchases, and knock down rebuilds that add dwellings. One catch worth knowing: if you buy a new build and later sell it to another investor, the next buyer loses the new build treatment.

Research and development tax incentive overhaul

A meaningful reshape of the R&D Tax Incentive lands from 1 July 2028. The offset for experimental core R&D is being lifted by 25 to 50%. The intensity threshold drops to 1.5%, which means biz doing substantial core R&D get higher offsets. The maximum expenditure cap goes up to $200 million, encouraging more onshore R&D activity.

The refundable offset turnover threshold lifts to $50 million, but refundability is limited to biz that have been operating less than 10 years. Older biz keep an equivalent non-refundable offset. The minimum project expenditure threshold rises to $50,000, and projects below that level need to be done with a Research Service Provider or Cooperative Research Centre to qualify.

Electric vehicles and FBT: the exemption is ending

The 100% FBT exemption for electric cars is being phased out and replaced with a permanent 25% FBT discount. The timing breaks down like this.

• EVs valued at $75,000 or less, with arrangements starting before 1 April 2029: continue to get the full FBT exemption.

• EVs valued between $75,000 and the luxury car tax fuel efficient threshold, with arrangements starting between 1 April 2027 and 1 April 2029: get the 25% FBT discount.

• From 1 April 2029: all EVs get only the 25% FBT discount.

Eligible cars retain whatever rate was in place when the FBT arrangement commenced, so existing novated leases and salary packaging arrangements are grandfathered at their original rate.

The personal tax cuts: the actual picture

The government is calling this a "five tax cuts" package, which sounds promising until you realise a few of them were already on the books. Here's what's actually happening, in date order.

Already legislated, locked in regardless of this Budget:

From 1 July 2026, the marginal rate on income between $18,201 and $45,000 drops from 16% to 15%. Worth $268 a year for anyone earning above $45,000, and proportionally less below that.

From 1 July 2027, the same band drops again from 15% to 14%. Another $268 a year, so $536 total compared to 2024-25 settings.

New in this Budget:

The $1,000 instant tax deduction for work expenses, starting 2026-27. No receipts required, applied automatically when you lodge. If your genuine work expenses are above $1,000, you can still claim them the normal way with substantiation.

A new $250 Working Australians Tax Offset from 2027-28, ongoing. Available to 13 million workers (including sole traders), paid automatically at lodgement, with 97% of eligible workers expected to receive the full $250.

The Medicare levy low-income thresholds are also being lifted by 2.9%, backdated to 1 July 2025. The singles threshold rises to $28,011, the family threshold to $47,238, and the senior and pensioner family threshold to $61,623. The per dependent child amount rises to $4,338. Worth noting: because it's backdated, this is already in effect for the 2025-26 year, so your current return should reflect it.

The honest read: a few hundred dollars a year for most workers, building to around $50 a week for average earners by 2027-28. Modest, structurally sensible, and aimed at chipping away at bracket creep rather than delivering a single big hit. Whether it lands as meaningful cost of living relief or a coffee a week depends entirely on your perspective and your grocery bill.

Big disclaimer coming

These are budget announcements, not yet law. Some will sail through Parliament, some will be amended, and some might quietly disappear. We'll be watching the legislation as it progresses and we'll flag anything that materially shifts.

If any of this looks like it touches your situation and you want to talk through what this means for your business specifically? You know where to find us 😉

Disclaimer: The information provided is general in nature and does not take into account your personal situation. You should consider whether the information is appropriate to your needs, and where appropriate, seek professional advice