Australia's 2026 federal budget: tax reforms, cost-of-living measures, and economic outlook

✓ Verified by 2+ sources

Key details reported by multiple sources:

• Treasurer Jim Chalmers announced a $250 annual Working Australians Tax Offset (WATO) starting from the 2027–28 income year, benefiting over 13.3 million workers.
• The WATO will cost the budget $6.4 billion over four years, with the delay until 2027–28 attributed to avoiding inflationary pressures.
• A new $1,000 instant tax deduction for work-related expenses will apply from the 2026–27 income year, benefiting 6.2 million workers (42% of taxpayers) with an average saving of $205.
• The 50% capital gains tax (CGT) discount for assets held over 12 months will be replaced by an inflation-based discount, with a minimum 30% tax rate on gains (excluding pensioners and income support recipients).
• Negative gearing will be limited to new builds only, with existing investment properties exempt, starting from budget night (May 12, 2026).
• The budget projects inflation will peak at 5% in the June 2026 quarter before dropping to 2.5% by June 2027, assuming oil prices fall from $100 to $80 per barrel by mid-2027.
• The budget deficit is forecast at $31.5 billion for 2026–27, an improvement of $2.8 billion from the mid-year economic forecast (MYEFO).
• The government expects the CGT and negative gearing reforms to help 75,000 Australians buy their first home over the next decade, despite a projected 35,000 fewer homes being built.
• A $2 billion infrastructure fund for councils and utilities will support 65,000 new homes, offsetting the 35,000 reduction in housing supply from tax reforms, resulting in a net gain of 30,000 homes.
• Foreign investors will be banned from buying existing homes for two years until mid-2029, though new homes remain exempt.
• The budget includes a $105.9 million AI tool to help developers navigate environmental red tape for housing projects.
• The government will introduce a 30% minimum tax rate on discretionary trusts from July 2028, generating $4.47 billion in revenue by the end of the decade, excluding fixed trusts, superannuation funds, and charitable trusts.
• The budget forecasts economic growth of 1.75% in 2026–27, down from 2.25% in the last financial year, with unemployment projected to rise slightly to 4.5% for the next two years.
• The budget includes a $5.9 billion investment to deliver cheaper life-saving medicines, including treatments for cystic fibrosis, chronic kidney disease, and various cancers, with the PBS co-payment reduced to $25.
• The Paid Parental Leave Scheme will be expanded to six months from July 1, 2026, with families projected to be $14,000 better off compared to 2022.
• The fuel excise will be halved for three months, reducing the cost of a 65-litre tank of fuel by nearly $23.
• The government will invest $11.4 billion to incentivise bulk billing, aiming for nine out of ten GP services to be bulk-billed by 2030.
• The budget includes $431 million to permanently fund Public Dental Services for Adults, supporting low-income adults.
• The government will save $37.8 billion over four years by overhauling the National Disability Insurance Scheme (NDIS).
• The budget projects gross debt will climb above $1 trillion in 2026–27 and reach $1.25 trillion by the end of the decade.
• The budget assumes net overseas migration will be 295,000 in 2025–26, dropping to 245,000 in 2026–27 and 225,000 in 2027–28.
• The 16% tax rate for income between $18,201 and $45,000 will be reduced to 15% from July 1, 2026, and further to 14% from July 1, 2027.
• The average worker earning $79,000 will receive a total tax cut of $2,496 per year from 2027–28, combining all tax cuts and offsets.
• The $20,000 instant asset write-off for small businesses will be made permanent, allowing immediate deduction of eligible assets.