The Treasurer Hon. Dr Jim Chalmers MP has handed down his fifth Federal Budget, on 12 May 2026 describing it as “a hard road of reform” focused on tax changes, housing, and long‑term budget repair. The budget documents detail $833.2 billion of spending for 2026-27, delivering a projected deficit of $31.5 billion.

Below is a summary of the main measures likely to affect individuals, investors, retirees and business owners.

 

TAX CHANGES FOR WORKERS AND HOUSEHOLDS

Working Australians Tax Offset (WATO)

• New offset: A permanent $250 Working Australians Tax Offset for income earned from work (wages or sole trader income).
• Timing: Applies from 1 July 2027, first seen in 2027–28 tax returns (lodged from July 2028).
• Who benefits: Over 13 million workers are expected to receive this annual tax cut.

 

$1,000 Instant Tax Deduction for Work Expenses

From the 2026–27 income year, employees and sole traders can claim up to $1,000 of work‑related expenses without receipts.

Taxpayers with higher work expenses can still claim more than $1,000 under the usual substantiation rules, and other non‑work deductions (e.g. donations and professional memberships) remain claimable separately.

 

Medicare Levy Threshold Increases

• More low‑income Australians will be exempt from the Medicare levy.
• Thresholds rise to $28,011 for singles, $44,268 for pensioners, and $47,238 for families.

 

MAJOR PROPERTY AND INVESTMENT TAX REFORMS

This budget delivers the most significant property tax changes in two decades, aimed at “rebalancing” the system towards workers and first home buyers.

 

Capital Gains Tax (CGT)

• The current 50% CGT discount will be replaced with an inflation‑adjusted “real gain” model.
• A minimum 30% tax rate will apply to capital gains for individuals and trusts.
• Gains accrued before 1 July 2027 remain eligible for the existing discount.
• New builds exception: Investors in newly built homes may choose between the old 50% discount or the new rules.

 

Negative Gearing

From 1 July 2027:

• Negative gearing will be restricted to new builds only.
• Losses can generally only be offset against property-related income, not wages.
• Properties acquired prior to the Budget announcement at 7.30pm AEST 12 May 2026, (including contracts entered into but not yet settled) will be exempt from the changes until disposed of.

 

Trust Taxation Changes

From 1 July 2028, a minimum 30% tax rate will apply to many discretionary trust distributions and capital gains.

Exemptions include:

• Fixed trusts
• Superannuation funds
• Special disability trusts
• Deceased estates
• Primary production income exclusions
• Charitable trusts.

 

This measure aims to reduce income-splitting advantages across multiple beneficiaries.

 

SUPPORT FOR SMALL BUSINESSES

Loss Carry-back Reintroduced

Companies with an aggregated annual turnover <$1b will be able to carry losses back to offset tax paid in the prior two years generating refunds and improving cash flow when investing.

 

Instant Asset Write-off Made Permanent

The $20,000 instant asset write‑off for small businesses with turnover under $10 million becomes permanent from 1 July 2026.

 

HOUSING, INFRASTRUCTURE AND FOREIGN INVESTMENT

Housing Supply Measures

• A $2 billion infrastructure fund will support local councils to build enabling infrastructure (roads, water, power and sewerage) for up to 65,000 new homes over 10 years.
• $500 million will streamline environment approvals to accelerate construction.

 

Foreign Investment

The ban on foreign investors purchasing established homes is extended to 30 June 2029, with higher application fees.

 

HEALTH, AGED CARE AND NDIS

Aged Care

A $3.7 billion package will deliver:

• 5,000 new aged care beds per year
• More dementia care units
• Stronger regulatory oversight.

 

Savings from reducing the private health insurance rebate for over‑65s (around $3 billion) will be redirected into aged care.

 

Hospitals and Medicare

• $24.4 billion in additional public hospital funding.
• 137 Medicare Urgent Care Clinics funded over four years.

 

NDIS and Disability Supports

• NDIS growth will be constrained by $37.8 billion over four years, and 160,000 people are expected to lose NDIS support under eligibility resets.
• $2 billion for the Thriving Kids program (autism support), as part of $5b foundational supports matched by states

 

ECONOMY OUTLOOK

The budget is framed against global uncertainty, particularly the conflict in the Middle East and associated oil price volatility.

• Economic growth: Slows from 2.25% to 1.75% in 2026–27.
• Inflation: Expected to peak at 5% with a risk scenario of 7%+ if oil prices reach $200 a barrel.
• Real wages: Fall 1.75% this year, then grow by 1% annually over the next two years.
• Deficit: $28.3 billion this year (2025-2026), $31.5 billion next year (2026-2027).

 

WHAT THIS MEANS FOR YOU

• Workers receive modest but permanent tax relief.
• Property investors face significant structural changes to CGT and negative gearing.
• Trust users should prepare for higher minimum tax rates from 2028.
• Small businesses benefit from improved cash flow and investment incentives.
• Retirees see expanded aged care services but reduced private health rebates.

 

HOW REGENCY PARTNERS CAN HELP

The 2026–27 Budget introduces complex changes that may affect your tax position, investment strategy, property decisions and long‑term financial planning.

Our experienced advisers can help you:

• Understand how the CGT and negative gearing reforms may apply to your portfolio
• Review trust structures ahead of the 2028 changes
• Optimise your tax position under the new WATO and deduction rules
• Assess business investment opportunities under the updated write‑off and loss carry‑back measures
• Plan for aged care, retirement and intergenerational wealth strategies in light of the new funding landscape.

 

If you’d like tailored advice on how these measures affect you, please contact our team at Regency Partners. We’re here to help you navigate the proposed changes with clarity and confidence.

 

Disclaimer

This article is provided for general information purposes only and does not constitute accounting, taxation, legal, or financial advice. The measures referred to above are proposed only and, at the date of publication, have not been enacted and are not yet law. As such, they may be amended, delayed, or not proceed at all. The information is based on publicly available announcements and our understanding at the time of publication. As individual circumstances vary, you should not act on this information without obtaining specific professional advice tailored to your situation. Regency Partners accepts no responsibility for any loss arising from reliance on the information contained in this article.