For the last few years, my Federal Budget summary was pretty mundane with very few significant changes. However, the 2026-27 Budget announced last night by Treasurer Jim Chalmers was anything but boring. Significant changes were announced affecting both individuals and businesses which I have summarised below into a few key areas.
The Government’s immediate focus is clear: cost-of-living relief. With households and businesses under sustained pressure from business costs, rising interest rates, and persistent inflation, targeted support measures are both politically and economically necessary.
INDIVIDUALS
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.
Assets that are sold prior to 1 July 2027 will continue to be subject to the existing rules.
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.
Changes to 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 remain exempt from the changes until disposal.
Eligible new builds will be exempt from the changes. Properties in superannuation funds and widely held trusts will be excluded, alongside targeted exemptions for build-to-rent developments and private investors supporting government housing programs.
A new Working Australians Tax Offset
The Government will introduce a $250 Working Australians Tax Offset (WATO) with effect from the 2028 income year. This new offset will provide a permanent annual tax offset for Australians for income derived from work, including 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. 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.
BUSINESSES
Tax refunds for companies experiencing 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.
Put quite simply, if your business records a tax loss after having one or two years of taxable profits and paying that tax to the ATO, you may be able to get some or all that tax refunded depending on the size of the loss.
Loss refundability for small start-up companies
For tax years commencing on or after 1 July 2028, start-up companies with aggregated annual turnover of less than $10 million that generate a tax loss in their first two years of operation will be able to utilise the loss to generate a refundable tax offset.
The offset will be limited to the value of fringe benefits tax (FBT) and withholding tax on wages paid in respect of Australian employees in the loss year.
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.
If you have any concerns regarding the new Budget, or need further clarification, please reach out to your trusted Highview Accountant.
Simon Byers
Partner & CPA
Highview Accounting & Financial, Prahran
