Federal Budget 2026: What We Know So Far (and Why the Detail Still Matters)

Last night’s Federal Budget delivered a number of proposed tax changes that many of our clients are already asking about — particularly investors, small business owners and families using trusts. 

Before we dive in, an important reminder (and we can’t stress this enough): 

👉 Budget announcements are not law. 
👉 The devil is always in the detail. 
👉 Legislation still needs to be drafted and passed by both houses of Parliament. 

This initial summary is based on Budget night announcements and information provided by our good friends at Advisers Digest. Like you, we only found out about these measures last night, and we are still learning, analysing and working through what they could mean in practice before we can provide tailored advice. 

What follows is a high‑level, plain‑English overview only. 

The key areas our clients are asking about 

Capital Gains Tax – proposed removal of the 50% discount 

Proposed start date: 1 July 2027 
(For assets acquired from this date, subject to legislation) 

One of the most significant announcements is the proposal to remove the 50% general capital gains tax (CGT) discount for individuals and trusts and replace it with the old indexation method. 

In simple terms: 

• Currently, if you hold an asset for more than 12 months, only 50% of the capital gain is included in your taxable income. 
  

• Under the proposed change, the discount would no longer apply to newly acquired assets. 
  

• Instead, the cost base of the asset would be indexed for inflation, similar to how CGT worked prior to 1999. 
  

Whether this results in more or less tax will depend on: 

• how long the asset is held 
  

• inflation over that period 
  

• your marginal tax rate 
  

At this stage, it appears this change would apply prospectively, meaning assets acquired before 1 July 2027 may be treated differently, but we need legislation to confirm exactly how this will work. 

 
Negative gearing – residential property only 

Key dates: 

• Applies to established residential properties acquired after 7:30pm (AEST) on 12 May 2026 
  

• New rules proposed to apply from 1 July 2027 
  

The Budget proposes a major change to negative gearing on residential property. 

Under the proposal: 

• Losses from residential rental properties will only be able to offset other residential rental income 
  

• These losses would no longer be able to reduce salary, business income or other investment income 
  

• Losses would instead be quarantined and carried forward to offset future residential rental profits or capital gains on residential property 
  

This change is proposed to apply to established residential properties acquired after Budget night, with the new tax treatment kicking in from 1 July 2027. 

This is a significant shift for property investors, particularly those relying on negative gearing in the early years of ownership. 

As always, key questions remain — including how this interacts with existing properties and future investment decisions — and we’ll need legislation to confirm the full impact. 

 
Taxation of trusts 

Proposed start date: 1 July 2028 

Trusts remain firmly on the Government’s radar, with proposed changes to how trust income is taxed and attributed. 

While detail is limited at this stage, the extended start date suggests more reform is coming, rather than immediate change. For families and business owners using trusts, this highlights the importance of: 

• reviewing existing structures 
  

• understanding who is being taxed and why 
  

• and considering future flexibility 
  

There is still plenty of water to go under the bridge here, and we expect further consultation and refinement before these measures commence. 

 
WATO – $250 tax offset 

Proposed start date: 1 July 2027 

The WATO (Working Australian Tax Offset) is proposed as a $250 tax offset designed to provide modest tax relief to eligible individuals. 

In plain English: 

• A tax offset reduces your tax payable, not your taxable income 
  

• The WATO would provide a flat $250 reduction in tax for eligible taxpayers 
  

• Eligibility thresholds and interaction with other offsets are still to be confirmed 
  

While $250 on its own isn’t life‑changing, it may be helpful for lower to middle income earners, particularly when combined with other measures. 

 
IAWO – $20,000 instant asset write‑off for small business 

Proposed start date: 1 July 2026 and to be permanently legislated 

The IAWO (Instant Asset Write‑Off) proposes allowing eligible small businesses to: 

• immediately deduct the cost of eligible assets 
  

• up to $20,000 per asset 
  

• rather than depreciating them over time 
  

This is designed to: 

• improve cash flow 
  

• encourage business investment 
  

• simplify compliance 
  

As always, eligibility rules, turnover thresholds and asset definitions will matter — so this is another area where detail is critical before decisions are made. 

 
$1,000 standard deduction 

Proposed start date: 1 July 2026 

The Budget proposes a $1,000 standard deduction for work‑related expenses. 

The aim is to simplify tax returns for many taxpayers by allowing a flat deduction without receipts. However: 

• it may not suit those who regularly incur higher work‑related expenses 
  

• choosing between the standard deduction and actual expenses will be an important consideration 
  

 

Electric vehicle (EV) FBT exemption – proposed changes 

Timing: To be confirmed 

The Budget also flagged proposed changes to the current electric vehicle FBT exemption. 

While details are limited, this signals that: 

• the existing exemption may be tightened or adjusted 
  

• employers and employees using EVs under salary packaging arrangements should stay alert 
  

We’ll be watching closely for how this unfolds, particularly for business owners and employers offering EV benefits. 

 
A very honest reality check 

We want to be upfront with you: 

• We only found out about these measures last night 
  

• We are still learning, modelling and analysing 
  

• Budget announcements are not advice 
  

• No one can give definitive guidance without legislation 
  

This is the beginning of the conversation — not the final word. 

 

What should you do now? 

If any of these proposed changes may affect: 

• your investments 
  

• your business 
  

• your structures 
  

• or your future plans 
  

we encourage you to book an advice meeting once more clarity is available. 

This Budget also reinforces the importance of proactive tax planning. Our current tax planning offer is an excellent opportunity to review your position and be ready to act when the rules are confirmed. 

 

We’ll continue to update you as draft legislation is released and measures move through Parliament — always translating the detail into plain English. 

This summary is based on Budget night announcements and information provided by Advisers Digest as at 13 May 2026.