Federal Budget announcement 2026–2027 updates for individuals

The key considerations for individuals as a result of the 2026-2027 Federal Budget announcement are as follows:

Income tax offset

The Budget announces a new non‑refundable tax offset, the Working Australians Tax Offset (WATO), to apply from the 2027–28 income year (refundable through the 2028–29 tax return).

The WATO provides a tax reduction of up to $250 for most low and middle‑income earners. In practical terms, it partially reduces tax payable at lower income levels and operates alongside the existing low-income tax offset.

Medicare levy low-income thresholds

The Government will increase the Medicare levy low‑income thresholds by 2.9% from 1 July 2025. This change maintains access to Medicare levy relief for eligible low‑income earners.

Capital gains tax reforms

From 1 July 2027, the existing 50 per cent capital gains tax discount will be replaced with an inflation‑adjusted method for calculating capital gains, together with a minimum tax rate of 30 per cent on real capital gains.

Importantly:

• the changes apply only to gains accruing from 1 July 2027 onward. Calculations will need to include discounting from acquisition to 30 June 2027, and indexation from 1 July 2027;
• existing exemptions and concessions continue to apply, including the main residence exemption and the small business CGT concessions; and
• the 30 per cent rate applies only to the net real gain remaining after indexation and any applicable exemptions.

Investors in newly constructed residential property will have the option of applying either the existing 50 per cent CGT discount or the new system, where eligible.

Negative gearing

Under changes announced in the Budget, negative gearing for newly acquired residential investment properties will generally be limited to newly constructed housing from Budget night.

Existing arrangements will remain unchanged for properties held before Budget night, and investors who acquire new builds will continue to be able to deduct losses against other income.

Electronic Vehicle tax concessions

The Government has announced changes to the fringe benefits tax concessions for electric vehicles provided under salary packaging arrangements.

In summary:

• the full FBT exemption for eligible EVs will continue until March 2027;
• from April 2027, concessions will be limited by vehicle value; and
• further reductions apply from April 2029.
• These changes will primarily affect higher‑value EV salary packaging arrangements.