Federal Budget 2026-27: Business outlook and tax measures

The Australian Chamber of Commerce and Industry (ACCI) said the Budget is a missed opportunity to reset Australia’s economic settings and reverse a long‑running period of economic decline.

While there are some positives, such as specific tax incentives for investment and measures to ease regulation, the overall settings will increase tax and weigh down on business activity and broader investment.

ACCI warned the Australian economy has been in genteel decline for several years, marked by falling productivity, weak investment and low growth, and said this Budget is unlikely to change that trajectory.

The Budget forecasts deficits of $28.2 billion in the current financial year and $31.5 billion next year, while economic growth is projected to slow from 2.25 per cent to 1.75 per cent in 2026-27.

Inflation is expected to rise from 4.6 per cent to 5 per cent by the end of June and could exceed 7 per cent if the conflict involving Iran escalates and oil prices spike.

Real wages are expected to fall by 1.75 per cent this year, with only modest growth of 1 per cent forecast in 2026-27 and again the following year.

ACCI acting chief executive officer David Alexander said: “While there are some positives such as specific tax incentives for investment and measures to ease regulation, the broad settings will increase tax and weigh down on business activity and investment.

“Higher taxes will scare away investment in Australian businesses and send this funding to more welcoming overseas jurisdictions."

He notes spending is estimated to sit at a historically high level of 26.8 per cent over the next two financial years, while revenues are expected to rise further to be the highest level in forty years next year (25.9 per cent of GDP).

“Matching spending blowouts with tax hikes is only going to lock in a lumbering slow-growth economy,” Mr Alexander said.

Key announcements include:

Business

• Loss carry-back: From 2026–27, eligible companies can offset current‑year losses against tax paid in the previous two income years
• Instant asset write‑off: Made permanent for businesses with turnover under $10 million, with a $20,000 threshold retained
• Start-up tax loss refundability: From 2028–29, eligible start‑ups in their first two years can receive refunds for tax losses. Refund capped at FBT and PAYG withholding paid on employee wages
• Research and Development Tax Incentive changes (from 1 July 2028): Higher offsets for experimental core R&D (approximately 25-50%), with R&D intensity threshold lowered to 1.5%, refundable offset turnover threshold increased to $50 million, R&D expenditure cap increased to $200 million, and minimum expenditure threshold raised to $50,000.
• PAYG instalments: From 1 July 2027, businesses can opt into monthly PAYG instalments – an expansion of the ATO’s dynamic instalments pilot

Tax and superannuation

• Capital gains tax (CGT) reform: Reintroduction of an inflation‑adjusted CGT model taxing only real gains, with a flat 30% rate from July 2027; Investors in newly built homes may still opt for the 50% CGT discount
• Negative gearing: Limited to newly built housing, with existing investments excluded from new concessions
• Income tax cuts: Introduction of a $250 Working Australians Tax Offset (WATO) from 1 July next year; Additional tax cut of around $5 per week for those earning over $45,000 (previously announced); Reduction of the $18,201–$45,000 tax bracket rate from 16% to 15%
• Family trusts: From July 2028, a minimum 30% tax rate on discretionary trust distributions, with exemptions

Expenditure cuts and savings

• Net budget savings of $26.1 billion
• NDIS funding reduced by $36.2 billion over four years, with up to 300,000 fewer participants
• Brisbane-Melbourne Inland Rail project truncated to Parkes (NSW), cutting $4.4 billion from costs and gross debt
• Public service wage growth effectively frozen, with staff freezes and departmental cost‑cutting expected

Infrastructure and housing

• Suburban Rail Loop: Victoria to receive an additional $3.8 billion in federal funding
• Foreign investment: Ban on foreign buyers purchasing established homes extended to the end of 2029
• Infrastructure to support housing: $2 billion fund for roads, water, power and sewerage, available to states and councils committing to planning reform; Funding aimed at supporting 65,000 homes over 10 years
• Environmental approvals: $500 million to accelerate housing approvals and construction

Health

• $25 billion under federal-state funding agreements
• $5.9 billion to list additional medicines on the PBS
• $1.8 billion for 137 bulk‑billed clinics over four years, with ongoing funding of $500 million per year thereafter

Fuel, cost of living and defence

• Fuel security: $14.8 billion investment, including: $3.2 billion for a publicly owned fuel stockpile (1 billion litres); $7.5 billion for additional fuel storage; $1 billion to support domestic biofuel production
• Fuel excise relief: Three‑month fuel excise cut and heavy vehicle road user charge waiver, costing $3 billion in foregone revenue
• Defence: $53 billion in additional defence spending over 10 years; Includes a 5% increase in defence spending over the next four years
• Electric vehicle FBT: Transition to a permanent 25% FBT discount, which applies from 1 April 2027 for eligible EVs over $75,000, and from 1 April 2029 for all eligible EVs