The 2026/27 Federal Budget handed down last night included a mix of major long-term tax reforms, small business measures, and personal tax changes. While some announcements won’t take effect for several years, they signal significant shifts in how investment income, trusts, and deductions may be treated going forward.
Here’s a breakdown of some of the key measures affecting individuals and businesses—and what they actually mean in practice.
Changes for Individuals
A New $1,000 Standard Deduction
From 1 July 2026, individuals earning employment or sole trader income will be able to claim a standard deduction of up to $1,000 for work-related expenses without needing receipts or substantiation.
Importantly:
- If your work-related expenses (including vehicle costs, laundry, and other work-related costs) are under $1,000, you may be able to use the standard deduction instead of keeping records.
- If your actual expenses are higher than $1,000, you can still claim them the normal way, so make sure you’re still keeping receipts!
This is designed to simplify tax returns for many taxpayers, particularly employees with smaller claims.
Tax Cuts, Offsets & Other Individual Changes
The Federal Budget confirmed previously announced tax cuts:
- The current 16% tax rate will reduce to 15% from 1 July 2026
- Then further reduce to 14% from 1 July 2027
The Government also announced a new $250 Working Australians Tax Offset from the 2028 income year for individuals earning employment or sole trader income.
In addition:
- Medicare levy low-income thresholds will increase from 1 July 2025, which may reduce or eliminate the levy for some lower-income earners.
- The age-based uplift on the Private Health Insurance rebate will be removed from 1 April 2027, impacting older Australians who currently receive a higher rebate percentage.
Changes to Capital Gains Tax (CGT)
One of the biggest announcements was the proposed overhaul of the CGT discount system.
Currently, individuals and trusts who hold an asset for more than 12 months generally receive a 50% CGT discount. Under the proposed changes from 1 July 2027:
- The 50% discount would be replaced with cost base indexation
- A new 30% minimum tax on net capital gains would apply
In simple terms, instead of automatically halving the gain, the asset’s cost base would be adjusted for inflation before calculating the taxable gain.
Importantly:
- Assets sold before 1 July 2027 would remain under the current rules
- Gains accrued before that date are proposed to retain access to the existing 50% discount
There are still many unanswered questions around how the indexation method would work in practice, and the detailed legislation will be important.
Negative Gearing Changes
The Budget also announced significant changes to negative gearing for residential investment properties.
Currently, rental losses can generally be offset against other income such as salary and wages. Under the proposed rules:
- From 1 July 2027, losses on established residential properties would only be deductible against future rental income or capital gains from residential property
However:
- Existing investment properties purchased before budget night are proposed to be grandfathered
- New builds would remain exempt from the changes
The changes appear aimed at encouraging investment into new housing supply rather than existing homes.
Changes for Businesses
$20,000 Instant Asset Write-Off Made Permanent
One of the more practical measures for small businesses is the permanent extension of the $20,000 instant asset write-off from 1 July 2026.
Eligible businesses with turnover under $10 million will continue to be able to immediately deduct assets under the threshold, provided they are installed and ready for use.
This provides greater certainty for businesses planning equipment and asset purchases.
PAYG Instalments May Become More “Real Time”
The Government also announced plans for expanded dynamic PAYG instalments from 1 July 2027.
In practice, this means accounting software may eventually calculate PAYG instalments using more real-time business data, rather than relying heavily on prior-year tax returns.
The aim is to better align instalments with current business performance—but it may also mean more frequent adjustments for businesses with fluctuating income.
Changes to Electric Vehicle FBT Concessions
The Federal Budget also proposed changes to the current Fringe Benefits Tax (FBT) concessions for electric vehicles.
At the moment, eligible electric vehicles under the luxury car tax threshold can access a full FBT exemption. Under the new rules:
- EVs provided before 1 April 2029 and valued under $75,000 will retain the full exemption
- From 1 April 2029, eligible EVs will instead receive a 25% FBT discount rather than a full exemption
While the concession is not disappearing entirely, the proposal reduces the long-term tax benefit of providing electric vehicles through a business structure.
Trust Tax Changes
Another significant proposal is the introduction of a minimum 30% tax on discretionary trusts from the 2029 income year.
This would represent a major shift in trust taxation and could impact many family business and investment structures. However, the proposed commencement date is still several years away.
The Bottom Line
This year’s Federal Budget included a number of substantial long-term tax proposals, particularly around investments, trusts, and property taxation. For small businesses, the permanent extension of the instant asset write-off provides welcome certainty, while individuals may benefit from simplified deductions and gradual tax cuts.
As with all Federal Budget announcements, many measures still need to pass through legislation before becoming law.
If you’d like to understand how these proposed changes could affect your personal or business situation, get in touch with our team—we’re here to help you plan ahead with clarity and confidence.
