Federal Budget 2026-2027

 

​The 2026–27 Federal Budget introduces a number of significant measures beyond migration, with direct implications for workers, small businesses, investors, property owners and business structures. In addition to tax relief and business support, the Budget also proposes structural tax reforms affecting discretionary trusts, capital gains tax and negative gearing, as well as a broader package on productivity, trade, fuel relief and housing supply. Below is a practical summary of the key non-migration measures by category.structures, productivity and cost-of-living relief. Taken together, these changes suggest a continued policy focus on economic productivity, structural reform and more targeted support across key sectors. Below is a summary of the key Budget highlights.

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1. Immigration Update: Key Changes

 

Permanent Migration Cap

The permanent migration program remains at 185,000 places, with over 70% (132,240 places) allocated to the skill stream.

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Onshore Priority

A significant focus is placed on applicants already in Australia, with 129,590 places directed toward onshore applicants, reflecting a stronger preference for applicants already holding temporary visas in Australia.

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Points Test Reform

The government is redesigning the points test to place greater emphasis on applicants who are more highly educated, more skilled, and younger, with the stated goal of boosting productivity.

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Skilled Trades Focus

The Budget allocates $85.2 million to accelerate skills assessments for trades workers, aiming to bring in up to 4,000 additional construction and electrical workers.

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Student Visa Integrity

An additional $19.8 million over four years will be used to increase scrutiny of both onshore and offshore student visa applications.

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Working Holiday Maker (WHM) Program

The ballot system for Working Holiday Makers will be expanded to better manage application numbers.

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What It May Mean for Migrants and Employers

 

​For migrants

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Onshore applicants may have a stronger advantage

Applicants already in Australia may have a better chance under a system that increasingly prioritises onshore cases.

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Offshore applicants may face more challenges

Applicants outside Australia may face stricter assessment settings and lower priority, unless they fall within high-demand skilled areas.

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More scrutiny is likely across visa categories

The Budget suggests a continued emphasis on compliance and integrity, especially in the student visa space.

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Trades and construction-related backgrounds may remain in demand

Construction and electrical trades appear to remain a priority area.

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For employers

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Employers facing labour shortages, especially in trades and construction-related industries, may continue to benefit from policies that support skilled migration in those sectors.​

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At the same time, businesses relying on overseas workers should be prepared for tighter scrutiny and more structured migration planning.​

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2. Tax relief for workers and sole traders

 

The Budget includes further tax relief for workers. From 1 July 2026, the 16% tax rate for taxable income between $18,201 and $45,000 will reduce to 15%, and from 1 July 2027 it will reduce again to 14%. In addition, from 2027–28 there will be a permanent Working Australians Tax Offset (WATO) of up to $250 per year, which also applies to sole traders. The Budget also introduces a new $1,000 instant tax deduction from 2026–27, allowing eligible workers to claim up to $1,000 of work-related deductions without keeping receipts. Official materials say 6.2 million workers are expected to benefit from the instant deduction in 2026–27, with an average tax saving of $205. Sole traders are among those who may benefit from the broader worker tax measures.

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Why it matters

For employees and sole traders, the Budget is trying to do two things at once: reduce tax and reduce compliance. 

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3. Small business and start-up support

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​​​​​​​For SMEs, one of the headline measures is that the $20,000 Instant Asset Write-Off will be made permanent from 1 July 2026 for eligible small businesses with turnover under $10 million. Official budget materials say this is intended to improve cash flow, planning and investment certainty, and save small businesses around $32 million per year in compliance costs. The Budget also provides for a permanent two-year loss carry back for companies with turnover of up to $1 billion from 1 July 2026, allowing current-year losses to be used to claim refunds of tax paid in the prior two income years. In addition, loss refundability for start-ups is to begin from 2028–29, and venture capital tax incentives are to be expanded from 1 July 2027.

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Why it matters

This is one of the more business-friendly parts of the Budget. For SMEs and start-ups, the message is that the Government is trying to improve after-tax cash flow and investment incentives, especially where businesses are still in growth mode or absorbing short-term losses.

 

4. Trusts, business structures and tax planning

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A major structural change proposed in the Budget is a 30% minimum tax on discretionary trusts from 1 July 2028. The trustee will pay the minimum tax, while non-corporate beneficiaries will receive non-refundable credits for tax already paid by the trustee. The stated policy rationale is to reduce income-splitting advantages and better align the tax paid on discretionary trust income with tax paid by ordinary wage earners. Rollover relief will be available for three years from 1 July 2027 to support restructuring out of discretionary trusts into other structures such as companies or fixed trusts. The minimum tax will not apply to fixed trusts, charitable trusts and some other excluded categories, and some income types such as primary production income are also excluded.

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Why it matters

This is likely to be highly relevant for family groups and SME owners who currently operate through discretionary trusts. In practical terms, the Budget is signalling that obtaining the tax flexibility of a trust structure may become less attractive, and some businesses may need future advice on whether to stay in a trust, adjust distributions, or restructure altogether.

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5. Property tax reform: negative gearing and CGT

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Another major Budget change is the proposed reform of negative gearing and capital gains tax (CGT). According to the uploaded explainer, from 1 July 2027 negative gearing for residential property investments will generally be limited to new builds, while losses from existing residential properties purchased after the announcement time on 12 May 2026 will generally only be deductible against other residential property income, including capital gains, with excess losses carried forward. At the same time, the current 50% CGT discount for individuals, trusts and partnerships is proposed to be replaced by cost base indexation and a 30% minimum tax on capital gains, applying to gains accruing after 1 July 2027. Existing holdings receive transitional protection, and the main residence CGT exemption remains unchanged. Also preserve special treatment for some affordable housing and small business CGT concessions.

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Why it matters

This is one of the most sensitive parts of the Budget. For property investors, business owners holding investment assets, and family groups with investment portfolios, the proposed rules could materially change future acquisition, holding and exit strategies. The Budget position is that these reforms are intended to support home ownership and reduce distortions in the tax system, but in practice they will likely require careful tax and structuring advice.

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6. Housing and property market measures beyond tax

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Beyond tax reform, the Budget also includes housing measures intended to support supply and affordability. Official budget materials say the Government is establishing a $2 billion Local Infrastructure Fund to help local governments and utilities provide essential infrastructure such as water, power, sewerage and roads, supporting up to 65,000 homes over the decade. The Government is also extending the ban on foreign investors purchasing established homes until mid-2029, continuing work on renters’ rights reform, and maintaining support through Commonwealth Rent Assistance. Additional funding is also being directed to social and remote housing measures.

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7. Productivity, red tape and trade

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The Budget places a strong emphasis on productivity reform. Official materials say the Government is using tax reform, regulatory reform and trade measures to make it easier to invest, innovate and do business. This includes better targeting the R&D Tax Incentive from 1 July 2028, with the Budget saying this is expected to unlock around $400 million per year in additional R&D by young firms. The Government also says it will reduce financial sector regulatory burden by $780 million per year, reduce duplicative data requests through financial regulators, and work with states and territories to harmonise payroll tax administration. In trade, the Budget proposes abolishing another 497 nuisance tariffs from 1 July 2026, bringing the total abolished to around 1,000, with official estimates of significant compliance cost savings for businesses.

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Why it matters

For business clients, this part of the Budget matters less because of any single headline, and more because it shows the broader policy direction: lower friction, more investment, more innovation, and more pressure on businesses to become structurally efficient.

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8. Fuel relief, enforcement and operating costs

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The Budget also responds to fuel price pressures. Official materials say the Government has delivered a $2.9 billion package that more than halves fuel excise and reduces the heavy vehicle road user charge to zero for three months from 1 April 2026, with petrol and diesel excise reduced from 52.6 cents to 20.6 cents per litre. The ATO is also streamlining access to temporary tax relief for eligible businesses until 30 June 2026, including more generous payment plans and support for varying PAYG instalments. At the same time, enforcement is being strengthened: the ACCC is to undertake weekly reporting on retail fuel prices, and maximum penalties for major breaches of competition and consumer laws are being doubled to $100 million.

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* This news is a general summary only and does not constitute legal, tax or financial advice. Specific advice should be obtained based on the client’s individual circumstances.