Treasurer Jim Chalmers handed down the 2026–27 Federal Budget on Tuesday 12 May 2026 at 7:30pm against a difficult backdrop. The closure of the Strait of Hormuz has disrupted global oil supply, inflation is forecast to hit 5% by mid-year, and growth is expected to slow. The Government has framed this as a budget of resilience and reform. There is significant tax restructuring ahead. Here is what matters most for our clients.
The headline trust measure largely spares primary producers. The Government is proposing a 30% minimum tax on discretionary trust distributions from 1 July 2028. This is not yet law and key aspects are still subject to stakeholder consultation. Primary production income is explicitly carved out, as are income relating to vulnerable minors, deceased estates and existing testamentary trust assets at the announcement date.
Fuel excise has been cut from 52.6c to 20.6c per litre (more than halved) with the Heavy Vehicle Road User Charge reduced to zero for three months from 1 April 2026, as a direct response to Middle East supply disruption. A further extension beyond 30 June 2026 has been flagged.
Farm Management Deposit caps remain at $800,000 total, with the $100,000 off-farm income test unchanged. A 20% domestic gas reservation commences 1 July 2027 to stabilise input prices over time. Biosecurity border processes are being streamlined to speed up fertiliser access to farms. Supply chain agreements with Japan, South Korea, Singapore, Malaysia, and Brunei have been signed to secure agricultural inputs.
The $20,000 instant asset write-off is now permanent for businesses with turnover under $10 million from 1 July 2026. No more annual uncertainty — you can plan capital purchases with confidence. Treasury estimates this will improve small business cash flow by around $890 million over five years.
$10.2 billion a year in regulatory burden cuts are coming, including simpler record-keeping and lighter climate disclosure requirements. Interest-free loans from the National Reconstruction Fund's $1 billion Economic Resilience Program are available now for manufacturing and logistics businesses facing fuel cost pressures.
From 1 July 2028, it is proposed that start-ups in their first two years can receive a cash refund for tax losses up to the value of FBT and withholding tax paid on wages.
The ATO is also offering streamlined access to payment plans, interest and penalty remission, and PAYG instalment variations for eligible businesses until 30 June 2026. If cash flow has been tight this year, it is worth a conversation.
- Confirm your payroll software is Payday Super ready. Most major providers have already released updates
- Review your pay cycle. Weekly or fortnightly is more manageable than monthly given the 7-business-day window
- Assess the cash flow impact. Super becomes an ongoing obligation rather than a quarterly lump sum
- ATO Small Business Clearing House closes 30 June 2026. If you use it, you need an alternative now
- Talk to us if you are not sure where you stand.
The ATO has confirmed a risk-based compliance approach for the first year. Employers making genuine efforts to comply and correcting errors quickly will be treated as low risk and are unlikely to face penalties.
Division 296 was not modified by this Budget. It commences as legislated on 1 July 2026, with the first assessment based on balances at 30 June 2027.
For balances between $3m and $10m, an additional 15% tax applies to earnings on the excess — around 30% in total. For balances above $10m, the additional tax is 25%, around 40% in total. The thresholds are indexed. The tax applies to realised earnings. Unrealised gains on illiquid assets such as farmland held inside super are a specific concern worth modelling now.
Cost base reset: For clients affected by Division 296, there is a one-off opportunity to reset the cost base of super fund assets to market value as at 30 June 2026. This opt-in may reduce future tax exposure and should be carefully considered. If your super balance is approaching or above $3 million, contact our team to understand how Division 296 may impact your position.
This is the reform generating the most commentary. These are proposed changes only — they still need to pass Parliament and may change. Two measures are announced from 1 July 2027.
CGT reform: The 50% discount is replaced with cost-base indexation adjusted for CPI, plus a 30% minimum tax on real capital gains for assets held 12 months or more. The changes apply to individuals, trusts, and partnerships — not companies. The small business CGT concessions and main residence exemption are unchanged.
Pre-1985 assets: Assets acquired before CGT was introduced in 1985 have been exempt from CGT since then. This Budget changes that. Gains on pre-CGT assets accruing after 1 July 2027 will be subject to the new indexation and minimum tax regime. Gains accrued before 1 July 2027 on these assets remain exempt. This is significant for clients holding long-held land or other assets predating 1985.
New residential builds: Investors who buy newly constructed residential property from 1 July 2027 can choose, at the time of sale, between the existing 50% discount or the new indexation and minimum tax approach.
Pension and income support recipients are exempt from the 30% minimum tax in years they realise a capital gain.
- These changes apply only to the 50% general CGT discount available to individuals, trusts and partnerships. They do not affect the one-third discount available to superannuation funds, which remains unchanged.
- Companies do not currently receive a CGT discount and are not affected by the discount changes. However, companies will also not receive the benefit of cost base indexation after 1 July 2027 — indexation applies only to individuals, trusts and partnerships holding assets for more than 12 months.
- The small business CGT concessions (15-year exemption, 50% active asset reduction, retirement exemption, rollover) are entirely unchanged.
Negative gearing (proposed): From 1 July 2027, investors who purchase established residential property after 7:30pm AEST on 12 May 2026 cannot deduct net rental losses against other income such as wages. Losses can still be carried forward and offset against future residential property income or capital gains. This cutoff applies to the contract date — not settlement.
Exemptions: The changes only apply to residential property. Investors can still fully negative gear investments in new residential builds, commercial property and other income-producing assets such as shares. Superannuation funds are not impacted by the negative gearing or CGT discount changes. Existing super tax settings remain in place, although separate changes under Division 296 introduce additional tax on earnings for large super balances.
Treasury modelling projects around 75,000 additional owner-occupiers over the next decade and a modest reduction in house price growth of around 2% from the combined changes. A separate $2 billion housing infrastructure package is aimed at unlocking up to 65,000 new homes.
Every Australian taxpayer above $18,200 benefits. An average earner on $81,245 will be $1,978 better off in 2026–27 and $2,496 from 2027–28, compared to 2023–24 settings. These tax cuts are already legislated.
Proposed: $1,000 instant tax deduction from 2026–27. Workers and sole traders can claim up to $1,000 in work-related expenses without keeping receipts. 6.2 million workers are expected to benefit, with an average saving of $205. You can still claim more than $1,000 the normal way — the instant deduction removes the compliance cost for most people. This measure still needs to pass Parliament.
Proposed: $250 Working Australians Tax Offset from 1 July 2027. A permanent annual offset for income from work — available to employees and sole traders alike. 97% of the 13 million eligible workers are expected to receive the full $250. It would apply automatically in your tax return. This measure still needs to pass Parliament.
Medicare levy low-income thresholds have been increased, backdated to 1 July 2024. There is $25 billion extra for public hospitals and further reductions in PBS prescription prices.
$8.6 billion for nationally significant road and rail projects, with regional communities specifically included. The record $25 billion investment in public hospitals will flow through to regional health networks — distribution details to follow.
The fuel and fertiliser security measures have a strong regional dimension. The $7.5 billion Fuel and Fertiliser Security Facility has already secured over 450 million litres of additional diesel and 100 million litres of jet fuel. Biosecurity border processes are being streamlined to speed up fertiliser access to farms.
A $55 million Transport Resilience and Capacity Kickstart pilot will incentivise rail and sea freight — relevant for regional producers managing logistics costs in the current environment.
Our advisors will be in contact individually where the changes create urgency or opportunity. The areas requiring the most attention are:
- Trust distribution reviews — especially where trusts hold mixed primary production and non-farm income
- Division 296 planning — the 30 June 2027 first assessment is not far away for those near or above $3m
- CGT timing decisions — anyone with a significant property or investment gain should model pre- versus post-2027 scenarios now
- Payday Super readiness — every employer needs payroll confirmed as compliant before 1 July 2026
If any of this raises a question about your situation, please get in touch with your local Boyce advisor.
