Federal Budget 2026: What could the proposals mean for your finances?

The 2026 Federal Budget introduced a broad range of proposed measures affecting taxation, investments, property, aged care, government support and the cost of living. While many of these announcements are still proposals and may change before becoming law, they provide an important insight into the Government’s future direction and what Australians may need to prepare for financially.

For individuals, families, retirees, investors and business owners, the changes may create both opportunities and challenges. Some measures are designed to simplify tax and increase support, while others may alter long-term investment and wealth-building strategies.

Below is a simplified overview of some of the key Federal Budget proposals and what they could mean for your financial position.

Taxation changes

$1,000 instant tax deduction for employees

From the 2026/27 financial year, employees may be able to claim a standard tax deduction of up to $1,000 for eligible work-related expenses without needing to itemise smaller deductions.

If your work-related expenses exceed $1,000, you can still claim the actual amount, provided you keep appropriate records and receipts.

This measure is intended to simplify tax time for many Australians, particularly employees with smaller annual deductions.

Working Australians Tax Offset

From the 2027/28 financial year, eligible workers may receive a new annual tax offset of up to $250.

The offset applies to employment income and eligible sole trader income and is intended to provide modest ongoing tax relief for working Australians.

In addition, previously announced tax cuts were reaffirmed in the Budget:

• the 16% tax rate for income between $18,201 and $45,000 will reduce to 15% from 1 July 2026
• the same rate will reduce again to 14% from 1 July 2027.

These changes may slightly increase after-tax income over time.

Medicare levy threshold increases

The Medicare levy low-income thresholds will increase by 2.9% for the 2025/26 financial year.

This means some lower-income earners, retirees and pensioners may continue paying a reduced Medicare levy or avoid paying it altogether.

For households already managing cost-of-living pressures, even small tax savings may assist with overall cash flow.

 

Changes affecting investors and property owners

Negative gearing changes

One of the more significant announcements relates to negative gearing.

From 1 July 2027, losses from established residential investment properties purchased after 12 May 2026 may no longer be used to offset other forms of income. Instead, those losses may only be used against residential property income or future capital gains.

Existing investment properties and some newly constructed homes are expected to retain the current treatment.

This proposal may affect long-term property investment strategies, particularly for investors who rely on negative gearing benefits to improve cash flow or reduce taxable income.

Capital gains tax (CGT) changes

The Budget also proposes major changes to how capital gains are taxed from 1 July 2027.

Currently, many Australians benefit from a 50% CGT discount when assets are held for more than 12 months. Under the proposed rules, future gains accrued after July 2027 may instead use an indexation method that adjusts the purchase price for inflation before tax is calculated.

The Government also proposed a 30% minimum tax rate on capital gains, although Age Pension recipients receiving income support payments are expected to be exempt.

These proposed changes could affect:

• property investors
• share investors
• trust structures
• long-term wealth accumulation strategies.

Because the impact will vary depending on individual circumstances, professional financial and tax advice may become increasingly important.

 

Electric vehicles and small business measures

EV tax concession changes

The Government announced changes to Fringe Benefits Tax (FBT) concessions for electric vehicles provided through work arrangements or novated leases.

From April 2027, higher-priced EVs may receive reduced concessions compared to the current rules.

While eligible lower-priced EVs may continue receiving strong tax benefits, Australians considering salary packaging or novated leasing arrangements may want to carefully review costs and timing before entering new agreements.

$20,000 instant asset write-off

Small businesses may welcome the permanent increase to the instant asset write-off threshold.

From 1 July 2026, eligible businesses with turnover under $10 million may be able to immediately deduct eligible assets costing under $20,000 rather than depreciating them over several years.

This measure may improve cash flow flexibility and support business investment in equipment, technology and operations.

 

Aged care and support at home changes

Aged care was another major focus of the Budget, particularly around the Support at Home program.

The Government announced increased funding and additional home care packages to support more older Australians who wish to remain living independently at home for longer.

Changes to Support at Home contributions

From 1 October 2026, personal care services under Support at Home may become fully government funded for approved participants.

Personal care includes services such as:

• showering assistance
• dressing support
• continence management.

However, co-contributions may still apply for other services depending on:

• income
• assets
• pension status
• service type.

For many Australians and their families, understanding these contribution structures may become increasingly important when planning future care needs.

Additional residential aged care funding

Additional funding was also announced for residential aged care facilities, including:

• expansion of aged care beds
• increased provider subsidies
• incentives to improve facilities and accommodation standards.

These changes are intended to improve sustainability and quality across the aged care sector.

 

Government support and pension changes

Pension Supplement changes for Australians overseas

The Pension Supplement rules are expected to change for pensioners travelling overseas.

Under the proposal, the maximum supplement may continue for up to 12 weeks overseas instead of the current 6-week period.

This may provide greater flexibility for retirees who travel internationally for extended periods.

NDIS reforms

The Budget also included proposed reforms to the National Disability Insurance Scheme (NDIS), including:

• stronger fraud controls
• tighter provider oversight
• updated assessment processes
• revised planning and budget approaches.

While the changes are largely focused on improving long-term sustainability, participants may see increased compliance and reassessment requirements over time.

What should you do now?

While many Budget announcements are still proposals and subject to legislative approval, this is often a valuable time to review your financial position and consider whether future changes may affect your plans.

Areas worth reviewing may include:

• investment strategies
• tax planning
• property ownership structures
• retirement planning
• aged care preparation
• business asset purchases.

Financial decisions should always be considered in the context of your personal goals, cash flow needs, risk tolerance and long-term objectives.

 

Final thoughts

The information within, including tax, does not consider your personal circumstances and is general advice only. It has been prepared without taking into account any of your individual objectives, financial solutions or needs. Before acting on this information, you should consider its appropriateness regarding your objectives, financial situation and needs. You should read the relevant Product Disclosure Statements and seek personal advice from a qualified financial adviser. The views expressed in this publication are solely those of the author; they are not reflective or indicative of the licensee’s position and are not to be attributed to the licensee. They cannot be reproduced in any form without the author’s express written consent. Elliot Watson Financial Planning Pty Ltd and its advisers are Authorised Representatives of RI Advice Group Pty Ltd, ABN 23 001 774 125 AFSL 238429.