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Australian Federal Budget insights 2026-2027

How will the Federal Budget 2026 impact your business and what challenges will it address?

12/05/26 |

Australian Federal Budget 2026–2027

On Tuesday, 12 May 2026, the Treasurer, Dr Jim Chalmers, handed down the 2026–27 Federal Budget, setting out a tax and superannuation agenda that is more ambitious in scope than any single Budget delivered in recent years. For taxpayers, advisers and investors alike, this Budget signals a meaningful recalibration of how income, capital and business activity will be taxed in Australia over the medium term.

Several measures stand out as structurally significant. From 1 July 2027, the long-standing 50% CGT discount will be replaced by cost base indexation paired with a 30% minimum tax on net capital gains, fundamentally reshaping investment decision-making for individuals, trusts and partnerships. Negative gearing on established residential property will be quarantined, and from 1 July 2028 a 30% minimum tax will apply to the taxable income of discretionary trusts. A new $250 Working Australians Tax Offset will provide modest but permanent relief from the 2027–28 income year.

For business, the Budget delivers a substantial reshaping of the R&D Tax Incentive, expanded venture capital concessions, a permanent loss carry-back offset for companies under $1b in turnover, loss refundability for eligible start-ups, and the long-anticipated permanence of the $20,000 instant asset write-off. On the international tax front, Australia will implement the OECD’s Pillar Two side-by-side package, while a further tranche of nuisance tariffs is abolished and the Australian Trusted Trader program is expanded.

This publication provides PwC’s detailed analysis of these measures, the practical implications, and the actions we recommend taxpayers consider as they prepare for implementation.

Personal tax and superannuation

  • Cost-of-living relief remains the key driver behind personal tax announcements, with the introduction of a $250 Working Australians Tax Offset, available for individuals with earned income from 1 July 2027.
  • All Australian taxpayers will benefit from previously legislated personal income tax cuts from 1 July 2026.
  • A $1,000 instant tax deduction for working expenses to apply from 1 July 2026, assisting taxpayers who have low work-related expenses.
  • The Medicare levy low-income thresholds will increase from 1 July 2025, providing further targeted relief to lower income individuals.

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Business

  • Reintroduction of a company loss carry back regime for tax years commencing on or after 1 July 2026, allowing eligible companies with aggregated annual global turnover of less than $1b to offset a tax loss against tax paid up to two years earlier
  • Permanent increase to the small business instant asset write-off threshold for low-cost depreciating assets ($20,000)— from 1 July 2026
  • The Government is extending the FBT concession for electric vehicles, but in a reduced capacity. 

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Investment

  •  From 1 July 2027 negative gearing for established residential properties (acquired after 7:30 PM (AEST) on 12 May 2026) will be limited, with rental losses only able to reduce residential rental income or capital gains, not salary or other income.
  • From 1 July 2028, trustees of discretionary trusts will pay a 30% minimum tax on the taxable income of the trust, with non-corporate beneficiaries receiving non-refundable credits for the tax paid by the trustee.
  • Expanded rollover relief will be available for three years from 1 July 2027 to support small businesses and others that wish to restructure out of a discretionary trust into another entity, such as a company or a fixed trust. 

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International tax and trade

  • Australia’s global and domestic minimum tax laws will be amended to implement the OECD/G20 Side-by-Side Package, with effect from 1 January 2026—large multinational groups in scope of Pillar Two should reassess their 2026 compliance position, including the potential availability of new safe harbours
  • Businesses importing or purchasing goods previously subject to the latest “nuisance tariffs” should assess the impact of their abolition, for example, where they may have previously been paying customs duty (either directly or indirectly) and also consider the proposed abolition of another 86 tariffs from 1 July 2027.
  • Existing Australian Trusted Traders or businesses considering entering into the program should consider the potential benefits under its expansion. In particular, those who export to ASEAN countries should assess the potential benefits of the Origin Waiver benefit available as an Approved Exporter.  

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Other tax measures

  • The Government has committed $20.3 million in funding over four years from 2026–27 to disrupt the illicit tobacco market.

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The forward agenda

Business tax, personal tax and superannuation measures that remained unenacted at the time the 2026–27 Federal Budget was delivered.

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Economic analysis

A budget shaped by short term global shocks and long term economic repair.

Tax Briefing: Federal Budget Special Edition webcast

Federal Treasurer, The Hon Dr Jim Chalmers MP has handed down the Federal Budget outlining the Australian Government's plans for revenue and expenditure for 2026-27 and beyond. Don’t miss this opportunity to gain valuable insights and practical perspectives on the 2026-27 Federal Budget from PwC tax experts.

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