Johnson Partners 2026-27 Federal Budget Summary

Replacing the 50% CGT Discount with Cost Base Indexation

From 1 July 2027, the 50% Capital Gains Tax (CGT) discount will be replaced by cost base indexation for assets held for more than 12 months, with a 30% minimum tax on net capital gains applied.

The change will apply to all CGT assets held by individuals, trusts and partnerships — including pre-CGT assets (assets acquired before 20 Sep 1985), which were previously carved out from taxation. This new regime will not apply to companies, which are excluded from the current the 50% CGT discount regime.

As a transitional measure, the change will only apply to gains arising on or after 1 July 2027.

• Capital gains arising before 1 July 2027 will still be eligible for the 50% CGT discount.

• CGT assets held longer for 12 months prior to 1 July 2027, but disposed on or after 1 July 2027, will be assessable as follows:

  • Gains accrued prior to 1 July 2027 will be assessed under the existing CGT regime;

  • Gains accrued on or after 1 July 2027 will be assessed under the new CGT regime.

• Capital gains on pre-CGT assets arising before 1 July 2027 will remain exempt from CGT. In other words, a pre-CGT asset disposed prior to 1 July 2027 will retain its CGT-exempt status.

• Capital gains accrued on pre-CGT assets on or after 1 July 2027 will be taxable. Any capital gains accrued up to 1 July 2027 will remain exempt from CGT: only the post-1 July 2027 gains will be assessable under the new regime.

There is one exemption to the new cost base indexation regime. To incentivise new housing supply, investors in new residential properties will have a choice between using:

• The 50% CGT discount, or

• Cost base indexation with minimum tax.

At this stage, the main residence will continue to be exempt  from CGT.

The small business CGT concessions will also remain unchanged.

 

Limiting Negative Gearing to New Build Residential Properties

From 1 July 2027, losses from established residential properties will only be deductible against rental income or capital gains from residential properties. If there are excess losses, these will be carried forward and able to be offset against residential property income in future years. It is not specific to the property, but the asset class.

These limitations apply to properties that are acquired from 7:30pm AEST on 12 May 2026.

Properties that were acquired prior to this time (including where contracts have been entered into, but the properties are not yet settled) will be exempt from these changes, until the property is disposed of.

The following are excluded from the changes:

• Eligible new builds, such as:

  • Newly constructed apartments bought off-the-plan

  • Residential construction on previously vacant land.

  • Newly built property occupied for less than 12 months before first being sold.

• Properties in widely-held trusts

• Properties in superannuation funds

• Build-to-rent developments

• Private investors supporting government housing programs

 

$1,000 ‘Instant’ Tax Deduction for Working Taxpayers

From 1 July 2027, Australian tax residents who derive income from work will be eligible for an ‘instant’ tax deduction of up to $1,000. They will not need to itemise and claim work-related expenses if claiming less than $1,000. The deduction is ‘instant’ in the sense that it can be instantly included in your 2028 income tax return. So, the benefit of this deduction will be received in July 2028, at the earliest.

Taxpayers incurring and claiming work-related expenses greater than $1,000 can continue to claim deductions under the current ‘actual’ method, and must retain supporting documentation to substantiate these claims.

Donations, union and professional association memberships, and other non-work-related deductions can still be claimed separately and on top of this instant tax deduction.

 

New Working Australians Tax Offset

A permanent annual tax offset of $250 will be introduced from 1 July 2027 for individuals who derive income from work, such as wages, salaries, and sole trader business income. This effectively increases the tax-free threshold by approximately $1,800 for workers.

 

Foreign Buyer Ban

The current ban on foreign purchases of established dwellings will be extended to 30 June 2029 (original period 1 April 2025 to 31 March 2027).

 

Upcoming Tax Cuts (unchanged from previous announcements)

A reminder that the revised Stage 3 tax cuts will go ahead as previously legislated. The only changes are to the second income tax bracket between $18,201 and $45,000, where the tax rate decreases from 16% to 15% for FY27, and then to 14% from FY28 onwards.

2025 & 2026 income years		2027 income year		2028 income year
Thresholds	Rates	Thresholds	Rates	Thresholds	Rates
$0 – $18,200	Tax free	$0 – $18,200	Tax free	$0 – $18,200	Tax free
$18,201 – $45,000	16%	$18,201 – $45,000	15%	$18,201 – $45,000	14%
$45,001 – $135,000	30%	$45,001 – $135,000	30%	$45,001 – $135,000	30%
$135,001 – $190,000	37%	$135,001 – $190,000	37%	$135,001 – $190,000	37%
Over $190,000	45%	Over $190,000	45%	Over $190,000	45%

 

New Minimum Tax on Discretionary Trusts

From 1 July 2028, trustees of discretionary trusts will pay a 30% minimum tax on the trust’s taxable income. Beneficiaries (other than corporate beneficiaries) will receive non-refundable credits for the tax payable.

The minimum tax will not apply to other types of trusts; including, but not limited to:

• Fixed trusts,

• Widely-held trusts,

• Complying superannuation funds,

• Special disability trusts, and

• Deceased estates.

Additionally, some types of income will be excluded from the minimum tax; including, but not limited to:

• Primary production income,

• Amounts where non-resident withholding tax applies,

• Certain income relating to vulnerable minors, and

• Income from assets in a testamentary trust in existence at 7.30pm AEST on 12 May 2026.

There will be expanded rollover relief from 1 July 2027 to 30 June 2030 so small businesses and others can restructure out of discretionary trusts into another entity type. Details of how this relief will operate in practice are yet to be announced, and we will provide further information on these arrangements once it becomes available.

 

Permanent Instant Asset Write-Off (IAWO) for Small Businesses

The $20,000 instant asset write-off for small businesses with aggregated turnover up to $10m will be made permanent from 1 July 2026. Eligible assets valued at or above the threshold may continue to be placed in the simplified depreciation pool.

The lock-out rules that prevent small businesses from re-entering the simplified depreciation regime for 5 years after they opt out, will continue to be suspended until 30 June 2027.

 

Loss Carry-Back Tax Offset for Businesses and Start-ups

For tax years commencing on or after 1 July 2026, companies with aggregated global turnover of <$1 billion will be able to carry back a tax loss, resulting in an offset against tax paid up to 2 years earlier. Only revenue losses will be eligible, and the carry-back will be limited by the company’s franking account balance.

For tax years commencing on or after 1 July 2028, start-up companies with aggregated turnover of <$10m that generate a tax loss in their first 2 years of operation will be able to generate a refundable tax offset. The offset will be limited to the value of FBT and PAYG withholding tax on wages paid in respect of Australian employees in the loss year.

 

Changes to the Electric Car Discount

From 1 April 2029, a permanent 25% discount on FBT will be available for all electric cars valued up to and including the fuel‑efficient luxury car tax threshold, implemented through a 15% rate in the FBT statutory formula (currently 20%).

The following transitional arrangements will be put in place:

• Eligible electric cars will retain the FBT discount rate that was in place when the arrangement commenced.

• Electric cars valued up to and including $75,000 that are provided before 1 April 2029 will continue to be eligible for a 100% discount on FBT.

• Electric cars valued above $75,000 and up to and including the fuel‑efficient luxury car tax threshold that are provided between 1 April 2027 and 1 April 2029 will be eligible for a 25% discount on FBT.

The existing 20% statutory rate will continue to apply to all other cars, including electric cars that cost more than the fuel‑efficient luxury car tax threshold. Reportable fringe benefits for eligible electric cars will continue to be determined as if a 20% FBT statutory formula rate or cost basis method applied.

 

Reforming the R&D Tax Incentive (RDTI)

From 1 July 2028, there will be several changes to the R&D Tax Incentive, including but not limited to the following:

• Increasing the core R&D offset rates by 4.5%

• Reducing the intensity threshold from 2% to 1.5%

• Removing eligibility of supporting R&D expenditure for the RDTI

• Increasing the turnover threshold for the highest offset rate from $20m to $50m

• Lifting the maximum RDTI expenditure threshold from $150m to $200m

 

Dynamic PAYG Instalments for SMEs

The ATO is currently piloting “dynamic” Pay As You Go instalment calculations. From 1 July 2027, small and medium businesses will be able to opt in to reporting and paying PAYG instalments on a monthly basis, and use an ATO-approved calculation embedded in accounting software to calculate and vary their instalments.

Taxpayers with a history of non-compliance will be required to report and pay PAYG instalments on a monthly basis.