2026 Federal Budget

Jim Chalmers has recently handed down his fifth federal budget and it contains some of the most significant tax changes in the past two decades. For small business owners and property investors, there are several major changes that will require a strategic review of your current tax positions.

Here is a breakdown of the key announcements and what they mean for you and your business.

$250 Workers Offset

For the 2028 financial year onwards, there will be a new $250 Workers Tax Offset, meaning employees will be entitled to a $250 tax reduction.

$1,000 Instant Deduction

A simplified deduction threshold to help streamline basic individual tax returns will be introduced for the 2027 financial year.

Instant Asset Write-Off

The continuation of the instant asset write-off remains a vital tool for small businesses looking to invest in equipment and technology. The Government has fixed the $20,000 instant asset write-off for the foreseeable future.

CGT Discount Removal

This is perhaps the most critical area for long-term planning. The budget has abolished the 50% CGT discount, which has been in place since 1999. The Government is moving back to the old inflation method so capital gains will be taxed on the inflation adjusted gain (with a minimum 30% tax rate). These CGT reforms will only apply to gains accruing after 1 July 2027. Investors who buy new builds will be able to choose either the 50 per cent CGT discount or indexation and the minimum tax when they sell the property.

Pre-1985 CGT Exemption Removal

The budget has removed the "grandfathered" status for assets held prior to 1985 is a major policy shift. If you hold older assets, a valuation and disposal strategy review is now a priority.

Negative Gearing Restrictions

Negative gearing will now be restricted to new properties only. Changes to negative gearing will only apply to residential property. Commercial property and other asset classes, such as shares, will remain subject to existing arrangements.

Discretionary Trust Tax

Starting July 2028, a flat 30% tax rate will apply to trusts. While this is a couple of years away, it changes the math for many family business structures and wealth distribution strategies.

Tax Loss Carry Back Recommencement

Recommencing on 1 July 2026, companies will be able to carry back tax losses for up to two years and claim a refund of previously paid taxes. This will business cash flow in bad years.

Loss Refundability for Small Start-up Companies

The Government will introduce loss refundability for small start-up companies.

For tax years commencing on or after 1 July 2028, start-up companies with aggregated annual turnover of less than $10 million that generate a tax loss in their first two years of operation will be able to utilise the loss to generate a refundable tax offset. The offset will be limited to the value of fringe benefits tax (FBT) and withholding tax on wages paid in respect of Australian employees in the loss year.

R&D Changes

There are some significant changes in the Research & Development space with the minimum expenditure threshold increasing from $20,000 to $50,000. Payments will no longer form part of the annual tax return but be included in the quarterly BAS statement.

NDIS Cuts

The budget outlines huge cuts to the NDIS. For businesses operating as providers within the NDIS ecosystem, a careful assessment of your current business projections will be essential.

Checklist for Small Business Owners & Investors:

1. Audit Pre-1985 Assets: Consult with your tax advisor immediately regarding the loss of CGT-free status.

2. Review Trust Structures: Start modeling the impact of the 30% tax rate effective 2028.

3. Property Strategy: Evaluate your portfolio in light of the new build only negative gearing rules and changes to CGT discounts.

4. Capital Expenditure: Identify any equipment needs that can utilize the Instant Asset Write-off before the end of the financial year.

5. Innovation Companies: Review your R&D expenditure to ensure it is inline with the updated rules.