GFM May 2026 Newsletter – Federal Budget 2026-27 Update
14 May 2026
“The Federal budget breakdown – what matters most”
Dear Clients and Friends,
The Federal Government has handed down the 2026–27 Federal Budget, introducing some of the most significant changes to property, wealth, and small business taxation in decades.
While everyday workers will navigate new personal tax relief measures, investors and business owners face highly consequential overhauls to negative gearing, capital gains tax, and trust distributions.
In this special edition newsletter, we break down the core announcements from Budget Night.
As always, if you have any questions please, feel free to contact us.
Warm regards,
Darren, Brent and the Team at GFM
Replacing the 50% CGT discount with 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 assets, including pre-CGT assets, held by individuals, trusts and partnerships.
Transitional arrangements will limit the impact on existing investments by ensuring the changes only apply to gains accruing on or after 1 July 2027. The 50% CGT discount will continue to apply to gains that accrued before 1 July 2027.
Capital gains on pre-CGT assets that accrued before 1 July 2027 will remain exempt from CGT.
Furthermore, investors in new residential properties will be able to choose either:
- the 50% CGT discount; or
- cost base indexation and the 30% minimum tax.
Income support payment recipients, including Age Pension recipients, will be exempt from the minimum tax.
Assets that are sold prior to 1 July 2027 will continue to be subject to the existing rules.
Reforming negative gearing for residential property investments
From 1 July 2027, 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 are able to be 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 prior to this time (including contracts entered into but not yet settled) will be exempt from the changes until disposal.
Eligible new builds will be exempt from the changes.
Reforming the taxation of discretionary trusts
The Government will introduce a minimum 30% tax on discretionary trusts.
From 1 July 2028 (i.e., from the 2029 income year), 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.
Under the minimum tax, corporate beneficiaries will be assessed based on the trust income to which they are entitled, without being able to claim credits for tax payable by the trustee.
The minimum tax will not apply to other types of trusts such as fixed trusts, fixed testamentary trusts, complying superannuation funds, special disability trusts and deceased estates.
Some types of income such as primary production income, certain income relating to vulnerable minors, amounts to which non-resident withholding tax applies, and income from assets of discretionary testamentary trusts existing at announcement will also be excluded.
The Government will provide expanded rollover relief for three years from 1 July 2027 for small businesses and others that wish to restructure out of discretionary trusts into another type of entity, such as a company or fixed trust.
Permanent $20,000 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 less than $10 million.
Assets valued at $20,000 or more can continue to be placed into the small business 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.
Reducing the FBT concession for 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, implemented through a 15% rate in the statutory formula. The following transitional arrangements will apply:
- 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, implemented through a 0% rate in the statutory formula.
- Electric cars valued above $75,000 and up to and including the fuel-efficient luxury car tax threshold that are provided between 1 April 2027 and 1 April 2029 will be eligible for a 25% discount on FBT, 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.
Reintroducing ‘loss carry back’ for companies
The Government will provide tax relief to businesses by reforming the treatment of tax losses.
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 to a company’s franking account balance.
Introducing a Working Australians Tax Offset
The Government will introduce a $250 Working Australians Tax Offset with effect from the 2028 income year. This new offset will provide a permanent annual tax offset for Australians for their income derived from work such as salary and wages and the business income of sole traders.
$1,000 Standard Deduction for Work-related Expenses
The Government will introduce a standard tax deduction of up to $1,000 for work-related expenses from the 2027 income year. Draft legislation and explanatory materials have been released for consultation regarding this measure: Treasury Laws Amendment Bill 2026: standard deduction for work-related expenses.
The Draft Bill proposes to amend the tax law to introduce a standard deduction of up to $1,000 for Australian tax residents who earn income from work, starting 1 July 2026. Such taxpayers will not need to itemise or substantiate work-related expenses if they are claiming no more than $1,000.
Individuals who incur work-related expenses greater than the $1,000 maximum standard deduction can continue to claim their deduction 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 standard deduction.
Previously announced tax cuts in 2027 and 2028
The Budget referenced the Government’s previously announced tax cuts (which have already been legislated), as follows:
- The (current) 16% tax rate will be reduced to 15% from 1 July 2026.
- The 15% tax rate will be further reduced to 14% from 1 July 2027.
Increasing the Medicare levy low-income thresholds
The Government will increase the Medicare levy low-income thresholds for singles, families and seniors and pensioners by 2.9% from 1 July 2025 as follows:
- The threshold for singles will be increased from $27,222 to $28,011.
- The family threshold will be increased from $45,907 to $47,238.
- For single seniors and pensioners, the threshold will be increased from $43,020 to $44,268.
- The family threshold for seniors and pensioners will be increased from $59,886 to $61,623.
For each dependent child or student, the family income thresholds will increase by a further $4,338, up from the previous amount of $4,216.
