The 2026-27 Federal Budget contained some of the biggest changes to Australia's tax system in years.
Since the Budget was delivered on 12 May 2026, several major measures have now become law. They affect employees, property investors, small businesses, companies and SMSFs. Other announced reforms, particularly the proposed changes to discretionary trusts, are still being developed.
Here is where the major tax changes stand as at 13 September 2026.
Major changes to Capital Gains Tax from July 2027
The CGT changes are among the most significant reforms in the package.
From 1 July 2027, the existing 50% CGT discount for relevant individuals and trusts will generally be replaced by a system that adjusts the asset's cost base for inflation. The intention is that tax is calculated on the gain above inflation rather than simply reducing the nominal gain by 50%.
The legislation also introduces a minimum 30% tax treatment for certain capital gains, subject to the detailed rules and exemptions contained in the legislation. Certain recipients of government income-support payments are excluded from the minimum-tax arrangements.
Importantly, these reforms are designed to operate prospectively. Gains accrued before 1 July 2027 are protected by transitional rules, while gains arising after that date are brought into the new system.
That means taxpayers holding investment properties, shares or other significant CGT assets across 30 June 2027 should pay particular attention to their records and potentially their valuation evidence.
Negative gearing changes for residential property
Negative gearing is also changing from 1 July 2027.
The new rules primarily affect investors who acquire established residential property after 7:30 pm AEST on 12 May 2026.
For affected properties, rental losses will no longer generally be available to reduce unrelated income such as salary or wages. Instead, those losses can be applied against eligible residential property income, including relevant capital gains, with unused amounts carried forward.
Properties already held at the Budget announcement time are broadly grandfathered and can continue under the existing negative gearing rules.
Qualifying new builds are also excluded from the restriction, which again reflects the Government's policy of encouraging new housing construction.
Further legislation passed in August also protects the grandfathered treatment in certain circumstances involving inheritance or relationship breakdown, including some transfers between spouses and situations where an existing co-owner inherits an additional interest in a property.
For property investors, the date and nature of an acquisition will therefore become increasingly important.
$1,000 standard deduction for work-related expenses
One of the most immediate changes for employees applies from the 2026-27 income year.
Eligible Australian resident workers can claim a standard deduction of up to $1,000 for work-related expenses without having to itemize those expenses in the usual way.
This does not mean taxpayers receive $1,000 back from the ATO. It is a tax deduction that reduces taxable income.
Taxpayers with actual work-related deductions exceeding $1,000 can continue claiming their actual deductible expenses under the normal rules instead. Certain other deductions, including charitable donations and professional or association membership expenses, may continue to be claimed separately where eligible.
For many employees with relatively modest work expenses, this should make tax-time record keeping considerably simpler.
New $250 Working Australians Tax Offset
From the 2027-28 income year, eligible workers will also have access to the new Working Australians Tax Offset, or WATO.
The offset is worth up to $250 each year and is based broadly on eligible labour income. It is a non-refundable tax offset, meaning it can reduce tax payable but cannot create a cash refund by itself if there is no tax liability available to offset.
The Government estimates that more than 13 million Australian workers will benefit.
This is separate from the reductions to individual tax rates that commenced on 1 July 2026 and are scheduled to continue from 1 July 2027.
Special treatment for new residential builds
Investors acquiring qualifying new residential properties receive more favorable treatment.
For eligible new builds, investors may be able to choose between the existing 50% CGT discount and the new inflation-indexation arrangements when the property is eventually sold.
This is intended to encourage investment into new housing supply rather than existing housing.
SMSF residential property borrowing has been restricted
A significant superannuation change was added during the passage of the first tax reform legislation.
From 10 August 2026, a new limited recourse borrowing arrangement, or LRBA, involving real property can generally only satisfy the borrowing exception where the property is business real property.
In practical terms, this prevents SMSFs from entering into new LRBAs to acquire ordinary residential investment property.
There are transitional protections. Existing borrowing arrangements are not automatically affected, and refinancing of qualifying pre-commencement arrangements can remain protected. An acquisition entered into under an arrangement established before commencement may also qualify for transitional treatment even where settlement occurs later.
This point is worth stating carefully: the legislation specifically restricts new real-property LRBAs where the property is not business real property. It does not simply abolish every type of SMSF LRBA.
Anyone considering property acquisition through an SMSF should obtain advice before signing a contract or entering into finance arrangements.
Permanent $20,000 instant asset write-off
There is good news for eligible small businesses.
The $20,000 instant asset write-off has now been made permanent from 1 July 2026.
Small businesses with aggregated annual turnover below $10 million can immediately deduct the business-use portion of eligible assets costing less than $20,000.
The threshold applies per asset, which means a business may potentially claim the write-off for multiple qualifying assets during the same income year.
Assets costing $20,000 or more generally enter the small business depreciation pool, subject to the applicable simplified depreciation rules.
This gives businesses more certainty when planning equipment, technology, tools and other eligible capital purchases instead of waiting each year to see whether the temporary threshold will be extended.
Company loss carry-back
Loss carry-back has also been reintroduced for eligible companies for income years starting on or after 1 July 2026.
Broadly, an eligible corporate tax entity that makes a tax loss can choose to carry that loss back against income tax paid in either or both of the previous two income years.
This may generate a refundable tax offset, providing valuable cash-flow support to companies that were previously profitable but later experienced a downturn or made significant investments.
The amount available is subject to conditions, including the company's previous tax liabilities and its franking account balance. The legislation also excludes significant global entities.
This is particularly relevant for growing businesses that may move between profitable and loss-making years.
Small business CGT active asset reduction expanded
The reforms also broaden access to the 50% active asset reduction under the small business CGT concessions.
The turnover test associated with access to this particular concession has effectively increased from $2 million to $10 million from 1 July 2027.
However, this does not mean every business with turnover below $10 million automatically receives a 50% CGT reduction. The asset must still satisfy the relevant active asset and other eligibility requirements.
Business owners should also be careful not to assume the increased threshold automatically applies to the other Division 152 concessions, such as the 15-year exemption, retirement exemption or small business rollover. Those concessions continue to have their own conditions.
What has not yet become law?
One major Budget proposal remains unfinished: the proposed 30% minimum tax on discretionary trusts from 1 July 2028.
The Government released exposure draft legislation on 3 September 2026, but consultation remains open until 18 September 2026. It is therefore still a proposal and should not yet be treated as enacted tax law.
This distinction is important for business owners using family trusts or discretionary trusts. Major restructures should generally not be undertaken purely in response to an announced proposal before the final legislation and transitional arrangements are understood.
What these changes mean for taxpayers
The key message is that some tax decisions being made today may have consequences once the new rules commence.
Property investors should review when properties were acquired, whether they qualify for grandfathering and how the CGT and negative gearing reforms could affect future investment decisions.
Small businesses should review planned asset purchases now that the $20,000 instant asset write-off has permanent legislative support.
Companies experiencing temporary losses should consider whether the new loss carry-back rules could generate a tax refund.
SMSF trustees considering borrowing for property should seek advice before proceeding because the residential-property LRBA rules have already changed.
And taxpayers holding significant CGT assets approaching 1 July 2027 should ensure their acquisition records, cost-base information and supporting documentation are complete.
How SmartBridge Accounting can help
Tax reform may not affect every taxpayer in exactly the same way. The outcome will depend on your assets, business structure, income, acquisition dates and future plans.
SmartBridge Accounting can help you understand how the new rules apply to your circumstances, including property investment and negative gearing, capital gains tax planning, small business tax concessions, instant asset write-offs, company loss carry-back and SMSF tax and compliance matters.
Planning before a transaction is usually much easier than trying to fix the tax consequences afterwards.
Need help understanding how the 2026 tax changes affect you or your business? Contact SmartBridge Accounting to discuss your circumstances.
General information disclaimer
This article contains general information only and is current as at 13 September 2026. It does not constitute personal tax, financial, legal or investment advice and does not take into account your individual circumstances, objectives or needs. Tax and superannuation laws can change, and their application depends on the particular facts. You should obtain professional advice before making financial, investment, business or taxation decisions.
