The 2026-2027 Federal Budget Recap: What Australian Business Owners Need to Know

Jim Chalmers handed down the 2026-27 Federal Budget on 25 March 2026 – and if you run a business in Australia, this one’s worth your full attention. For Australian business owners, there is a lot to unpack – from income tax cuts to superannuation changes and several reform proposals that are still working their way through the legislative process. From capital gains tax overhauls to trust taxation changes and a permanent instant asset write-off, the 2026 federal budget recap below cuts through the noise so you can see exactly what applies to you.

We’ve summarised the most pertinent areas for business owners below *rubs hands together* so, let’s get into it!

Why This Budget Is Different

The 2026 Federal Budget lands in the context of a global oil shock that’s slowed Australia’s economic growth, elevated inflation, and multiple interest rate increases over recent years. The government’s stated aims in this budget are to ease cost-of-living pressure on working Australians in the near term while strengthening the long-term budget position.

For business owners, the proposed changes span income tax, superannuation, and several structural areas – though a number of these remain announced proposals rather than legislated law. For business owners, this creates both opportunities and some urgent decisions.

If you want to compare the measures in this Budget against the prior cycle, our 2024 Federal Budget recap covers what was announced and what passed into law from that year.

Income Tax Cuts For Individuals

The 2026 federal budget delivers two rounds of personal income tax cuts tied to specific future dates – here’s what each means for you and your employees.

From 1 July 2026 

The tax rate on income between $18,201 and $45,000 drops from 16% to 15%, saving most workers around $236 per year. A new $1,000 instant work-related tax deduction (no receipts required) also takes effect – a simple win for employees and sole traders alike.

From 1 July 2027

That same rate drops again to 14%, delivering a further $236 saving – a total of $472/year for anyone earning above $45,000. A new Working Australians Tax Offset of $250/year becomes available from the 2027–28 tax return, targeting bracket creep for middle-income earners.

What’s already changed?

Minimum wage: 4.75% increase

• The Fair Work Commission increased modern award rates by 4.75% from the first full pay period on or after 1 July 2026, taking the national minimum to $26.44 per hour
• Award-reliant workers (concentrated in hospitality, retail, administration, and healthcare) are the direct recipients, but the decision tends to set a benchmark across the broader workforce.
• Casual employees at the minimum wage must now receive at least $33.05 per hour, including the 25% casual loading.

Super guarantee: rate rises to 12%

• The SG rate rose from 11.5% to 12% on 1 July 2026, the final step in a legislated schedule that has been running since 2021.
• For businesses with ten employees on average wages of $80,000, that’s approximately $4,000 more in super contributions per year.
• Review employment contracts now. Some older agreements express total remuneration as inclusive of super, which can create unintended underpayment risk if not updated.

Payday super: the biggest payroll change in a generation

• From 1 July 2026, super must be paid at the same time as wages rather than not quarterly. Contributions must reach the employee’s super fund within seven business days of each payday.
• This is a fundamental change to cash flow management for many businesses. Previously, quarterly super payments could be held for up to 90 days. Now that buffer is gone.
• The ATO’s Small Business Super Clearing House closed to new users in October 2025 and shut entirely on 30 June 2026. Businesses still using it must have already moved to an alternative clearing house solution.

Small Business Measures in the 2026 Budget

Several of the most consequential changes in this federal budget recap are aimed squarely at small business owners. Here’s a breakdown of the key items, including some that require immediate action.

Instant Asset Write-Off Made Permanent

The government has announced that the $20,000 instant asset write-off will be made permanent from 1 July 2026 for businesses with annual turnover under $10 million. Unlike previous years, where the threshold required annual re-legislation, this measure is intended to be an ongoing feature of the tax system if it passes into law. Each eligible asset must cost less than $20,000 and be first used or installed ready for use in the income year you claim the deduction. The government estimates this will improve cash flow for small businesses by around $890 million over five years. This measure has been announced in the Budget but has not yet been legislated.

Loss Carry-Back Returns Permanently

The government has announced a proposal to permanently reintroduce loss carry-back provisions for companies with turnover up to $1 billion, proposed to apply from 1 July 2026. Confirm the legislative status of this measure before relying on it for tax planning. This allows current-year losses to be offset against prior-year profits, resulting in a tax refund.

Quick example:

• FY24/25 profit: $200,000 → company tax paid: $60,000
• FY25/26 loss: $100,000
• Apply the loss → ATO refunds approx. $30,000
• Note: the refund reduces your franking account by the same amount – worth factoring into any dividend strategy

PAYG Instalment Flexibility (From 1 July 2027)

The Budget also announces that businesses will be able to opt into monthly PAYG instalments from 1 July 2027, giving more flexibility to align tax payments with actual cash flow rather than quarterly estimates. If you are not across how the PAYG instalment system currently works, our explainer on PAYG instalments is worth reading ahead of this change.

ATO Enforcement Expanding

Significant funding targets ATO fraud detection, debt recovery, and compliance. Expect expanded garnishee powers and a new joint asset risk provision – meaning the ATO gains greater power to pursue assets held jointly where one party carries an unpaid tax debt. If your business has outstanding obligations, act now.

If your business has outstanding obligations, act now. Understanding your options around ATO compliance and penalty remissions is a practical first step before the ATO’s expanded enforcement powers take effect. It is also worth running through the compliance obligations business owners most commonly miss – particularly around super and BAS, which sit squarely in the ATO’s enforcement focus areas.

R&D Tax Incentive Reform (2028)

From 1 July 2028, the R&D Tax Incentive is being reformed to better target experimental core R&D. The changes include higher offset rates for genuine experimental R&D, an increase in the turnover threshold for the refundable offset to $50 million, and a minimum expenditure threshold of $50,000 for claims. If your business relies on R&D claims, review your current activities against the new eligibility criteria with your adviser ahead of the commencement date. If your business relies on R&D claims, start strengthening your record-keeping now.

Capital Gains Tax Changes – The Biggest Reform in This Budget

This is the section most business owners will need to read twice. The CGT changes announced in the 2026 federal budget aren’t just about property – they affect shares, business goodwill, and assets held in trusts and partnerships. Here’s what changes and when.

What Changes from 1 July 2027?

The government has announced a proposal to replace the 50% CGT discount for individuals, trusts, and partnerships with cost base indexation and a minimum 30% tax rate applied to capital gains. This proposal has not yet been legislated. We recommend seeking advice before making any decisions based on this measure, as it may change or not proceed.

In plain terms: instead of only paying tax on 50% of your gain, the gain will be indexed to inflation and taxed at a minimum rate of 30%. For fast-appreciating assets, this means a higher taxable amount than the current regime.

Affected entities include:

• Individuals selling investment assets or business interests
• Trusts distributing capital gains
• Partnerships realising gains on business assets
• Shareholders in private companies held outside of superannuation

What’s Still Exempt?

• Your main residence – the family home CGT exemption remains untouched
• For a full breakdown of how the main residence exemption works, including the six-year rule and scenarios for properties that have been rented out, see our guide to the main residence CGT exemption.
• Superannuation funds, including SMSFs, receive a one-third discount on capital gains for assets held over 12 months, resulting in an effective CGT rate of 10%. This existing treatment is not affected by the proposed changes.
• Gains arising before 1 July 2027 still attract the 50% discount, even if the asset is sold later – so the timing of a sale matters
• Small business CGT concessions (15-year exemption, retirement exemption, rollover) remain – though they interact differently under the new regime and should be reviewed with your adviser

Foreign investors: an uneven playing field

• Foreign investors selling Australian assets will be subject to a 15% CGT rate under the new regime, while Australian residents face a 30% minimum.
• This disparity has drawn significant criticism and may be subject to further amendment as the legislation progresses, but as announced it creates a materially unequal outcome between local and foreign capital.

Pre-CGT Assets – A Valuation Deadline You Cannot Ignore

Pre-CGT assets acquired before 20 September 1985 are currently fully exempt from capital gains tax. If the government’s proposed CGT changes proceed as announced – which is not yet certain – the treatment of post-announcement growth on these assets may change. If you hold pre-CGT assets, this is worth discussing with us once the legislative position is clearer. We will update this article as developments occur.

Pre-CGT asset questions often intersect with estate planning. Our guide to deceased estates and CGT covers the related territory.

Negative Gearing Changes

Negative gearing on residential property is being restricted – but existing investors are protected. Here’s the clear breakdown.

What Changes

The government has announced a proposal to limit negative gearing deductions to new residential builds from a future date, with established properties acquired after Budget night potentially losing access to full deductions. This measure has not yet passed into law. The date and precise mechanics may change as the legislation progresses. We will update this article once the position is confirmed.

What’s Protected

• Properties held at Budget night are fully exempt
• The 50% CGT discount continues for gains arising before 1 July 2027 on these properties
• Losses from negatively geared established properties acquired after Budget night aren’t lost – they’re quarantined and can offset future residential rental income or CGT on eventual sale
• Build-to-rent developments and government housing investments remain exempt
• Commercial property, shares, and other asset classes are completely unaffected

Labor projects 75,000 additional homes will reach the market via these measures, with new builds remaining the most tax-advantaged residential investment path.

Superannuation Changes

• The Superannuation Guarantee (SG) rate reached 12% from 1 July 2025 under the previously legislated schedule. This is already in effect and should already be reflected in your payroll. If you need to confirm your current setup is compliant, speak with our team.
• Employers: review your payroll and employment contracts before 1 July to ensure compliance. If you need help modelling the impact, our team can run the numbers.
• SMSFs and most super funds are excluded from the new negative gearing restrictions. Existing super tax arrangements and the main residence CGT exemption remain unaffected by the CGT changes.

For employees looking to make the most of their superannuation position, understanding what salary sacrificing means for your super contributions is a good starting point. 

Trust Taxation – The Most Far-Reaching Change in 25 Years

If you are not across how a discretionary trust differs from a unit trust, hybrid trust, or testamentary trust, our guide to the types of trusts in Australia covers the full picture before you read on.

The 30% Minimum Tax Rule (From 1 July 2028)

The government has announced a proposal to apply a minimum 30% tax rate to income distributed through discretionary trusts, with the trustee liable and beneficiaries receiving a non-refundable credit to avoid double taxation. If legislated, this would significantly affect income-splitting strategies used by many family and business trusts. This measure has not yet passed into law. The final form and start date may change.

Company vs Trust – The Maths Has Changed

The company tax rate for base rate entities sits at 25%. If the proposed trust tax changes proceed as announced, the relative merits of company versus trust structures would shift for many businesses. This is worth monitoring closely. We would recommend holding off on any restructuring decisions until the legislation is confirmed, at which point our team can model the impact for your specific situation.

If the announced trust changes proceed, this is the kind of question a business structure review is designed to answer.

Rollover Relief Available (Before 1 July 2028)

The government has indicated that rollover relief would be available for eligible trusts restructuring before the proposed commencement date. As this measure has not been legislated, the details, eligibility conditions, and timing may change. We will update this article when the legislation is tabled.

Read our full guide on trust structures in Australia to understand your options.

Excluded from the 30% minimum rule: widely held trusts (including most managed investment trusts) and superannuation funds (including SMSFs).

Bendel: the High Court just overturned 16 years of ATO practice on UPEs

• On 10 June 2026, the High Court handed down its decision in Commissioner of Taxation v Bendel, ruling 5–2 that an unpaid present entitlement (UPE) owed by a trust to a corporate beneficiary is not a loan for Division 7A purposes. This directly overturns the ATO’s position that has governed trust distribution practice since 2010.
• In practical terms, this means that leaving a trust distribution unpaid to a company beneficiary no longer automatically creates a deemed dividend, removing a compliance risk that has shaped how many private groups structure their distributions for over a decade.
• However, the ATO has confirmed it will withdraw TD 2022/11 and review related guidance and has put taxpayers on notice that Subdivision EA and section 100A still apply. Subdivision EA can trigger a deemed dividend where a trust with a UPE to a company makes loans or payments to associated parties. Section 100A can apply where trust income is appointed to one beneficiary but enjoyed by another, with the consequence that the trustee is taxed at the top marginal rate.
• Bendel is a win, but not a green light to restructure without advice. The two-year window before the trust minimum tax takes effect adds further urgency to reviewing existing arrangements now.

Beyond Business: Key Social & Community Changes

Not every line in the 2026 Federal Budget is aimed at business owners – here’s a summary of the broader community impacts.

Cost of Living and Energy

• The fuel excise was cut by 26.3 cents per litre from 30 March for three months, reducing the cost of a 65-litre tank by approximately $19
• $10 billion has been committed to expand the national fuel stockpile and fund assessment of new fuel refineries to improve energy security
• The Medicare levy low-income threshold has been raised by 2.9%, with singles now exempt up to $28,011 (up from $27,222), and families up to $47,238.

While much of the Budget’s attention falls on tax and business, there are significant changes across health, disability, aged care, defence and social services that will affect many Australians.

PBS and Medicines

• $5.9 billion over five years for new and amended Pharmaceutical Benefits Scheme (PBS) listings, keeping life-saving medicines affordable
• The government says cheaper medicines reforms since 2022 have already saved Australians more than $2.6 billion.

Medicare and Public Hospitals

• $25 billion in additional Commonwealth funding for public hospitals over five years which is three times the increase under the previous agreement
• 137 Medicare Urgent Care Clinics are being made permanent, with $1.8 billion in funding. By July 2026, four in five Australians will be within a 20-minute drive of one
• Growing investment in medical research through the Medical Research Future Fund, rising to $1 billion per year by 2030–31.

Families and Social Services

• Paid Parental Leave increases to a full six months from July 2026
• The 3 Day Guarantee entitles eligible families to three days of subsidised childcare per week
• $316.1 million over five years to support employment programs and improve job seeker outcomes, as unemployment is forecast to rise to 4.5%
• $182.6 million to make the Child Support Scheme safer for women and children.

NDIS Reform

• The government is resetting the NDIS back to its original intent – supporting people with permanent and significant disability – with stricter eligibility and clearer criteria for funded supports
• Plan budgets for social and community participation will be reset, with New Framework Planning delivering more consistent outcomes from April 2027
• $2 billion committed to a new Thriving Kids program to transition children with lower-level needs to community-based services outside the NDIS
• These reforms are expected to save $37.8 billion over the next four years

Aged Care

• $3.7 billion to expand residential aged care beds and improve care quality, including $1.7 billion to incentivise construction of up to 5,000 new beds per year
• $1.4 billion over four years to improve home care affordability, including fully subsidising personal care services (showering, dressing, and personal support)
• Up to 20 new Specialist Dementia Care units and expanded Hospital to Aged Care Dementia Support programs.

Defence and National Security

• $53 billion in additional defence spending over the next decade, including the $12 billion Henderson Defence Precinct shipyard in Western Australia
• $863.8 million over four years for the nuclear-powered submarine program under AUKUS
• Almost $800 million for veterans, including $583.4 million to implement recommendations from the Royal Commission into Defence and Veteran Suicide.

But What Didn’t The Budget Touch On?

With the budget always comes long, speculative lists from armchair (and actual) experts about what it will touch on. Here’s what wasn’t in the budget…

Division 7A Reform

The rules governing loans from companies to their owners have been in need of an overhaul for years. No legislative fix was announced, though the new 30% minimum tax on discretionary trusts may indirectly reduce some of the pressure on this area.

Individual And Company Tax Residency Rules 

Reform of the residency tests for both individuals and companies has been flagged repeatedly. It didn’t make the cut this time.

CGT Rollovers And Demerger Relief 

A review of the available rollovers, including demerger rollover relief, remains outstanding, leaving gaps for businesses looking to restructure cleanly.

Small Business CGT Concessions 

With the 50% CGT discount being wound back, the small business CGT concessions become even more important for business owners. However no reform or simplification of those concessions was announced.

Section 100A And Trust Reimbursement Agreements

Further guidance or legislative clarity on the ATO’s approach to section 100A had been anticipated. Again, nothing, though the trust taxation changes may quietly reduce some of its relevance over time.

Family Trust Distribution Tax Rules 

Known deficiencies in the rules have been flagged by advisers for years. They remain unaddressed.

There’s a lot of change in this Federal Budget, and plenty of those changes will directly affect our clients. If any of the above has you feeling like you need to touch based, please do!

2026 Federal Budget Glossary

A quick reminder on what some of the above terms actually mean…

• Loss carry-back: When a business that made a profit in a previous year can offset a current-year loss against that profit to claim a tax refund.
• Bracket creep: When wage growth pushes people into higher tax brackets over time, even if their purchasing power hasn’t actually increased.
• Cost-based inflation: When prices rise because the cost of producing goods and services increases, driven by things like wages, energy, or supply chain pressures, rather than excess demand.
• Negative gearing: When the costs of owning an investment (like loan interest and maintenance) exceed the income it earns, creating a loss that can be offset against other taxable income.
• Capital gains tax: A tax on the profit made when you sell an asset (like property or shares) for more than you paid for it.
• Super guarantee: The minimum percentage of an employee’s earnings that employers are legally required to contribute to their superannuation fund.
• Discretionary trust: A legal structure where a trustee has the flexibility to decide how income and assets are distributed among beneficiaries each year.
• Widely held trust: A trust with a large number of beneficiaries or unit holders (typically managed funds or listed trusts) subject to different tax rules than discretionary trusts.
• Medicare levy: A compulsory contribution (currently 2% of taxable income) paid by most Australian taxpayers to help fund the public health system.
• PBS (Pharmaceutical Benefits Scheme): A government program that subsidises the cost of a wide range of medicines for Australians, making them more affordable at the pharmacy.
• Paid parental leave: A government-funded payment to eligible parents taking time off work following the birth or adoption of a child, designed to support families during that period.
• Franking account: A record kept by a company tracking the tax it has already paid on its profits, which can be passed on to shareholders as franking credits to avoid being taxed twice on the same income.

What Should You Do Now?

The 2026-2027 federal budget is one of the most structurally significant in recent memory for Australian business owners. Capital gains tax, trust distribution rules, and super all shift – and some of those shifts have hard deadlines.

Act now – these are already legislated and in effect

The Superannuation Guarantee rate reached 12% on 1 July 2025. If you have not already confirmed your payroll reflects this, check it immediately.

The Stage 3 income tax cuts are legislated and apply from 1 July 2026. If you run payroll, confirm your withholding tables are updated before the next pay run.

Announced in the 2026-27 Budget – not yet legislated, but officially confirmed as government policy

The $20,000 instant asset write-off is announced as permanent from 1 July 2026. If you have been holding off on eligible equipment under $20,000, this measure provides a stable planning window – though we recommend confirming the legislative status with us before committing to timing decisions.

Loss carry-back is announced as returning from 2026-27, allowing eligible companies to offset current losses against tax paid in the prior two income years. If your business made a profit last year and is facing a loss this year, speak with us about whether this applies to your situation.

The CGT reform – replacing the 50% discount with inflation-based indexation and a 30% minimum rate – is announced to apply to gains arising from 1 July 2027 onwards. If you are planning to sell a business asset, shares, or investment property, bring that conversation forward. The timing of a sale relative to 1 July 2027 could be material – but only if this measure is legislated. We will keep you updated.

Negative gearing restrictions on established residential property acquired after Budget night are announced to apply from 1 July 2027. If you are considering purchasing investment property, speak with us before proceeding.

The 30% minimum tax on discretionary trust distributions is announced to apply from 1 July 2028, with three years of rollover relief available from 1 July 2027 for businesses that restructure. If your business operates through a discretionary trust, this is worth discussing with us now on a planning basis – not to restructure immediately, but to understand your options if the measure is legislated.

One important note on all Budget measures above

Announced Budget measures reflect government policy intent. They are not law until passed by Parliament. Some measures may be amended, delayed, or not proceed. We will update this article as legislation progresses.

Future Advisory is a Melbourne-based accounting firm working with small business owners, tradies, and growing companies across Australia. Our accounting and tax services cover everything from business structure reviews to CGT planning and trust advice. If this federal budget recap has raised questions about your situation, we would love to help you work through them. 

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