Federal Budget 2026 Explained: Who Benefits, Who Pays More

Key changes affecting this group:

• $1,000 Instant Tax Deduction from 2026-27 income year — no receipts required. 6.2 million workers benefit; average tax saving $205. You can still itemise above $1,000 if your work expenses are higher.
• $250 Working Australians Tax Offset (WATO) from 2027-28 income year — automatic permanent annual offset. Raises effective tax-free threshold to $19,985 ($24,985 with LITO).
• Stage 3+ second-bracket rate falling 16% → 15% from 1 July 2026 (already legislated; not a new Budget measure).
• Medicare Levy low-income singles threshold raised to $28,011 (from $27,222), retroactive to 1 July 2025.

Key changes affecting this group:

• Medicare Levy family low-income threshold raised to $47,238 (from $45,907), retroactive to 1 July 2025.
• Family income threshold per dependant: +$4,338 per child (up from $4,216).
• Senior + pensioner family threshold raised to $61,623 (from $59,886).
• MLS family tier 1 threshold unchanged at $202,000 in 2026-27 (ATO publishes indexed value separately).
• Both spouses can claim $1,000 instant deduction independently — household saving up to $2,000 from 2026-27 if both work.

Key changes affecting this group:

• Negative gearing reform from 1 July 2027 — now law (Act 49 of 2026, assent 26 June 2026). Properties held at 7:30 PM AEST 12 May 2026 are grandfathered forever, with no per-taxpayer dwelling limit. Around 230,000 individuals/year acquire negatively geared property (1% of taxfilers).
• 50% CGT discount replaced from 1 July 2027 — now law: CPI cost base indexation + 30% minimum tax on real gains. Applies to individuals, partnerships, trusts. Companies unaffected. Main residence exemption unchanged; the four small business CGT concessions survive, and the Senate lifted the 50% active-asset reduction turnover threshold from $2m to $10m from 2027-28.
• Split treatment for assets owned at 1 July 2027 (Subdiv 112-E deemed sale): the pre-1 July 2027 gain keeps the 50% discount and is deferred until actual sale; post-1 July 2027 growth uses the new rules. The split uses market valuation at 1 July 2027 as the primary method (an apportioning method can be elected) — keep evidence of value at that date.
• New build exemption: knock-down rebuilds adding dwellings, off-the-plan apartments, vacant land construction all qualify. Subsequent purchaser loses new-build status (once-only per property). New residential dwellings are the only asset class retaining the 50% CGT discount (owner's choice vs indexation) — the proposed ministerial power to add more classes was removed in the Senate.
• Treasury modelling: house price growth ~2% lower over a couple of years; +75,000 owner-occupiers over decade.

Key changes affecting this group:

• IAWO $20,000 permanence PROPOSED from 1 July 2026 — in the Tax Reform No. 2 Bill, still before Parliament (July 2026). Would save ~$32M/yr in compliance costs across the sector.
• Loss carry-back permanent + 2yr lookback proposed from 1 July 2026 for companies with turnover up to $1 billion (not just small biz) — same bill, not yet law. 85,000 companies would benefit.
• R&D Tax Incentive reform from 1 July 2028: core R&D offset increased 25-50%, intensity threshold 1.5%, $50M turnover for higher offset, $200M expenditure cap, $50k minimum project. Awaits its own legislation.
• Venture capital incentives expanded from 1 July 2027 (ESVCLP + VCLP programs). Awaits its own legislation.
• Start-up loss refundability from 2028-29 — refund losses up to FBT + withholding tax paid on employee wages (first 2 yrs operation).
• ~1.5 million sole traders benefit from the $250 WATO from 2027-28.
• Small business CGT concessions retained — and improved: a Senate amendment lifts the 50% active-asset reduction (Subdiv 152-C) turnover threshold from $2m to $10m aggregated turnover from 2027-28. The 15-year exemption, retirement exemption and rollover keep the $2m turnover / $6m net-asset tests.
• PAYG monthly opt-in from 1 July 2027; dynamic instalments pilot expanded.

Key changes affecting this group:

• No super cap changes announced. Concessional cap stays $30k (AWOTE-indexed via ATO administrative process), non-concessional $120k, Div 293 threshold $250k.
• Div 296 (super >$3M) not modified by this Budget — already legislated to commence 1 July 2026 with +15% on earnings (30% total) for $3M–$10M balances, +25% (40% total) above $10M.
• SAPTO unchanged ($2,230 single, $1,602 couple-each, $2,040 illness-separated — ATO will publish indexed values separately).
• Welfare recipients on the hard-coded statutory list in s 119-15 (Age Pension, DSP, JobSeeker, Carer Payment and others) are EXEMPT from the 30% CGT minimum tax only in years they realise a capital gain — they do NOT keep the 50% discount; their gains still move to cost-base indexation from 1 July 2027.
• New (Senate amendment): SMSF limited recourse borrowing arrangements over real property are restricted to business real property for new borrowings from 10 August 2026; existing and refinanced arrangements are grandfathered.
• Retirees with discretionary trusts should plan ahead: 30% trust minimum tax from 1 July 2028; rollover relief 1 July 2027 – 30 June 2030 supports restructure.

Key changes affecting this group:

• No new HELP measures announced. CPI-indexed thresholds and rates continue as scheduled.
• HELP minimum repayment threshold for 2026-27 will be published by ATO administratively (typically May/June) — Budget did not modify the indexation formula.
• Voluntary repayments before 1 June 2026 still reduce 2026 indexation as usual.
• $1,000 instant deduction effectively reduces taxable income — slightly lowers HELP repayment amount (HELP is calculated on repayment income, which includes adjusted taxable income).