Evidence-backed. Sourced from the 2026–27 Federal Budget papers, PwC, BDO, CPA Australia, ATO, AMP and Ashurst. General information only — not financial or tax advice. Your tax position depends on your specific circumstances. Consult a registered tax agent for personalised advice. Last updated: June 2026.
⚡ Key Takeaways
- The 2026–27 Budget cuts the lowest personal income tax rate (on income $18,201–$45,000) from 16% to 15% from 1 July 2026, and to 14% from 1 July 2027. Treasury estimates this saves most taxpayers up to $268/year from 2026–27, rising to $536/year from 2027–28. [1][2][3]
- From 1 July 2026, a new $1,000 standard work-expense deduction lets eligible employees claim without receipts. But if your actual work costs exceed $1,000 — WFH, tools, uniforms, union fees, study — you can still claim the higher proven amount under existing rules and should keep records. [5][6][1]
- From 1 July 2027, the long-standing 50% CGT discount is replaced with an inflation-based discount, and a 30% minimum tax on capital gains will apply. This is described by BDO and CPA Australia as “one of the most significant CGT reform budgets in years.” [7][8][9]
- Negative gearing on residential property will be limited to new builds only from 2027–28. Losses from existing investment properties will no longer be deductible against wage income after that date. [7][8][9]
- The Division 296 super tax — an additional 15% on earnings linked to super balances above $3 million — applies from 1 July 2025, with first ATO assessments expected in 2026–27. Effective tax rate on earnings above $3m becomes 30%. [10][2]
- A new Working Australians Tax Offset (WATO) of up to $250 per year will be introduced from 1 July 2027, targeted at low- and middle-income workers. [3][1]
2026 Budget Tax Changes Every Australian Must Know Before Lodging Their Return
By The Fine Print editorial team | Last updated: June 2026 | 11 min read | ⚠️ Not financial advice
The 2026–27 Federal Budget handed down in May 2026 is one of the more consequential tax budgets in recent memory — not just for people lodging right now, but for anyone with investments, a mortgage, a large super balance, or a job with work-related expenses. For most Australians, the immediate impact is a modest rate cut worth a few hundred dollars a year. For investors, the changes are bigger and the timeline tighter: the 50% CGT discount is gone from 1 July 2027, negative gearing on existing properties ends the same year, and Division 296 on large super balances starts this cycle. Here’s a plain-English breakdown of every change that matters for your 2025–26 return and your planning through to 2027–28.📋 What’s in This Guide
- The income tax rate cut — what it means for your 2026–27 return
- The $1,000 standard work-expense deduction
- CGT reform from 1 July 2027 — what’s actually changing
- Negative gearing: new builds only from 2027–28
- Division 296 — the super tax on balances above $3m
- Three actions to take before you lodge
- Frequently asked questions
The Income Tax Rate Cut — What It Means for Your 2026–27 Return
The 2026–27 Budget confirms a two-stage cut to the lowest personal income tax rate — the rate that applies to income between $18,201 and $45,000. The current rate (for 2025–26) is 16%. The Budget cuts it to 15% from 1 July 2026 (for your 2026–27 return), and then further to 14% from 1 July 2027 (for your 2027–28 return and beyond). [1][2][3]Rate change summary for income $18,201–$45,000:
- 2025–26 (current year you’re lodging now): 16%
- 2026–27 (from 1 July 2026): 15% — saving up to $268/year vs 2024–25 settings
- 2027–28 (from 1 July 2027): 14% — saving up to $536/year vs 2024–25 settings
💡 Timing tip: If you’re expecting a bonus, share vesting, or a significant asset sale, the timing relative to 30 June can affect which rate year it falls into. From 1 July 2026, the rate on the first $45,000 drops by 1 percentage point, which could be worth modelling for larger income events. [3][1]
The $1,000 Standard Work-Expense Deduction
From 1 July 2026, eligible individuals with employment or business income can claim a standard work-related expense deduction of up to $1,000 without receipts. The ATO’s guidance confirms this is an either/or election: you can claim the $1,000 standard amount, or you can claim your actual work-related expenses (which require substantiation under existing rules) — whichever is higher. You cannot add the standard deduction on top of your actual expenses. [5][6][1]⚠️ The trap: The standard deduction is a convenience, not automatically the best outcome. If your real work costs — WFH expenses at 70c/hour, tools, uniforms, professional memberships, union fees, self-education costs — add up to more than $1,000, defaulting to the standard amount means you’re leaving a legitimate deduction on the table. Anyone who works from home regularly, uses their own equipment, or does study for their current job should tally their actual expenses before assuming the standard deduction is the right choice for 2026–27. [6][1][5]
CGT Reform From 1 July 2027 — What’s Actually Changing
This is the change that will have the largest dollar impact on investors who hold assets outside super. From 1 July 2027, the long-standing 50% CGT discount — which has applied to assets held longer than 12 months since 1999 — is to be replaced with an inflation-based discount. At the same time, a 30% minimum tax on capital gains will apply after indexation. [7][8][9]In practice, this means future gains will generally be taxed more heavily, particularly for assets held over long periods in a high-inflation environment, where the inflation-indexed discount may be smaller than the previous 50% flat discount. BDO and CPA Australia both describe the 2026–27 Budget as “one of the most significant CGT reform budgets in years.” [8][9]Critical timeline for investors:
- 2025–26 and 2026–27: Current 50% CGT discount still applies for assets held 12+ months
- From 1 July 2027 (gains accruing after this date): Inflation-based discount replaces 50% flat discount; 30% minimum tax on gains post-indexation
- Key question for 2026–27: If you are planning to sell a major CGT asset — shares, investment property, business — the tax outcome could differ materially depending on whether the disposal falls before or after 1 July 2027
💡 Note for 2025–26 lodgement: The CGT changes do not affect your current 2025–26 return — the 50% discount still applies for all disposals in this year. But if you are holding assets with large unrealised gains and were planning to sell in 2027 or later, the timing of that sale now has material tax consequences worth modelling with a tax adviser. [7][8][1]
Negative Gearing: New Builds Only From 2027–28
From the 2027–28 income year, negative gearing deductions on residential investment property will be limited to new builds only. This means losses from existing investment properties — where rental income is less than deductible expenses — can no longer be offset against wage or other income after that point. The change is prospective: existing negatively geared properties held before the cutoff are affected from the date the rule takes effect, not grandfathered. [7][8][9]Proponents argue the policy redirects investment toward new housing supply. Critics, including some property industry groups, warn it will reduce investor participation in established rental markets and push rents higher for tenants. The debate is ongoing, but the legislative intent is clear: after 2027–28, the deductibility advantage that has underpinned property investment strategies for decades will no longer apply to existing stock. [8][9][7]⚠️ For current investment property holders: Your 2025–26 and 2026–27 returns are unaffected — you can still claim losses against income this year. But if you hold one or more negatively geared existing properties, you have roughly 12 months to model whether to retain, sell, or restructure before the restriction takes effect. This requires a conversation with both a tax adviser and a financial adviser, not a decision made at tax time. [7][9][8]
Division 296 — The Super Tax on Balances Above $3 Million
The “better targeted superannuation concessions” package was confirmed in ATO guidance and the 2026–27 Budget. From 1 July 2025 — meaning this applies to the 2025–26 year you’re lodging now — earnings attributable to the portion of a person’s total super balance above $3 million will attract an additional 15% tax. This brings the effective tax rate on earnings in that portion to 30% (the existing 15% fund-level tax plus 15% Division 296), while balances below $3 million remain taxed at 15% (or 0% in retirement phase). [10][2][1]First ATO assessments under Division 296 are expected to issue in 2026–27. The measure has attracted criticism from some industry and high-wealth groups, but the government has defended it on equity grounds, noting only a small fraction of super accounts are above the threshold. [10][2]💡 Importantly, Division 296 is assessed on unrealised gains as well as realised ones. The tax applies to the “earnings” of the above-threshold portion, which includes movements in the market value of assets inside the fund — not just income received. If your SMSF holds illiquid assets like property or unlisted shares, you may face a tax liability on paper gains before those assets are sold. This is one of the most contested design features of the measure and may require specific planning. [10][1]
✅ Three Actions to Take Before You Lodge
Action 1: Model your marginal rate and decide on the $1,000 standard deduction
For your 2025–26 return (lodging now): use a reputable tax calculator to confirm your current marginal rate and expected refund or bill. Separately, tally your actual work-related expenses for 2025–26 to decide whether to claim them (which requires substantiation) or wait and use the $1,000 standard deduction once it becomes available from 1 July 2026. Note: the $1,000 standard deduction is a 2026–27 measure — it does not apply to your current 2025–26 return. For 2026–27 planning, if your work costs consistently exceed $1,000, keep records throughout the year and plan to itemise rather than default to the standard amount. [3][1][5][6]Action 2: Review CGT and negative-gearing exposure before 1 July 2027
Map all your CGT assets — shares, investment properties, business interests — and identify which have large unrealised gains. For each, consider whether a disposal before 1 July 2027 (while the 50% CGT discount still applies) produces a materially better tax outcome than a disposal after. Do the same for any plans to buy further investment properties: after 2027–28, only new builds will attract negative gearing, which changes the economics of purchasing established rental properties significantly. This is not a tax-time calculation — it requires a planned session with a tax adviser at least several months before you would need to act. [7][8][9][1]Action 3: If your super balance is near or above $3 million, get specific Division 296 advice now
Division 296 assessments will start issuing in 2026–27 for the 2025–26 year — meaning the first tax bills under this regime are imminent. If your total super balance (including spouse accounts in some planning scenarios) is approaching or above $3 million, you need specific advice on whether to adjust contribution strategies, draw down balances, hold assets inside versus outside super, or restructure an SMSF. The interaction between Division 296 and unrealised gains on illiquid SMSF assets is a particularly complex area. Waiting until the assessment arrives removes most of your options. [10][2][1]❓ Frequently Asked Questions
What is the income tax rate change in the 2026 Budget?
The lowest rate (income $18,201–$45,000) drops from 16% to 15% from 1 July 2026, and to 14% from 1 July 2027. Worth up to $268/year from 2026–27 and $536/year from 2027–28. [1][2][3]Does the $1,000 deduction apply to my 2025–26 return?
No — it starts from 1 July 2026, so it applies from your 2026–27 return. For your current 2025–26 lodgement, normal substantiation rules apply. [5][6]Is the 50% CGT discount gone?
For gains accruing from 1 July 2027 — yes, replaced by inflation-indexed discount plus 30% minimum tax. Still applies in full for 2025–26 and 2026–27. [7][8][9]What happens to negative gearing?
Limited to new residential builds from 2027–28. Losses on existing investment properties cannot be offset against wages after that date. No change for 2025–26. [7][8][9]Who does Division 296 affect?
Anyone with total super above $3 million. Extra 15% tax on earnings attributable to the above-threshold portion, effective from 1 July 2025. First ATO assessments in 2026–27. [10][2]⚖️ The Fine Print Verdict
Most Australians will notice the rate cut — a few hundred dollars more in their pocket from 1 July 2026, and a bit more again from 2027. The $1,000 standard deduction is a useful simplification for people with modest work costs, but it’s a trap for people with real expenses above that amount who stop keeping records. The CGT and negative-gearing changes are more significant and have a hard deadline: 1 July 2027. If you hold assets with large unrealised gains, or negatively geared existing properties, you have a window that closes. The Division 296 super changes are already in effect — the first assessments are imminent for those above the $3 million threshold. Across all of these, the consistent message is the same: the people who plan ahead will pay less tax than the people who react after the fact.
👉 Rate cut: bank it. Standard deduction: tally your actual costs first. CGT and negative gearing: act before 1 July 2027. Division 296: get advice now if you’re near $3m in super.
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Plain-English breakdowns of Australian money news every week — no jargon, no spam.📚 Sources & References
- PwC Australia, “Personal tax and superannuation — 2026–27 Federal Budget,” pwc.com.au/insights/federal-budget-tax-analysis-and-insights/personal-tax-and-superannuation.html
- AMP, “2026–27 Federal Budget round-up,” amp.com.au/resources/insights-hub/2026-27-federal-budget-round-up
- Budget.gov.au, “Cost of living chapter,” budget.gov.au/content/02-cost-of-living.htm
- TDLS, “2026 Federal Budget summary,” tdls.com.au/wp-content/uploads/2026/05/2026-federal-budget-summary.pdf
- ATO, “Standard deduction for work-related expenses,” ato.gov.au/about-ato/new-legislation/in-detail/individuals/standard-deduction-for-work-related-expenses
- Vlassisco, “TaxWise News Individual Edition May 2025,” vlassisco.com.au/wp-content/uploads/2025/05/TaxWise-News-Individual-Edition-May-2025.pdf
- Wikipedia, “2026 Australian federal budget,” en.wikipedia.org/wiki/2026_Australian_federal_budget
- BDO Australia, “Federal Budget 2026,” bdo.com.au/en-au/federal-budget/2026
- CPA Australia, “Tax news 4 June 2026,” cpaaustralia.com.au/taxnews/4-june-2026
- ATO, “Better targeted superannuation concessions (Division 296),” ato.gov.au/about-ato/new-legislation/in-detail/superannuation/better-targeted-superannuation-concessions
- PwC Australia, “Tax briefings December 2025,” pwc.com.au/tax/tax-briefings/december-2025.html
- SBS, “Your guide to the major 2026 changes,” sbs.com.au/news/article/your-guide-to-the-major-2026-changes/zd5258wvu
- Ashurst, “Australia Federal Budget 2025–2026 key tax measures,” ashurst.com/en/insights/australia-federal-budget-2025-2026-key-tax-measures/
This article is general information only and does not constitute financial or tax advice. The tax changes described are based on 2026–27 Federal Budget announcements and ATO guidance current as at June 2026; confirm final legislative details with a registered tax agent before acting. The Fine Print 🇦🇺 is not affiliated with the ATO or any firm mentioned.