The 2026–27 Federal Budget was handed down on Tuesday, 12 May 2026 by Treasurer Jim Chalmers of the Albanese Government. Framed around “reform and resilience”, this year’s Budget responds to global uncertainty, rising fuel costs, housing affordability pressures and the need for longer-term tax reform.
The Budget forecasts an underlying cash deficit of $31.5 billion for 2026–27, with economic growth expected to slow to 1.75 per cent and inflation forecast to temporarily rise to around 5 per cent, largely due to global fuel and transport cost pressures.
Key priorities in this year’s Budget include:
- Significant changes to negative gearing and capital gains tax
- A new Working Australians Tax Offset
- A $1,000 instant work-related expense deduction
- Further tax cuts from 1 July 2026 and 1 July 2027
- Additional investment in housing supply, health, aged care and the PBS
- Changes to discretionary trust taxation from 1 July 2028
Below, we outline the main points relevant to individuals, families, retirees, investors and business owners. Note that many of these measures will require legislation to pass through Parliament before they become law.
Tax
Tax cuts for every taxpayer: From 1 July 2026, the 16 per cent tax rate applying to income between $18,201 and $45,000 will reduce to 15 per cent. From 1 July 2027, it will reduce further to 14 per cent. This is expected to provide tax savings of up to $268 from 1 July 2026, increasing to up to $536 per year from 1 July 2027.
Working Australians Tax Offset: From the 2027–28 income year, the Government plans to introduce a permanent $250 Working Australians Tax Offset for people earning income from work, such as wages, salaries and sole trader business income. Around 13 million workers are expected to benefit.
$1,000 instant work-related deduction: From 1 July 2026, eligible taxpayers will be able to claim a standard deduction of up to $1,000 for work-related expenses without needing receipts. Those with higher deductible expenses can still claim their actual costs under the existing rules.
Medicare Levy
Higher low-income thresholds: The Government will increase the Medicare Levy low-income thresholds by 2.9 per cent from the 2025–26 income year. This means more low-income earners, seniors, pensioners and families will remain exempt from the Medicare Levy or pay a reduced amount.
Property Investment
Negative gearing changes: From 1 July 2027, negative gearing for residential property will generally be limited to newly built homes. Established residential properties held before 7:30pm AEST on 12 May 2026 are expected to be grandfathered, meaning existing arrangements can continue until the property is sold.
For established residential properties purchased after Budget night and before 30 June 2027, losses may still be negatively geared during that period, but not from 1 July 2027. From then, losses on existing residential investment properties will generally only be deductible against residential property income, with excess losses carried forward.
Capital gains tax reform: From 1 July 2027, the 50 per cent CGT discount is proposed to be replaced by cost-base indexation, with a new minimum effective tax rate of 30 per cent applying to net capital gains. The reforms are expected to apply to gains accruing after 1 July 2027, with transitional rules for assets already owned.
For investors, this may have a meaningful impact on long-term investment planning, particularly where property, shares or other growth assets are held outside superannuation.
Trusts
Minimum tax rate for discretionary trusts: From 1 July 2028, the Government proposes to introduce a minimum 30 per cent tax rate on taxable income distributed from discretionary trusts. This measure is intended to reduce the benefit of income splitting and improve tax integrity.
Some exclusions are expected to apply, including for complying superannuation funds, charitable trusts and certain testamentary trusts. Expanded rollover relief will also be available for three years from 1 July 2027 to help eligible taxpayers restructure out of discretionary trusts.
Superannuation
No major new superannuation changes: Superannuation was not a major focus of this year’s Budget. Importantly, the proposed CGT changes are not expected to apply to superannuation funds, meaning the existing CGT discount of one-third for assets held by super funds for more than 12 months remains unchanged.
This may make superannuation an even more important structure to consider as part of long-term investment and retirement planning, subject to contribution caps, preservation rules and personal circumstances.
Housing
Increasing housing supply: The Government has announced further investment to support new housing, including funding for local infrastructure to help unlock new developments. The Budget also extends the ban on foreign buyers purchasing established homes until mid-2029.
The Government says the combined housing and tax reform measures are designed to improve affordability, support new construction and help more Australians move into home ownership.
Aged Care
More residential aged care beds: From 1 January 2027, the Government will provide incentives to support the construction of an additional 5,000 residential aged care beds each year, particularly for Australians with limited financial means.
Support at Home changes: From 1 October 2026, personal care services under the Support at Home program, such as showering, dressing and non-clinical continence management, are expected to be partially funded so eligible participants with approved services can receive this support with no out-of-pocket cost.
Healthcare
Cheaper medicines: The Government has confirmed further PBS changes, including reducing the maximum general PBS co-payment to $25 and freezing concessional co-payments at $7.70 until 2030.
Additional health funding: The Budget includes additional hospital funding and continued support for Medicare Urgent Care Clinics, aimed at improving access to care and easing pressure on emergency departments.
Social Security
Pension Supplement changes for Australians overseas: From 20 September 2026, the full rate of Pension Supplement for temporary overseas departures is proposed to extend from six weeks to 12 weeks before ceasing. For permanent departures, the Pension Supplement is expected to cease immediately.
NDIS reform: The Government has announced further reforms to the National Disability Insurance Scheme, aimed at improving sustainability, strengthening integrity and redirecting support to participants with the highest needs.
Private Health Insurance
Rebate changes for older Australians: From 1 April 2027, higher private health insurance rebate rates for people aged 65 and over are proposed to be removed, aligning rebate percentages with the rates applying to those under 65 in the same income tier.
Small Business
Permanent instant asset write-off: From 1 July 2026, the Government proposes to make the $20,000 instant asset write-off permanent for small businesses with aggregated annual turnover of less than $10 million.
Loss carry-back: From 1 July 2026, companies with annual turnover of less than $1 billion will be able to carry back eligible revenue losses and offset them against tax paid up to two years earlier, subject to their franking account balance.
Looking Ahead
This year’s Budget contains several measures that could meaningfully affect personal tax planning, investment structures, property decisions, aged care planning and retirement strategies. Some changes are immediate in effect, while others are proposed to commence over the next few years.
Given the scale of the proposed tax reforms, particularly for property investors, trust structures and capital gains, it may be worth reviewing your current arrangements before the relevant start dates.
If you have any questions about how the 2026–27 Federal Budget may affect your personal finances, investments, retirement planning or aged care decisions, please contact Priority Advisory Group to discuss your circumstances.
The material contained in this 2026–27 Federal Budget Update should be used as a guide in conjunction with professional expertise and judgement. All responsibility for the application of this update, and for the direct or indirect consequences of decisions based on it, rests with the user. Priority Advisory Group expressly disclaims all contractual, tortious or other forms of liability to any person in respect of this Budget Update and any consequences arising from its use by any person in reliance upon the whole or any part of its contents, without approaching us for specific advice. This update is not exhaustive, and Budget measures are subject to the passage of legislation.