2026 – 2027 Federal Budget Highlights

2026–27 Federal Budget

Tax & Superannuation Highlights

Treasurer: Dr Jim Chalmers    Delivered: 12 May 2026, 7:30 pm AEST    Prepared by: Quantum House Australia

• CGT discount replaced with cost base indexation   [from 1 Jul 2027]   for all CGT assets except new homes. A 30% minimum tax on realised gains will also apply from that date. Gains accrued prior to 1 July 2027 on existing assets retain the 50% discount.
• Minimum 30% tax on discretionary trusts   [from 1 Jul 2028]  . Trusts are historically not taxed as separate entities — this will have significant implications for individuals and businesses alike. Expanded rollover relief available for 3 years from 1 July 2027. Existing testamentary trusts as at 12 May 2026 are excluded.

• Negative gearing for residential property limited to new builds only   [from 1 Jul 2027]  . Existing arrangements prior to 7:30 pm AEST 12 May 2026 are fully grandfathered. Widely-held trusts and superannuation funds are excluded.
• $250 Working Australians Tax Offset (WATO) per year   [from 2027–28]  , applying to wages, salaries and sole trader business income. Raises the effective tax-free threshold for work income to $19,985 (up to $24,985 with LITO).
• Medicare levy low-income thresholds increased by 2.9%   [from 1 Jul 2025]  . Singles: $27,222 → $28,011. Families: $45,907 → $47,238. Senior/pensioner singles: $43,020 → $44,268.
• Ban on foreign purchases of established residential dwellings extended to   [30 Jun 2029]  . $47.5M to fund a strengthened foreign investment framework, including a 30-day decision target for low-risk applications from 1 January 2027.
• Age-based uplift of the PHI rebate removed   [from 1 Apr 2027]  , enabling a simplified and more equitable distribution.
• Full rate of pension supplement for temporarily absent recipients extended from 6 weeks to 12 weeks. Supplement ceases for those permanently overseas or absent for more than 12 weeks.

• FBT for electric vehicles (EVs) transitions to a permanent 25% discount (15% statutory rate) for eligible EVs valued up to the fuel-efficient LCT threshold   [from 1 Apr 2029]  . EVs ≤ $75,000 provided before 1 April 2029 retain the existing 100% discount.
• Instant asset write-off of $20,000 for small businesses (turnover < $10M) applying simplified depreciation rules made permanent   [from 1 Jul 2026]  .
• Permanent 2-year loss carry back for companies with aggregated global turnover < $1 billion   [from 1 Jul 2026]  . Generates a refundable tax offset capped to the company’s franking account balance.
• Loss refundability for small start-ups (turnover < $10M) in their first 2 years of operation   [from 1 Jul 2028]  . Refundable tax offset capped to employment tax remittances.
• R&D Tax Incentive reforms   [from 1 Jul 2028]  : core R&D offset increases from 25% to 50%; intensity threshold reduced from 2% to 1.5%; refundable offset turnover threshold raised from $20M to $50M; expenditure cap lifted from $150M to $200M; minimum spend raised from $20,000 to $50,000.
• VCLP and ESVCLP tax incentives expanded   [from 1 Jul 2027]  . VCLP investee asset cap: $250M → $480M. ESVCLP cap: $50M → $80M. Max ESVCLP fund size: $200M → $270M. Eligible venture capital investor program closed to new applications from 12 May 2026.
• OECD Pillar 2 side-by-side package implemented in Australian legislation   [from 1 Jan 2026]  , including simplification measures, a substance-based tax incentive safe harbour and new safe harbours for eligible parent entities.

• DGR list updated. New organisations receiving DGR status for gifts after 30 June 2026 include: CEW Bean Foundation, Council of First Nations Ltd, Hakoah Club Ltd, Jewish Education Foundation (Vic) Ltd, Sydney Harbour Federation Trust, Sydney Harbour Foundation Limited and Virtual War Memorial Limited.
• Jewish Community Foundation and Australian Jewish Funders named in a ministerial declaration enabling them to seek DGR endorsement to provide community relief following the Bondi Beach terrorist attack on 14 December 2025.
• Ministerial declaration requirement removed from the community charity DGR process, reducing red tape for eligible charities.

• Indirect Tax Concession Scheme (ITCS) access extended to the European Union, Italy, Chile and Tuvalu for their diplomatic missions and consular posts.
• 497 nuisance tariffs abolished   [from 1 Jul 2026]   — wine glasses, tyres, air conditioners, margarine and bitumen among items affected. Builds on 457 tariffs removed in July 2024.
• Ukraine duty exemption extended for a further 2 years to   [3 Jul 2028]  . “Free” rate of duty on all Ukraine-produced goods except excise-equivalent items.
• $20.3 million over 4 years from 2026–27 to combat the illicit tobacco market, including state and territory enforcement funding, data collection and strengthened law enforcement powers.

• Monthly PAYG reporting and payments with dynamic instalment calculations available to small and medium businesses   [from 1 Jul 2027]  . Mandatory for taxpayers with a history of non-compliance.
• $86.3 million over 4 years   [from 1 Jul 2026]   for Phase 2 of the Counter Fraud Strategy — real-time fraud detection across the tax and superannuation systems, including expanded powers against fraudulent tax agents and intermediaries.
• $17.9 million from 2026–27 to strengthen governance, supervision and enforcement for managed investment schemes, including enhanced ASIC data capabilities.
• $357.4 million to the ATO over 4 years from 2026–27 to maintain myID and the Relationship Authorisation Manager under the Digital ID Act 2024.
• $198.1 million over 2 years from 2026–27 to streamline regulatory systems and secure data access, including synchronisation of director information, ABN authentication upgrades and transition of ABN/superannuation lookup to the ATO.
• $80 million over 4 years from 2026–27 to address systems abuse in the child support scheme via strengthened tax lodgement enforcement, extended Single Touch Payroll data sharing and expanded employer withholding.
• Harmonisation of state payroll tax administration frameworks to be explored as part of the government’s national competition policy (NCP).

DISCLAIMER: This document has been prepared for general information purposes only and does not constitute legal, taxation or financial advice. No person should rely on the contents without first obtaining specific advice from a qualified professional. Quantum House Australia expressly disclaims any liability in respect of actions taken, or not taken, based on this material. Source: 2026–27 Budget Paper No. 2; Treasury media releases; CCH Tax & Superannuation Report, Wolters Kluwer.