By Hannah Griffits, Director
Last night’s Federal Budget delivered a strong focus on cost-of-living relief, tax reform, housing affordability, and economic resilience. With rising household pressures still front of mind for many Australians, the Government has introduced a range of measures aimed at easing financial strain while also reshaping parts of the tax system over the coming years.
Here’s a breakdown of some of the key announcements and what they could mean for individuals, investors, and business owners.
Tax Cuts
One of the headline announcements was additional tax relief for Australian workers.
From 1 July 2026, the tax rate for income between $18,201 and $45,000 will reduce from 16% to 15%, before dropping again to 14% from 1 July 2027. The Government has also announced a new Working Australians Tax Offset, providing up to $250 annually for eligible workers, which will begin from 1 July 2027.
For many Australians, this means slightly more money in their pocket each pay cycle, welcome news as everyday expenses remain high.
A New $1,000 Instant Tax Deduction
Another major change is the introduction of a $1,000 instant tax deduction from the 2026–27 financial year.
This measure allows employees to claim a standard $1,000 deduction for work-related expenses without needing to keep receipts. The Government says this is designed to simplify tax time for millions of Australians.
It is important to make sure you continue to claim all that you are entitled too. Under the proposal, for some individuals, union fees, professional association membership fees, charitable donations and other non work-related deductions can still be itemised separately and claimed on top of the instant tax deduction.
It is still very important to seek professional advice on this to ensure your not missing out on any eligible claims.
Housing and Property Changes
Housing affordability was another major focus of the Budget.
The Government announced significant proposed changes to negative gearing and capital gains tax concessions, aimed at supporting first home buyers and increasing housing supply. Proposed reforms include limiting negative gearing benefits on established properties purchased after Budget night, while continuing concessions for new builds.
There are also proposed changes to capital gains tax calculations from July 2027, replacing the current 50% discount model with an inflation-indexed approach, with a 30% minimum tax on net capital gains.
These measures are likely to generate considerable discussion in coming months, particularly among investors and property owners, and it will be important to monitor how the legislation progresses.
Changes for Discretionary Trusts
The Budget also announced a proposed 30% minimum tax on discretionary trusts from 1 July 2028. Under the proposed rules, trustees of discretionary (non-fixed) trusts would pay a minimum tax rate of 30% on taxable trust income, with individual beneficiaries receiving non-refundable tax credits for tax already paid by the trust.
Several trust structures will be excluded from the changes, including fixed trusts, superannuation funds, charitable trusts, and deceased estates. Certain types of income including primary production income and some testamentary trust income will also remain exempt.
To assist businesses and family groups that may wish to restructure, the Government has proposed expanded roll-over relief from 1 July 2027 for a three-year period. This would allow eligible taxpayers to transition from discretionary trusts into alternative structures, such as companies or fixed trusts, without immediate tax consequences.
Given how commonly discretionary trusts are used in Australia, this is expected to be one of the most closely watched tax measures announced in the Budget.
Support for Small Business
For small business owners, this year’s Federal Budget delivered a stronger focus on cash flow support, investment incentives, and reducing some of the administrative pressure many businesses have been facing over recent years.
One of the most significant announcements was 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 qualifying assets under $20,000, rather than depreciating them over several years. This is designed to improve cash flow and give businesses greater confidence when investing in equipment, technology, vehicles, and other operational assets.
Beyond direct tax measures, the Government also announced efforts to simplify compliance obligations for businesses. Proposed changes include more flexible PAYG instalment options, streamlined payroll tax administration discussions with the states, and expanded access to ATO dynamic instalment systems designed to better reflect real-time business conditions.
Cost-of-Living Relief
The Budget included several broader cost-of-living measures, including:
- A temporary reduction in fuel excise
- Continued investment in healthcare and Medicare
- Additional PBS medicine funding
- Ongoing rent assistance and housing support initiatives
These initiatives are designed to ease pressure on households while inflation continues to moderate.
As always with Federal Budgets, many of the announced measures still need to pass Parliament before becoming law.
If you’re unsure how the Budget announcements may impact your personal or business situation, speaking with our team early can help you plan ahead with confidence.
