The 2026-2027 Federal Budget proposes some of the most significant tax and business reforms in recent memory, with changes set to roll out progressively over a few years.

Following is a brief summary of the proposed changes, with some initial thoughts from our team. Remembering these announcements are still to go through legislative drafting and a consultation process, which will provide more detail on any eventual new laws.

Starts 1 July 2026

  • Permanent $20,000 instant asset write-off for businesses with turnover under $10 million.
  • Company loss carry-back to become permanent. Companies with turnover under $1 billion can carry tax losses back up to two income years against prior tax paid, subject to franking account limits.
    • RJC Evans & Co comment: A positive announcement for company businesses that will assist with cashflow.
  • A $1,000 instant tax deduction introduced for work-related expenses. No substantiation required below that threshold. Donations and union fees remain separately deductible.
    • RJC Evans & Co comment: Does this create an incentive for small business owners currently remunerated by trust distributions or dividends to now be on the payroll?

Starts 1 July 2027

  • The 50% CGT discount is replaced with CPI indexation of cost bases plus a 30% minimum tax on net real capital gains. Applies to individuals, trusts and partnerships. SMSFs retain their one-third CGT discount.
    • RJC Evans & Co comment: The minimum 30% will be a hit to low-income earners and young investors whose tax rate may have otherwise been less.
  • Transitional CGT rules apply from 1 July 2027. Gains accrued before that date continue under existing rules, while gains accruing after that date move to the new indexed regime. Market valuation or an ATO-approved apportionment methodology is expected to be available for determining the post-1 July 2027 taxable component.
  • Pre-CGT assets acquired before 20 September 1985 are brought into the CGT system for gains accruing from 1 July 2027 onward, with prior gains remaining exempt.
    • RJC Evans & Co comment: Formal valuations may be required as at 30 June 2027 to accurately determine the tax-exempt capital gain.
  • All four small business CGT concessions under Division 152 are retained.
    • RJC Evans & Co comment: Retained however does the removal of the 50% general discount reduce the benefit?
  • Negative gearing changes commence. Existing residential properties held before 7:30pm AEST on 12 May 2026 are grandfathered. For established residential property acquired after that time, losses can only be offset against residential property income and future residential capital gains. Unused losses to be carried forward. New builds remain exempt from the restrictions. Geared commercial property, shares and other non-residential investments are unaffected.
  • Trust restructure rollover relief introduced. A three-year window opens to allow eligible restructures from discretionary trusts into companies or fixed trusts without immediate CGT or income tax consequences. Scheduled to close on 30 June 2030.
    • RJC Evans & Co comment: Devil will be in the detail. Will there also be stamp duty relief, which is levied by State Governments?
  • Businesses may opt into monthly PAYG instalments, alongside expanded access to dynamic PAYG instalment calculations through accounting software.
  • Working Australians Tax Offset (WATO) begins. Provides an annual tax offset of up to $250 for income derived from work, including sole traders.
    • RJC Evans & Co comment: Does this create an incentive for small business owners currently remunerated by trust distributions or dividends to now be on the payroll?
  • New EVs purchased for over $75,000 but below the fuel-efficient luxury car tax threshold receive a 25% FBT discount. Those costing less than $75,000 will continue to receive the 100% discount.

Starts 1 July 2028

  • A 30% tax on discretionary trust profits, which is to be paid by the trustee. Beneficiaries to report distribution and receive a tax offset for the tax already paid on it, in their tax returns ensuring the minimum tax incurred is 30%. Trusts earning primary production income and existing testamentary trusts are proposed to be exempt.
    • RJC Evans & Co comment: Devil will be in the detail. Again, does this create an incentive for business owners currently remunerated by way of trust distributions or dividends to now be on the payroll? Should beneficiaries charge interest on amounts owed to them? What does this mean for corporate beneficiaries and franking credits?
  • Start-up loss refundability introduced. Eligible companies in their first two years, with turnover under $10 million, may convert tax losses into a refundable offset capped by PAYG withholding and FBT remitted for Australian employees.
    • RJC Evans & Co comment: A positive announcement for company businesses that will assist with cashflow.
  • R&D Tax Incentive reforms to commence, including higher offsets for core experimental R&D and an increase in the refundable turnover threshold to $50 million.

Starts 1 July 2029

  • A permanent 25% FBT discount applies to eligible EVs purchased up to the fuel-efficient LCT threshold.