Australian Federal Budget 2026-27: Brisbane Small Business Guide
The Treasurer delivered his 2026-27 Federal Budget on Tuesday, 12 May 2026. There’s a lot to unpack. To make sense of it, we’ve put together a summary of what you need to know as a Brisbane SME.
Budget Overview for Brisbane Business Owners
The 2026-27 Federal Budget is a mixed bag for Brisbane business owners. While there are some really nice measures for small businesses and working Australians, there is also some significant tightening up of property investment rules, and a few measures that look good on paper but need careful analysis before you assume they apply to you.
Managing a business is challenging enough without the added stress of changing tax regulations. So, we’ve put together this plain English rundown of each Budget measure that applies to small and medium businesses operating in Brisbane, along with the key dates you need to remember.
Quick Reference - Key Changes and Timeline
| Measure | Who It Affects | When | Timing |
|---|---|---|---|
| Working Australians Tax Offset ($250) | Employees and sole traders | From 2027-28 FY | SOON |
| Negative gearing quarantining | New investment property buyers | From 1 Jul 2027 | SOON |
| CGT discount reduction (50% to 25%) | Investors in new established properties | From 1 Jul 2027 | SOON |
| EV FBT exemption wind-back begins | Novated lease holders, employers | From 1 Apr 2027 | SOON |
| Loss carry-back for companies | Companies under $1B turnover | From 1 Jul 2026 | NOW |
| $1,000 instant tax deduction | All individual taxpayers | From 2026-27 FY | NOW |
| Start-up loss refundability | Small start-ups (under $10M turnover) | From 1 Jul 2028 | LATER |
$250 Working Australians Tax Offset (WATO)
The Government is introducing a new permanent Working Australians Tax Offset worth up to $250 for working Australians. This includes anyone who earns wage or salary income, as well as the business income of sole traders who work in their own business.
Who qualifies?
To receive the full offset, you need to earn income from work and have a tax liability to apply it against. If you pay little or no tax, you will receive a reduced benefit, or none at all. The offset reduces tax owed; it does not provide a direct cash payment.
When does it kick in?
Not yet. This offset applies from the 2027-28 financial year. Most people will see it when their 2027-28 tax return is processed, generally between July and October 2028. Your employer does not change tax withholding in the meantime.
Why it matters for Brisbane business owners
If you operate as a sole trader and earn from your own labour, you are eligible. This is essentially a sweetener from the Government, which has confirmed the tax-free threshold for income earned from working will increase by just under $1,800. From 2027-28, it will be roughly $19,985, or $24,985 if you also qualify for the Low-Income Tax Offset.
ONE THING TO WATCH
If you have an outstanding tax debt or other liabilities, this offset may be used to reduce what you owe rather than appear as a refund. It is worth reviewing your position before you lodge your 2027-28 return. Note: the offset does not reduce the 2% Medicare Levy.
Negative Gearing Changes: What Property Investors Need to Know
Negative gearing has been a cornerstone of Australian property investment strategy for decades. The 2026-27 Budget confirms changes that will affect investors who own or are planning to acquire investment properties, though the impact will vary significantly depending on your current position.
What is negative gearing?
When your investment property costs you more to own than it earns in rent, it is negatively geared. Costs include interest payments, property management fees, maintenance costs, rates, depreciation and anything else the ATO lets you claim. Under the current rules, you can use the net loss made on that property to offset against your other income, including wages/salary. Therefore, reducing your overall taxable income.
What has changed?
- Existing properties are protected. If you already own a negatively geared investment property, your ability to offset those losses against your other income continues unchanged for as long as you hold that property.
- New established properties are affected. For established residential properties acquired after 7:30 pm AEST on 12 May 2026, the rules change from 1 July 2027. Losses from these properties will only be deductible against rental income or capital gain when you eventually sell the property. They cannot be used to reduce your salary or wage income.
- New builds remain fully deductible. Negative gearing deductions remain fully available for newly constructed properties.
- Grandfathering applies to contracts. Contracts entered before 7:30 pm on 12 May 2026, including those not yet settled, are covered by the grandfathering provisions.
Who Is Affected
If you own existing investment properties and have no plans to acquire more, the practical impact is limited. The change becomes relevant when you consider your next acquisition. Any established residential property purchased after 7:30 pm on 12 May 2026 will be subject to the new quarantining rules from 1 July 2027. Contracts entered into before that time, including those not yet settled, are covered by the grandfathering provisions.
The Combined Effect
For a high-income investor who has been using rental losses to reduce their taxable income, the loss of that deduction against salary income represents a real increase in annual after-tax cost. The negative gearing changes also interact directly with the CGT changes, and the combined effect on the economics of acquiring a new established investment property is material.
Note: Full details, including the precise definition of qualifying new builds, are subject to the release of draft legislation.
TALK TO YOUR ACCOUNTANT
If you are considering purchasing another investment property, the rules have changed in ways that affect both your ongoing cash flow and your future capital gains position. Please contact us before you proceed.
Changes to the Capital Gains Tax Discount
One of the most significant measures in this Budget is the replacement of the 50% CGT discount with cost base indexation for capital gains arising on or after 1 July 2027, combined with a new 30% minimum tax on net capital gains. This applies to all CGT assets, including shares, investment properties, and business assets held by individuals, trusts, and partnerships. Indexation was the method used for CGT in Australia from 1985 through to 1999; in effect, we are returning to the pre-1999 approach.
The Good News: Generous Transitional Rules
The 50% CGT discount will continue to apply to all gains arising before 1 July 2027. If you sell an asset before that date, the existing rules apply in full regardless of when you bought it. There is also a specific concession for new residential properties: investors in new builds can choose between the 50% CGT discount or cost base indexation, whichever produces the better outcome. Income support and Age Pension recipients will be exempt from the minimum tax.
What Does This Mean in Practice?
Here is an example. Suppose you purchased an asset 11 years ago for $500,000. It is worth approximately $1,000,000 today, and you plan to sell it in 2037 for $2,000,000. For the pre-2027 portion of the gain (approximately $786,000), the 50% discount applies, leaving approximately $393,000 taxable. For the post-2027 portion (approximately $714,000), indexation reduces the taxable gain to approximately $476,000. Total tax: approximately $408,000 at the 47% combined rate. Under the current rules, the tax would have been approximately $353,000, an additional cost of roughly $56,000 on this one asset.
What If You Sold Before 1 July 2027 Instead?
If you sold the same asset on 30 June 2027, the $500,000 gain produces tax of approximately $118,000. Holding the original asset and selling in 2037 produces a lower total tax outcome in this example, but it also means a larger tax bill deferred to the future rather than paid today.
Note: These examples assume an asset purchased 11 years ago for $500,000, worth $1,000,000 on 30 June 2027, and sold in 2037 for $2,000,000. All calculations assume CPI of 3% per annum and a 47% combined rate. All figures are illustrative only and subject to final legislation.
THIS ONE NEEDS A CONVERSATION
Whether to hold or sell an existing asset will be a different decision for every client, the right answer depends on your individual tax rate, your specific asset, and how long you plan to hold it.
Please contact us before making any decisions, so we can engage with you to model the numbers for your situation.
What the CGT Changes Mean for Business Owners
The shift to indexation for capital gains arising from 1 July 2027 has significant implications for business owners, particularly those operating as sole traders or through discretionary trusts. In many cases, it will fundamentally change the economics of selling, and raises urgent questions about whether the current business structure is still the right one.
The Problem with a Zero Cost Base
The most significant issue for many business owners is goodwill. When a business is built from scratch, the goodwill that develops over time has a cost base of zero. Under the current rules, the goodwill gain qualifies for the 50% CGT discount when the business is sold. Under the new rules, any growth in goodwill from 1 July 2027 onwards will only be reduced by indexation — but if the cost base is zero, there is nothing to index. Every dollar of goodwill gain accruing after 1 July 2027 will be fully taxable at up to 47% combined. In practical terms, the tax on that portion of the goodwill is effectively doubled.
Small Business CGT Concessions Still Apply, But Are Worth Less
The Small Business CGT Concessions, including the 50% active asset reduction, the retirement exemption of up to $500,000 (lifetime), and the 15-year exemption, remain available. However, where indexation produces no reduction on a zero cost base, the starting gain is larger, and the concessions are applied to a higher taxable amount. In effect, the value of those concessions is eroded.
IS YOUR BUSINESS STRUCTURE STILL RIGHT?
The Budget confirms expanded rollover relief for three years from 1 July 2027, specifically to support businesses wishing to restructure out of discretionary trusts into a company or fixed trust without triggering a capital gains tax liability at the time of transfer. This is a genuine and time-limited opportunity. While rollover relief removes the immediate tax consequences of restructuring, it does not eliminate stamp duty; however, given the potential long-term tax savings, this is often a necessary upfront cost.
Please contact us to arrange a review we can assess what your business is worth today, model the tax outcomes under different structures, and help you understand whether the rollover window from 1 July 2027 is an opportunity worth taking.
Changes to the Taxation of Trust Distributions
The 2026-27 Budget announces the introduction of a 30% minimum tax on discretionary trusts from 1 July 2028. While the headline is straightforward, the detail is complex, and it is important to be direct about what is known, what is not known, and why the gap between the two matters for anyone who operates through or benefits from a discretionary trust.
What Has Been Announced
From 1 July 2028, trustees of discretionary trusts will be required to pay a minimum tax of 30% on the taxable income of the trust. Beneficiaries other than corporate beneficiaries will receive non-refundable credits for the tax paid by the trustee, similar in concept to franking credits. If the credit exceeds a beneficiary’s actual tax liability, the excess is permanently lost and cannot be refunded.
What This Means in Practice
A family member with no other income who receives a $20,000 trust distribution would currently pay approximately $288 in tax. Under the new rules, the trust pays a minimum tax of $6,000 on that income. The beneficiary receives a non-refundable credit of $6,000 against their $288 tax liability, with $5,712 permanently lost. The breakeven point is approximately $131,600 in income. Every beneficiary earning below that level results in some portion of the trust’s tax being unrecoverable.
What We Do Not Yet Know
The Budget announcement raises far more questions than it answers. What happens to corporate beneficiaries is not yet clear and it may mean no credit at all, resulting in double taxation. The announcement lists several exclusions, including primary production income, income relating to vulnerable minors, and income from discretionary testamentary trusts existing at the time of announcement. Each exclusion will require a precise legislative definition. No assumption should be made until the legislation is released.
The Rollover Relief Window
The Budget confirms expanded rollover relief for three years from 1 July 2027, to support businesses and others wishing to restructure out of discretionary trusts. This provides a meaningful window to act before the minimum tax takes effect. Draft legislation is expected during the second half of 2026.
Note: This article is based solely on the Budget announcement of 12 May 2026. No legislation has been released. All details are subject to change and no planning decisions should be made on the basis of this announcement alone.
SOMETHING TO CONSIDER
We cannot provide definitive advice on this measure yet, as the legislation does not exist, but early engagement will maximise your options when it does.
Changes to the Fringe Benefits Tax Exemption for Electric Vehicles
Since 2022, battery electric vehicles provided through novated lease or salary packaging have been fully exempt from Fringe Benefits Tax (FBT), making them significantly more cost-effective than equivalent petrol or diesel vehicles. That exemption is now being wound back.
The phase-out timeline
- Until 31 March 2027, the full FBT exemption remains for all eligible EVs.
- From 1 April 2027, the full exemption applies only to EVs priced at $75,000 or less. EVs above $75,000 but below the Luxury Car Tax threshold attract a reduced 25% FBT discount only.
- From 1 April 2029: The 25% discount applies to all EVs below the Luxury Car Tax threshold, regardless of price.
What does this mean for existing arrangements?
This is where it gets complicated. The Budget states that eligible electric cars will retain the FBT discount rate that was in place when the arrangement began. However, the word ‘eligible’ is critical. Reading the Budget papers, it appears that ‘eligible’ refers to eligibility under the new rules, meaning only EVs priced at $75,000 or less retain the full 100% exemption beyond 1 April 2027.
If your current EV is priced above $75,000, you will likely lose the full exemption on 1 April 2027 regardless of when you entered the arrangement. This is a materially different outcome from what many people may be expecting.
A Further Complication
The Budget papers do not define what ‘commenced’ means for grandfathering purposes. When plug-in hybrid vehicles were removed from the exemption, grandfathering required not just that a lease existed, but that there was a financially binding ongoing commitment. Optional lease extensions did not qualify. It is possible that a similar test will apply here. No assumption should be made that an existing arrangement is automatically protected until the legislation is released.
TALK TO ACCTIVATE BUSINESSS ACCOUNTANTS
If you currently have an EV under a novated lease or are thinking about entering one, the rules are changing in ways that could significantly affect your after-tax cost.
Please contact us before making any changes to your arrangement or committing to a new lease so we can walk through the numbers with you.
Loss Carry-Back and Start-Up Incentives for Companies
Two measures here are genuinely good news for company clients, one of which takes effect almost immediately.
Tax Loss carry-back for companies
Starting 1 July 2026, companies with an aggregated annual turnover of less than $1 billion will be able to carry back a tax loss and use it to offset against tax paid in either of the two preceding income years.
Translation: if your company paid income tax in either 2024-25 or 2025-26 and makes a loss in 2026-27 (financial year starting 1 July) or subsequent years, you can claim a refund of tax paid in those previous years. The carry-back applies to revenue losses only, not capital losses, and is limited by your company’s franking account balance. This will be hugely beneficial for companies that made profits in prior years but are now experiencing a downturn.
Loss refundability for start-ups (from 1 July 2028)
From 1 July 2028, small start-up companies with annual turnover of less than $10 million that generate a tax loss in their first two years of operation will be able to convert that loss into a refundable tax offset. This means the ATO will pay out the offset as a cash refund even where no tax has previously been paid. The offset is capped at the value of FBT and withholding tax on wages paid to Australian employees in the loss year.
Expanded venture capital incentives (from 1 July 2027)
Standard venture capital limited partnerships cap lifted from $250 million to $480 million; early-stage funds lifted from $50 million to $80 million. Applies to new and existing funds
Note: the separate Eligible Venture Capital Investor program has been closed to new applications from Budget night, 12 May 2026.
DO NOT WAIT ON THIS ONE
If your company has paid tax in recent years and is now experiencing or expecting a loss, please contact us as a matter of priority. A cash refund may be available sooner than you think.
The $1,000 Instant Tax Deduction
Individual taxpayers will be able to claim $1,000 worth of work-related expenses as a tax deduction from the 2026-27 financial year without needing to keep receipts.
How it works
Say goodbye to keeping dozens of individual work-related receipts. You’ll be able to claim up to $1,000 of work expenses without substantiation. Instead of keeping every grocery receipt where you bought work-related supplies, you can claim $1,000 as a ‘flat rate deduction’. If your total expenses are more than $1,000, you’ll be eligible to claim the full amount, but you’ll need to keep your receipts.
Who benefits most?
- Employees with moderate work-related expenses who find record-keeping a burden
- Sole traders with regular smaller purchases
- Tradies with job-related costs that have previously gone unclaimed due to missing receipts
STILL WORTH KEEPING RECORDS IF YOUR EXPENSES EXCEED $1000
The $1,000 is a floor for convenience, not a cap on what you can claim. If you spend more than $1,000 on genuine work-related items, keep the receipts and claim the full amount.
What to Do Now
There is a lot to absorb here. The good news is that many of these changes are not immediate, which means there is time to plan. But ‘time to plan’ is not the same as ‘time to wait.’ A few things are worth acting on sooner rather than later.
If you own investment properties
- If you own investment properties, reach out and we can model how the proposed changes will impact your current situation.
- Understand whether any properties you are considering purchasing will fall under the new negative gearing rules
- Review contracts currently in progress to confirm their grandfathering status
If you have an EV through novated lease
- Check the value of your EV against the $75,000 threshold
- Do not make changes to your arrangement or commit to a new lease until the legislation is released
- Talk to us before 1 April 2027 so we can walk through the numbers together
If your company has paid tax and is now in a loss position
- Contact us as a priority. The loss carry-back applies from 1 July 2026 and a cash refund may be available sooner than you think.
If you are a sole trader or employee
- The $1,000 instant deduction applies this financial year, so make sure you are claiming it in your 2026-27 return
- The Working Australians Tax Offset does not apply until 2027-28, but it is worth understanding how it will interact with any outstanding tax debt
Australian Federal Budget 2026-27: Frequently Asked Questions
Reflects 2026–27 Federal Budget measures announced 12 May 2026.
What is the Working Australians Tax Offset and when does it start?
The Working Australians Tax Offset (WATO) is a new permanent tax offset worth up to $250, introduced in the 2026–27 Federal Budget. It applies to employees and sole traders who earn income from work and have a tax liability to offset it against. The offset does not apply until the 2027–28 financial year; most Australians will first see it when their 2027–28 tax return is processed, generally between July and October 2028. Importantly, it does not reduce the 2% Medicare Levy, and if you have an outstanding ATO debt, the offset may be applied to reduce that debt rather than appear as a refund.
What changed with negative gearing in the 2026–27 Budget, and does it affect me?
The 2026–27 Federal Budget introduced a quarantining rule for losses on newly acquired established residential properties. For established properties purchased after 7:30pm AEST on 12 May 2026, rental losses can no longer be offset against salary or wage income from 1 July 2027, they can only be deducted against rental income or capital gains from residential properties. If you already own investment property, your existing arrangements are fully grandfathered and continue unchanged. The change only becomes relevant when you consider your next acquisition of an established property.
Are newly constructed properties exempt from the negative gearing changes?
Yes. Newly constructed properties are fully exempt from the quarantining rules introduced in the 2026–27 Budget and retain unrestricted negative gearing deductions regardless of when they are acquired. This creates a significant after-tax difference between buying a new build versus an established property after 12 May 2026.
What is changing with the capital gains tax discount for property investors?
The 2026–27 Budget replaces the 50% CGT discount with cost base indexation for capital gains arising on or after 1 July 2027, combined with a new 30% minimum tax on net capital gains. This applies to all CGT assets including shares, investment properties, and business assets held by individuals, trusts, and partnerships. The 50% CGT discount will continue to apply to all gains arising before 1 July 2027. If you sell an asset before that date, the existing rules apply in full regardless of when you bought it.
What is changing with the electric vehicle FBT exemption?
The full FBT exemption for battery electric vehicles provided through novated lease or salary packaging is being wound back in two stages. From 1 April 2027, the full exemption applies only to EVs priced at $75,000 or less; EVs above that price (but below the Luxury Car Tax threshold) attract only a 25% FBT discount. From 1 April 2029, the 25% discount applies to all EVs below the LCT threshold regardless of price. If your current EV is priced above $75,000, you should not assume your existing arrangement is grandfathered, the legislation has not yet been released, and this matters significantly before committing to any new or amended novated lease.
Can my company claim a tax refund if it makes a loss in 2026–27?
Yes, from 1 July 2026. Companies with aggregated annual global turnover of less than $1 billion can carry back a revenue tax loss and offset it against tax paid in either of the two preceding income years; meaning tax paid in 2024–25 or 2025–26 may be recoverable as a cash refund if a loss is made in 2026–27 or later. The carry-back is limited to revenue losses (not capital losses) and is capped by the company’s franking account balance. If your company paid tax in recent years and is now in a loss position or heading that way, this is worth acting on, as soon as possible.
What is the $1,000 instant tax deduction and who can claim it?
From the 2026–27 financial year, all individual taxpayers (employees and sole traders) can claim up to $1,000 in work-related expenses without keeping receipts or substantiating individual items. This applies to your tax return for the year ending 30 June 2027, which you can lodge from 1 July 2027. If your actual work-related expenses exceed $1,000, you should keep receipts and claim the full amount instead, as the $1,000 is a convenience floor, not a cap. Tradies, remote workers, and anyone with regular unreceipted work purchases benefit most from this change.
What should I do right now based on the Australian Federal Budget changes?
The most time-sensitive actions depend on your situation:
- Property investors – if you are considering purchasing an established residential property, contact us before you proceed. The combined impact of quarantined negative gearing losses and the shift to cost base indexation and the new 30% minimum tax on capital gains needs to be modelled against your specific income and portfolio.
- Discount needs to be modelled against your income and portfolio to provide you with all the information to buy.
- EV novated lease holders – check whether your EV is priced above or below $75,000 and do not make changes to your arrangement until the legislation is released.
- Company directors – if your company paid tax in 2024–25 or 2025–26 and is now experiencing a loss, the loss carry-back applies from 1 July 2026 and a refund may be available sooner than you expect.
- Employees and sole traders – claim the $1,000 instant deduction in your 2026–27 return and note the Working Australians Tax Offset does not apply until 2027–28.
Elle Green, CA
Elle Green is a Chartered Accountant (CAANZ) and Co-Founder of Acctivate Business Accountants, with over a decade of experience supporting small businesses across taxation and cash flow management. Holding a Bachelor of Commerce and a Xero Advisor certification, Elle is known for translating complex financial concepts into clear, practical guidance for business owners.
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