FEDERAL BUDGET 2026–27

2026 Federal Budget: What It Means for Small Business & Property Investors

Big night in Canberra. Here’s what you actually need to know — without the noise.

Well, Jim Chalmers wasn’t kidding when he called this one ambitious. Last night’s budget is the most significant structural tax reform we’ve seen in over 25 years — with real changes to negative gearing, capital gains tax, and how family trusts are taxed. There’s also some genuinely good news for small business owners buried in there.

We’ve been through the official budget papers so you don’t have to. Here’s what matters for you.

PROPERTY INVESTORS

Negative Gearing & Capital Gains Tax Changes — What Property Investors Need to Know

Let’s be straight with you: the protections for existing investors are real — but they work differently for negative gearing versus CGT, and it’s easy to draw the wrong conclusion if you’re reading quickly.

We’ve laid it out scenario by scenario below so you know exactly where you stand.

Negative Gearing — Four Buckets, Four Different Outcomes

From 1 July 2027, your outcome depends on when you bought and what type of property it is.

The Budget Papers also confirm an important definition: a “new build” means vacant-land construction, off-the-plan purchases, or knock-down rebuilds that add dwellings. A subsequent investor purchase of a previously new build loses that new-build status.

✅ BUCKET 1

Properties You Already Owned at Budget Night

You’re fully protected.

The Budget papers are unambiguous: “Existing arrangements will remain unchanged for all properties held before Budget night.”

Full negative gearing continues — losses offset against all income including wages.

Nothing changes. No end date.

✅ BUCKET 2

New Builds Bought After Budget Night

Buy a newly constructed property after Budget night and you keep full negative gearing — losses still deductible against wages and all other income, just like today.

The Government deliberately preserved this to encourage new housing supply.

⚠️ BUCKET 3

Established Property Bought After Budget Night to 30 June 2027 — Transitional

If you purchase an established property after Budget night but before 1 July 2027, there’s a transitional period. Full negative gearing continues as normal until 30 June 2027. From 1 July 2027, losses can only offset residential property income — not wages.

Worth knowing if you’re mid-way through a purchase right now.

⚠️ BUCKET 4

Established Property Bought From 1 July 2027

From 1 July 2027, losses on established properties can only be offset against residential property income and carried forward — not deducted against wages or other income.

If negative gearing against your salary was part of your investment strategy, established property no longer delivers that from this date.

The Bottom Line on Negative Gearing

Property type and timing now matter as much as location or price. A new build after Budget night keeps all the tax benefits. An established property purchased after Budget night through to June 2027 has a transitional period before restrictions kick in. An established property from July 2027 has the full restriction from day one.

That’s a conversation worth having with us before you sign anything.

Capital Gains Tax — This One’s More Nuanced Than It Looks

Here’s where it’s easy to draw the wrong conclusion. The CGT changes aren’t property-based — they’re gain-based. What that means: it’s not about when you bought the property, it’s about when the gain arises — i.e. when you sell.

And the treatment differs depending on what you own.

Four scenarios:

✅ CGT SCENARIO 1

Any Property — Sell Before 1 July 2027

The existing 50% CGT discount applies in full — same as always.

If you’ve been thinking about selling and the numbers work, settling before July 2027 locks in the current treatment no matter what type of property you hold or when you bought it.

✅ CGT SCENARIO 2

New Build Bought After Budget Night — Sell After 1 July 2027

Investors in new builds get a choice when they eventually sell. The official Budget papers confirm you can pick the 50% CGT discount or the new indexation + 30% minimum tax rules — whichever works better for you at the time.

That flexibility has real value.

⚠️ CGT SCENARIO 3

Established Property Bought After Budget Night — Sell After 1 July 2027

No choice here. Gains arising after 1 July 2027 are subject to the new rules only — cost base indexation plus a 30% minimum tax on net capital gains.

The 50% discount doesn’t apply.

⚠️ CGT SCENARIO 4

Properties You Owned at Budget Night — Sell After 1 July 2027

This is the one that’s catching people off guard. Your negative gearing is grandfathered — but your CGT isn’t.

The Budget Papers confirm a split treatment:

• The gain that accrued before 1 July 2027 still attracts the 50% discount
• The gain that arises from 1 July 2027 onward is subject to the new rules

Two valuation methods will apply — actual valuation or an ATO apportionment formula.

The timing of any future sale now genuinely matters.

⚠️ The Key Takeaway on CGT

The 50% CGT discount isn’t gone — but it’s being significantly narrowed.

After 1 July 2027, it’s only available for gains that arose before that date, or as an investor’s choice on new builds.

If you’re holding investment property and have any thought of selling in the next couple of years, let’s run the numbers together before you make a move.

The timing could make a real difference.

Special Note — Pre-1985 Properties

If you’re holding a property acquired before 20 September 1985, read this carefully. The pre-CGT exemption is only partially preserved after 1 July 2027.

Sell before 1 July 2027

→ the entire gain remains CGT-exempt. Full pre-CGT treatment, no change.

Sell after 1 July 2027

→ split treatment applies.

The gain accrued up to 30 June 2027 remains exempt. But any gain arising from 1 July 2027 onward is subject to the new rules: cost base indexation plus the 30% minimum tax. Two valuation methods apply — actual valuation at 1 July 2027 or the ATO apportionment formula. In plain terms: the pre-CGT exemption on future gains effectively ends on 1 July 2027.

For long-held family properties where retirement or estate planning is on the horizon, this is significant. Call us — the window to lock in full CGT-free treatment is now less than 14 months away.

Your home is untouched. The CGT main residence exemption isn’t changing, and super fund tax arrangements remain as they are.

SMALL BUSINESS & SMES

2026 Federal Budget Small Business Measures: Instant Asset Write-Off, Loss Carry-Back & More

Amidst all the property talk, there’s actually some solid wins for small business in this budget. Here’s the rundown.

Income Tax Rate Cuts — For Every Taxpayer

From 1 July 2026, the 16% marginal tax rate on income between $18,201 and $45,000 drops to 15% — a saving of up to $268 per year. From 1 July 2027 it drops again to 14%, lifting the annual saving to up to $536.

Every single one of your employees benefits automatically.

$20,000 Instant Asset Write-Off — Finally Permanent

If your business turns over under $10 million, you can immediately deduct eligible assets costing less than $20,000 — locked in for good from 1 July 2026. No more annual lobbying, no more uncertainty.

Plan your asset purchases with confidence.

Loss Carry-Back — Cash Back for Tough Years

From 2026–27, eligible companies that make a loss can claim a refund against tax paid in the prior two years. Had a rough year after a profitable one? This could put real cash back in your account. Up to 85,000 businesses are expected to benefit.

Note: available to companies with turnover up to $1 billion — broader than many realise.

Start-Up Loss Refundability

From 2028–29, new companies in their first two years can get a refund on tax losses — up to the value of FBT and employee withholding tax. Up to 25,000 young companies per year will benefit.

If you’re thinking about starting something new, this is meaningful early-stage support.

$1,000 Instant Deduction for Workers

From the 2026–27 tax year, employees can claim up to $1,000 in work-related deductions without keeping receipts. 6.2 million Australians benefit — average saving of $205. Expect this one to come up a lot at tax time.

(Taxpayers with expenses above $1,000 can still claim more with substantiation.)

Working Australians Tax Offset — $250 a Year

A new permanent $250 tax offset for every working Australian, kicking in from the 2027–28 income year. Good for your staff’s hip pocket, and a useful talking point in recruiting conversations.

EV Fringe Benefits Tax — Grandfathering Confirmed, But Act Before April 2029

The full FBT exemption on EVs is being phased down — but existing arrangements are fully protected, and there’s still a planning window for new leases.

Here’s the full picture;

Existing EV Arrangements — Fully Grandfathered

Confirmed in the official ministerial joint release and Budget Papers: “Existing leases won’t be impacted by the changes.”

Any EV already on a salary-packaging or novated lease arrangement retains the FBT discount rate that applied when the arrangement started — for the entire life of that arrangement.

If you’re already in an EV lease, nothing changes for you.

✅ PHASE 1 — NOW TO 31 MARCH 2027

Full Exemption for All Eligible EVs

No change yet. All eligible BEVs under the LCT threshold ($91,387 for 2026–27) retain the full 100% FBT exemption. New arrangements entered now lock in this rate for the life of the lease — even if the lease runs past April 2029.

⚠️ PHASE 2 — 1 APRIL 2027 TO 31 MARCH 2029

Full Exemption Limited to EVs Under $75,000

Full FBT exemption (0% rate) limited to EVs at $75,000 or below. EVs priced $75,000–$91,387 move to a 25% discount — but for the first time gain access to a partial discount. New arrangements on sub-$75k EVs entered before 1 April 2029 still lock in the full exemption for the lease term.

⚠️ PHASE 3 — FROM 1 APRIL 2029

Full Exemption Ends — 25% Discount Only

From 1 April 2029, the full FBT exemption ceases for all new arrangements. All eligible EVs under the LCT threshold receive a permanent 25% FBT discount only. Existing grandfathered arrangements remain protected at their commencement rate.

⚠️ PHEVS — ALREADY CHANGED

FBT Exemption Already Ceased for New PHEVs

The FBT exemption for plug-in hybrids (PHEVs) ceased for new arrangements from 1 April 2025. If you have a grandfathered PHEV arrangement, document it carefully — refinancing, extending or materially changing the lease voids the grandfathering. Call us if you’re unsure.

The Planning Opportunity — Window Open Until 1 April 2029

Locking in a new arrangement before 1 April 2029 on an EV under $75,000 preserves the full 100% FBT exemption for the entire lease term — even if the lease runs well beyond 2029. A 4-year lease on a $65,000 EV entered today retains the 0% rate through to 2030 and beyond.

For EVs over $75,000 (up to $91,387), it’s worth waiting until 1 April 2027 — that’s when the 25% discount becomes available on higher-priced models for the first time.

Note: There is some ambiguity in the Budget Papers around new EVs acquired up to 31 March 2027. The best interpretation is no changes apply for the 2026–27 FBT year, but we’d recommend waiting for further legislative detail before finalising arrangements in that range.

Fuel Excise — Short-Term Relief Worth Noting

Petrol and diesel excise has been cut from 52.6 to 20.6 cents per litre — a reduction of 32 cents per litre — for three months from 1 April 2026. If you’re running a fleet or have high transport costs, factor the end date into your cash flow planning.

BUSINESS STRUCTURES & TRUSTS

Discretionary Trust Tax Changes 2028: What Family & Business Trusts Need to Know

If you run your business or investments through a family discretionary trust, pay attention here. From 1 July 2028, trust distributions will be subject to a minimum 30% tax rate, paid by the trustee.

We know — 2028 feels like a long way away. It isn’t. This is the kind of change that needs 12–18 months of planning to navigate well, and the Government has actually given you a meaningful runway to work with if you start now.

⚠️ Who This Affects — and Who’s Exempt

Discretionary (family) trusts commonly used to distribute income to lower-tax-rate beneficiaries are in scope.

The Budget Papers confirm the following exemptions:

Exempt trust types:

• Fixed trusts
• Widely-held trusts (most managed investment trusts)
• Complying super funds
• Special disability trusts
• Deceased estates
• Charitable trusts

Exempt income types:

• Primary production income
• Income to vulnerable minors
• Non-resident withholding amounts
• Income from testamentary trusts existing at announcement

Good news for farming and rural clients.

Important — the anti-bucket-company rule:

If your trust distributes to a corporate beneficiary (a “bucket company”), that company will NOT receive non-refundable credits for tax paid by the trustee. This removes a common planning strategy. Individual beneficiaries do receive non-refundable credits.

✅ There’s a Restructuring Window — But Use It

Three years of rollover relief from 1 July 2027 (until 30 June 2030), covering both income tax and CGT, to allow businesses to restructure without penalty. The Australian Small Business and Family Enterprise Ombudsman will also provide support from 1 January 2027.

Genuine concession — but it only helps if you plan ahead.

KEY DATES TO KNOW

Timeline of Budget Changes

From 1 July 2026

• Income tax rate cut — 16% rate on $18,201–$45,000 drops to 15%, saving up to $268 per taxpayer.
• $20,000 instant asset write-off permanent for businesses under $10m turnover.
• $1,000 instant work-related deduction (no receipts) for 2026–27 tax year.
• Loss carry-back commences - refunds on tax paid in prior two years.

Budget Night (12 May 2026) to 30 June 2027

• Transitional negative gearing period for established properties purchased after Budget night. Full negative gearing continues during this window — restrictions apply from 1 July 2027.

From 1 July 2027

• Income tax rate cut again — 15% rate drops to 14%, saving up to $536 per year.
• Negative gearing restricted for established properties purchased after Budget night.
• CGT discount replaced by indexation + 30% minimum tax on gains from this date (new builds can choose either treatment).
• WATO $250 offset commences for all working Australians.
• Trust restructure rollover relief window opens — three years until 30 June 2030.

From 1 April 2027

• EV FBT exemption starts transitioning — full exemption limited to EVs under $75,000. EVs over $75,000 move to 25% discount.

From 1 July 2028

• Discretionary trust 30% minimum tax commences. Three-year rollover window expires 30 June 2030. Don’t be caught unprepared.

From 2028–29

• Start-up loss refundability commences — companies in first two years can claim refunds on losses up to the value of FBT and withholding tax paid. Up to 25,000 new companies per year.

From 1 April 2029

• Full EV FBT exemption ends — all eligible EVs move to the permanent 25% discount only.

OUR TAKE

What Should You Do Now?

Here’s the honest summary: this is a budget with a generous lead time on most of its biggest changes. That’s not an invitation to sit on your hands — it’s an opportunity to plan properly rather than react in a panic when the deadlines arrive.

The clients who come out ahead from budgets like this aren’t the ones who read the most articles last night. They’re the ones who have a conversation with their accountant in the next few weeks and work out exactly what these changes mean for their specific situation.

Where to Focus First

Property investors

Existing holdings? Your negative gearing is safe. But if you’re planning future purchases, new build vs established is now a genuinely different tax decision. And if you’ve been thinking about selling, let’s talk about CGT timing before 1 July 2027.

Pre-1985 property holders

Urgent. The pre-CGT exemption on future gains ends 1 July 2027. If a sale — or estate planning — is anywhere on your horizon, the window to lock in full CGT-free treatment is now less than 14 months away. Call us.

Trust holders

Get a review on the calendar. The 30% minimum tax from 2028 could meaningfully change your tax position, and the three-year restructure window from July 2027 is valuable — but only if you use it with enough lead time.

SME owners

The permanent write-off gives you certainty. If asset investment has been on the backburner, now’s a sensible time to revisit. Also worth checking: does loss carry-back mean a refund is on the table for your business?

EV arrangements

Already in an EV lease? You’re grandfathered — your rate is locked in for the life of the arrangement, nothing changes.

Considering a new EV through salary packaging?

• EV under $75,000, new arrangement before 1 April 2029 → locks in the full 100% FBT exemption for the lease term, even if the lease runs past 2029.
• EV $75,000–$91,387, new arrangement from 1 April 2027 → gains access to a 25% FBT discount for the first time.
• PHEVs — if you have an existing arrangement, document it carefully and don’t alter the lease terms without speaking to us first.

Everyone

The $1,000 deduction for 2026–27 is a freebie — but if your actual expenses are higher, keep your receipts. More is still more.

COMMON QUESTIONS

Frequently Asked Questions — 2026 Federal Budget

A few questions we’re already fielding since last night. If yours isn’t here, just give us a call.

Does the 2026 budget affect my existing investment properties?

Negative gearing: No impact at all. Properties held before Budget night are fully grandfathered. Your existing arrangements don’t change.

CGT: Partially. The new CGT rules apply to gains arising on or after 1 July 2027 — not based on when you bought. Timing of any future sale is now a real planning consideration.

When does negative gearing change, and what exactly changes?

1. You already owned it at Budget night (12 May 2026) → nothing changes. Full negative gearing, no end date.
2. You buy a new build after Budget night → full negative gearing continues. Note: “new build” means vacant-land construction, off-the-plan or knock-down rebuilds. A subsequent investor purchase of a previously new build loses that status.
3. You buy established property after Budget night but before 1 July 2027 → transitional. Full negative gearing until 30 June 2027, then restricted to property income only.
4. You buy established property from 1 July 2027 → full restriction from day one. Losses only offset residential property income, carried forward. Cannot deduct against wages.

What happens to the 50% CGT discount?

1. Any property, gain before 1 July 2027 → 50% discount in full. No change.
2. New build bought after Budget night, gain after 1 July 2027 → your choice — 50% discount OR new indexation + 30% minimum tax.
3. Established property bought after Budget night, gain after 1 July 2027 → new rules only. No 50% discount.
4. Property you owned at Budget night, gain after 1 July 2027 → split treatment. Pre-1 July 2027 gain → 50% discount. Post-1 July 2027 gain → new rules.

I own a property bought before 1985 — am I still CGT exempt?

Sell before 1 July 2027 → fully exempt. Entire gain is CGT-free. No change.

Sell after 1 July 2027 → split treatment. Gain accrued to 30 June 2027 remains exempt. Gain from 1 July 2027 onward is subject to the new rules. Actual valuation or ATO apportionment formula determines the split.

If you’re holding a long-owned family property and retirement or estate planning is on the horizon, this is a significant planning consideration. Call us.

Is the $20,000 instant asset write-off actually permanent this time?

Yes — and we mean it this time. Confirmed in the official Budget papers as a permanent measure from 1 July 2026 for businesses with turnover under $10 million. No more annual renewals. Plan with certainty.

My business uses a family trust. What do I need to do?

First thing — don’t panic, you have time. But do start planning. From 1 July 2028, discretionary trust distributions face a minimum 30% tax at trustee level. Three years of rollover relief from July 2027 to restructure if needed. Give us a call and we’ll work out what the impact looks like for your specific trust.

What is loss carry-back and could it help my business?

From 2026–27, if your company makes a loss this year, you can apply it against tax paid in the prior two years and get a refund. Available to companies with turnover up to $1 billion. Up to 85,000 businesses expected to benefit. Definitely worth checking at tax time.

I already have an EV on a novated lease — am I affected by the FBT changes?

No — existing arrangements are fully grandfathered. The official ministerial statement confirms: “Existing leases won’t be impacted by the changes.” Your FBT discount rate is locked in for the entire life of the arrangement.

The changes only apply to new arrangements. If you’re considering a new EV through salary packaging:

• EV under $75,000, new arrangement before 1 April 2029 → locks in the full 100% FBT exemption for the lease term, even if the lease runs past 2029.
• EV $75,000–$91,387, new arrangement from 1 April 2027 → gains access to a 25% FBT discount for the first time.
• PHEVs → FBT exemption already ceased for new arrangements from 1 April 2025. If you have a grandfathered PHEV, don’t alter your lease terms without speaking to us first.

Let’s Talk Through What This Means for You

Every client’s situation is different. A budget this big deserves more than a blog — give us a call and let’s work out what it actually means for yours.

📞 02 4601 1000
🌐 hailstonco.com.au
📍 22 Hill Street, Camden NSW 2570

General Advice Disclaimer
This article has been prepared by Hailston + Co as a general information resource. It does not constitute specific tax, financial or legal advice and should not be relied upon as such. The information is based on Budget announcements as of 12 May 2026 and may be subject to legislative change. Please contact our office to discuss how these measures apply to your individual circumstances.