2026 Federal Budget Update

Understand the key takeaways from the May 2026 Federal Budget and how it will affect your business.

What is the budget?

The Australian Federal Budget is prepared by the Treasurer and presented to Parliament. The budget outlines the proposed revenue and spending of the Australian Government for the upcoming financial year. The Federal Budget is also a political statement of the government’s intentions and priorities for the upcoming financial year and beyond.

The majority of government revenue comes from income & company tax, sales tax (GST), and interest and dividends. The government needs this revenue to pay for the public goods and services it provides, including education, health, defence, infrastructure, welfare, and much more.

What did the May 2026 budget deliver?

The 2026-2027 federal budget is largely focused on responding to the oil crisis in the Middle East, providing support to Aussie workers and businesses, and undertaking major tax reform. There are some significant changes affecting Aussie small businesses, some good and some requiring operational adjustments. Here are the key takeaways from the latest Budget announcement that may affect you and your business.

Instant asset write-off made permanent

The $20,000 instant asset write-off claim deduction is now permanent, going forward from 1 July 2026. This is an immediate relief for small businesses with a turnover of up to $10 million.

$1 billion interest-free loans

Due to the ongoing fuel crisis, the government is introducing $1 billion in interest-free loans to manufacturing and logistics businesses affected by rising costs. This can be accessed through the National Reconstruction Fund’s Economic Relief Program.

Loss carry back scheme reintroduced

From 2026-2027, eligible companies that make a loss in the current year can claim a refund on tax paid in the previous two financial years. This will provide much-needed relief to the cash flow of up to 85,000 businesses, predominantly small businesses.

Loss refundability for start-ups

For the years 2028-2029, small businesses and start-ups with an aggregate turnover of less than 10 million will be able to claim a refund of tax losses in their first 2 years of operation. This is up to the amount of fringe benefit tax payments and PAYG withholding made in the years of losses. The scheme will benefit up to 25,000 businesses.

Worker Relief

$1,000 instant tax deduction

Workers will be able to claim the $1000 deduction on their tax return without receipts from 2026-2027

Income tax cuts

The lowest marginal tax bracket will reduce from 16% to 15% from 1 July 2026. In July 2027, the bracket will be lowered again from 15% to 14%

$250 Working Australians Tax Offset

Working Australians Tax Offset (WATO) will be a permanent $250 offset for workers starting in the 2027-2028 FY

Tax Reform

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Negative Gearing Reform

Negative gearing has been scaled back and will only apply to new builds from 1 July 2027. However, properties held before budget night (12 May, 7.30 pm) are unaffected and can still be negatively geared. Existing properties purchased after budget night can negative gear until 30 June 2027. From 1 July 2027, existing properties purchased may be able to deduct losses, but not against wage/salary income.

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Capital Gains Tax Reform

The 50% CGT discount has been replaced by an indexed inflation-based discount, with a minimum 30% tax on capital gains from 1 July 2027. This applies to most assets. Assets purchased before budget night will retain the 50% discount only on gains realised up to 30 June 2027; any gains thereafter will be subject to the new scheme. New Builds will be able to choose between both CGT treatments to spur investment.

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Discretionary Trust Tax Reform

Discretionary trusts will be subject to a minimum 30% tax on all income from 1 July 2028. Roll-over relief will be available for three years from 2027 to help with restructuring. Many small businesses, however, should be unaffected – up to 90% – and farming will be exempt.