Budget night is over. Now the advisory work begins.
A practical Federal Budget briefing for accountants, tax agents and advisers — focused on the measures that may affect client communication, tax planning, compliance workflows and practice risk.
A Glance
What accounting firms need to watch
The 2026–27 Federal Budget includes several tax measures that are directly relevant to accounting firms. The most important practitioner issues are not simply the headline announcements, but how those announcements affect client expectations, tax planning conversations, internal workflows and future compliance risk.
Key highlights
Budget at a Glance
Six briefing streams for accounting firms
The 2026–27 Federal Budget includes several measures that are directly relevant to accounting firms, including individual tax changes, small business measures, property investment reforms, CGT reform, discretionary trust changes and ATO compliance measures. Budget Paper No. 2 is the key source for the detailed Budget measures, while the Budget’s tax reform statement frames the package around workers, businesses, housing and investment reform.
Key highlights
Priority briefing streams
Briefing stream | Key Budget measures | Firm-level focus |
1. Individual tax return workflow | $1,000 instant deduction, Working Australians Tax Offset, Medicare levy thresholds | Client scripts, deduction versus refund education, tax estimate updates, software treatment to be confirmed |
2. Small business and company tax planning | Permanent $20,000 instant asset write-off, PAYG instalment changes, company loss carry-back, start-up loss refundability | Cash flow planning, asset timing, company loss modelling, franking account limits |
3. Property investor reforms | Negative gearing changes, new build distinction, grandfathering rules, foreign residential property measures | Acquisition timing, cash flow modelling, established property versus new build advice |
4. CGT and investment asset planning | CGT discount reform, cost base indexation, minimum tax, transitional rules | Unrealised gain reviews, disposal timing, trust-held investments, pre/post commencement modelling |
5. Trusts and private groups | 30% minimum tax proposal, beneficiary credits, restructure relief | Family trust reviews, bucket company arrangements, trading trust structures, no rushed restructures |
6. Employer, compliance and practice risk | EV FBT changes, salary packaging, ATO fraud monitoring, intermediary powers, client verification controls | FBT planning, novated lease reviews, portal access, identity checks, refund risk controls |
Briefing Stream 1:
Individual Tax Return Workflow
Client scripts, deduction education and tax estimate updates
Effective dates at a glance
Measure | Effective date | Firm workflow impact |
$1,000 instant tax deduction | From 2026–27 income year | Future individual tax return workflow, client FAQs, software treatment to be confirmed |
Working Australians Tax Offset | From 2027–28 income year | Future-year tax estimates and client communication |
Medicare levy low-income thresholds | From 1 July 2025 | Relevant for 2025–26 individual tax return estimates |
Key highlights
Key points
$1,000 instant tax deduction
The Budget announces an instant tax deduction of up to $1,000 from the 2026–27 income year. Australian tax residents who earn income from work will be eligible and will not need to itemise work-related expenses where they are claiming less than $1,000. Where work-related expenses exceed the instant deduction, taxpayers can continue to claim actual deductions under the usual rules. Donations, union and professional association membership fees and other non-work-related deductions can still be claimed separately.
Working Australians Tax Offset
The Budget announces a $250 Working Australians Tax Offset from the 2027–28 income year. It applies to income derived from work, such as wages, salaries and sole trader business income. The Budget papers state that the offset will increase the effective tax-free threshold for work income by nearly $1,800 to $19,985, or up to $24,985 for workers eligible for the Low Income Tax Offset.
Medicare levy thresholds
The Medicare levy low-income thresholds will increase by 2.9% from 1 July 2025. The new thresholds are $28,011 for singles, $47,238 for families, $44,268 for single seniors and pensioners, and $61,623 for senior and pensioner families. The family threshold increases by $4,338 for each dependent child or student.
Firm impact
This stream is mainly about front-line tax return workflow.
The biggest risk is client misunderstanding. Clients may ask whether they can claim the $1,000 deduction and then still claim car, working from home, study, tools, uniforms and travel expenses on top. The safer briefing position is that the instant deduction is designed to replace itemising smaller work-related expense claims, not to stack on top of those same work-related expenses.
Adviser action
Before the relevant tax seasons, firms should prepare:
2025–26: update Medicare levy threshold assumptions in tax estimate templates;
2026–27: prepare client scripts and internal guidance for the $1,000 instant deduction;
2026–27: add a software note: “ATO label/treatment to be confirmed”;
2027–28: include the Working Australians Tax Offset in future-year tax estimate guidance;
Train staff to explain the difference between a deduction, an offset and a refund.
Briefing Stream 2:
Small Business and Company Tax Planning
Effective dates at a glance
Measure | Effective date | Firm workflow impact |
Permanent $20,000 instant asset write-off | From 1 July 2026 | Asset purchase planning, depreciation advice, small business cash flow discussions |
Dynamic PAYG instalment pilot / monthly PAYG option | From 1 July 2027 | Instalment planning, accounting software workflows, cash flow management |
Company loss carry-back | Tax years commencing on or after 1 July 2026 | Company tax planning, franking account reviews, loss modelling |
Start-up loss refundability | Tax years commencing on or after 1 July 2028 | Start-up advisory, early-stage company cash flow, PAYG withholding and FBT linkage |
Key highlights
Key points
Permanent $20,000 instant asset write-off
From 1 July 2026, the Government will permanently extend the $20,000 instant asset write-off for small businesses with turnover up to $10 million. Eligible assets costing less than $20,000 may be immediately deducted, while assets valued at $20,000 or more can continue to be placed into the small business simplified depreciation pool. The five-year lockout rule for re-entering the simplified depreciation regime will remain suspended until 30 June 2027.
PAYG instalment changes
From 1 July 2027, small and medium businesses will be able to opt into monthly PAYG instalment reporting and payment and use an ATO-approved calculation embedded in accounting software to calculate and vary instalments. Businesses with a demonstrated history of non-compliance may be required to report and pay PAYG instalments monthly.
Company loss carry-back
For tax years commencing on or after 1 July 2026, companies with aggregated annual global turnover of less than $1 billion will be able to carry back tax losses and offset them against tax paid up to two years earlier. The measure applies to revenue losses only and is limited by the company’s franking account balance.
Start-up loss refundability
For tax years commencing on or after 1 July 2028, start-up companies with aggregated annual turnover of less than $10 million that generate a tax loss in their first two years of operation may be able to use that loss to generate a refundable tax offset. The offset will be limited to the value of FBT and withholding tax on wages paid for Australian employees in the loss year.
Firm impact
This stream is mainly about cash flow planning.
The instant asset write-off gives small business clients more certainty, but firms should avoid framing it as “free money”. The asset must still be genuinely required for the business, and the deduction only reduces taxable income — it does not fund the purchase.
The PAYG instalment changes may improve alignment between instalments and current trading conditions, but they also create a workflow issue. Firms will need to understand how accounting software calculates instalments, how variations are documented, and which clients may be better suited to monthly reporting.
For company clients, loss carry-back reintroduces a valuable planning tool. However, firms will need to check:
whether the loss is a revenue loss;
whether the company has tax paid in the relevant prior years;
whether the franking account balance supports the claim;
whether continuity and integrity requirements are satisfied once legislation is released.
Adviser action
Firms should prepare a small business and company review list.
Before 30 June planning
Identify small business clients planning asset purchases.
Confirm turnover eligibility before advising on the instant asset write-off.
Check whether assets are first used or installed ready for use at the relevant time.
Remind clients that tax deductions should not override commercial cash flow decisions.
For 2026–27 company planning
Identify company clients with prior-year taxable income and current or forecast losses.
Review franking account balances.
Separate revenue losses from capital losses.
Flag potential loss carry-back clients for review once legislation is available.
For PAYG instalment workflows
Monitor ATO and software provider guidance.
Identify clients with volatile income who may benefit from dynamic instalments.
Identify clients with compliance issues who may be moved to monthly reporting.
Briefing Stream 3:
Property Investor Reforms
Effective dates at a glance
Measure | Effective date | Firm workflow impact |
Negative gearing limited to new residential builds | From 1 July 2027 | Property investor reviews, cash flow modelling, client communication |
Budget night acquisition test | Applies to established residential properties acquired after 7:30 pm AEST, 12 May 2026 | Contract date review, grandfathering analysis |
Existing property grandfathering | Properties held or contracted before 7:30 pm AEST, 12 May 2026 remain exempt until disposal | Client segmentation and evidence review |
Foreign purchase ban on established dwellings extended | Extended to 30 June 2029 | Foreign investor and residency-related property advice |
Key highlights
Key points
From 1 July 2027, the Government will limit negative gearing for residential property to new builds. Net rental losses from established residential properties will only be deductible against rent or capital gains from residential properties. Excess losses may be carried forward and offset against residential property income in future years.
The limitation applies only to net rental losses from residential property. Budget Paper No. 1 states that commercial property and other asset classes, such as shares, will remain subject to existing arrangements.
Transitional arrangements apply. Properties purchased or held before the Budget night announcement are exempt from the changes until disposal, including properties where a contract was entered into but settlement had not occurred. Properties purchased after 7:30 pm AEST on 12 May 2026 and before 30 June 2027 may be negatively geared during that interim period, but not in later years.Foreign residential property measure
Firm impact
Client group | Firm focus |
Existing residential property investors | Confirm grandfathering position and maintain acquisition records |
Clients who exchanged contracts around Budget night | Review contract timing carefully |
Clients purchasing established residential property after Budget night | Model loss quarantining and cash flow impact |
Clients considering new residential builds | Review eligibility for continued negative gearing treatment |
Clients with mixed property portfolios | Separate established residential property, new builds and commercial property |
Foreign clients or temporary residents | Consider foreign investment rules and established dwelling restrictions |
The major advisory change is cash flow. A client with an affected established residential property may still incur the same rental loss, but may no longer be able to offset that loss against salary, business income or other non-residential property income from 1 July 2027.
Adviser action
Firms should create a property investor review list.
Immediate client segmentation
Existing residential property investors.
Clients who exchanged contracts before or after 7:30 pm AEST, 12 May 2026.
Clients planning to acquire established residential property.
Clients considering new residential builds.
Clients with high gearing and negative cash flow.
Clients with foreign residency or FIRB-related issues.
Evidence to collect
Contract date and time, where relevant.
Settlement date.
Property type.
Whether the property is an established dwelling or new build.
Loan and interest details.
Forecast rental income and expenses.
Expected capital gains position.
Ownership structure.
Firm workflow
Add a Budget night acquisition question to property investor checklists.
Update rental property review templates for future loss quarantining.
Prepare cash flow models comparing established residential property and new builds.
Avoid restructure or disposal advice until legislation and transitional rules are confirmed.
Briefing Stream 4:
CGT and Investment Asset Planning
Effective dates at a glance
Measure | Effective date | Firm workflow impact |
Replacement of 50% CGT discount with cost base indexation | From 1 July 2027 | CGT modelling, disposal timing, investment asset reviews |
30% minimum tax on real capital gains | From 1 July 2027 | Tax estimate modelling for individuals, trusts and partnerships |
Transitional protection for existing gains | Applies to gains arising before 1 July 2027 | Valuation, gain apportionment and record-keeping |
New residential property choice | From 1 July 2027 | New build investor modelling and comparison of CGT methods |
Key highlights
Key points
The Budget announces a major shift in CGT treatment. From 1 July 2027, the Government will replace the 50% CGT discount with a discount based on inflation, returning the CGT system to a focus on taxing real capital gains rather than nominal gains. The official Budget tax reform material states that the reforms will only apply to gains arising after 1 July 2027.
The Government will also introduce a 30% minimum tax on real capital gains from 1 July 2027. Budget Paper No. 1 states that this measure is aimed at reducing incentives to time asset sales into low-income years and aligning the minimum tax rate on real capital gains with the 30% marginal rate applying to average worker income bands.
The reforms apply to assets held by individuals, trusts and partnerships. Investors who buy new residential builds will be able to choose either the existing 50% CGT discount or the new indexation/minimum tax arrangements.
Firm impact
This stream is mainly about future CGT modelling and client segmentation.
The advisory conversation shifts from: “Has the asset been held for more than 12 months?”
to: “What part of the gain arose before and after 1 July 2027, and which calculation method produces the best outcome?”
For firms, the practical issues will include:
Client group | Firm focus |
Individual investors | Modelling gains under current and proposed settings |
Trusts holding growth assets | Interaction with trust distribution planning and future trust minimum tax |
Property investors | Combined impact of negative gearing and CGT changes |
Business owners | Disposal timing, succession planning and retirement exits |
Clients with pre-CGT or long-held assets | Valuation evidence and transitional treatment |
New residential property investors | Method choice between 50% discount and new rules |
Adviser action
Firms should start building a CGT review list before the commencement date.
Priority clients to flag
Clients with large unrealised gains.
Clients planning to sell investment properties.
Clients holding significant share portfolios.
Trusts holding appreciating assets.
Business owners considering sale or succession.
Clients approaching retirement who may be timing disposals.
Property investors considering new residential builds.
Records and evidence to consider
Original acquisition records.
Cost base adjustments.
Improvement costs.
Market valuation evidence.
Ownership structure.
Expected disposal timing.
Pre- and post-1 July 2027 gain apportionment approach, once confirmed.
Practitioner note
The critical workflow issue will be modelling. Firms may need to compare:
current 50% discount outcomes;
indexed cost base outcomes;
30% minimum tax outcomes;
transitional treatment for gains accrued before 1 July 2027;
special treatment for new residential builds.
Briefing Stream 5:
Trusts and Private Groups
Effective dates at a glance
Measure | Effective date | Firm workflow impact |
30% minimum tax on discretionary trust taxable income | From 1 July 2028 | Family trust reviews, distribution strategy, private group planning |
Expanded rollover relief for restructuring out of discretionary trusts | Three years from 1 July 2027 | Entity structure reviews, trust-to-company or trust-to-fixed trust modelling |
Small business support through ASBFEO | From 1 January 2027 | Referral and education pathway for small business clients considering restructure |
ASIC incorporation support arrangements | From 1 January 2027 | Relevant for small businesses considering incorporation |
Key highlights
Key points
The Budget announces a 30% minimum tax on the taxable income of discretionary trusts from 1 July 2028. The trustee will pay the tax, as the trustee controls distributions. Beneficiaries will still need to declare trust income in their tax returns, but beneficiaries other than corporate beneficiaries will receive non-refundable credits for the tax payable by the trustee.
The Budget also announces expanded rollover relief for three years from 1 July 2027 to assist small businesses and other taxpayers to restructure out of discretionary trusts into companies or fixed trusts. The Budget materials indicate this relief will cover income tax consequences, including CGT, for those who choose to restructure.
The minimum tax will not apply to certain income and entities, including primary production income of farms, certain income relating to vulnerable minors, amounts subject to non-resident withholding tax, and income from assets of testamentary trusts existing at announcement. Fixed trusts, widely held trusts, complying superannuation funds, special disability trusts, deceased estates and charitable trusts are also excluded.
Firm impact
This stream is mainly about private group triage and structure review.
Client group | Firm focus |
Family groups | Distribution strategy and marginal rate outcomes |
Trading trusts | Whether the trust remains commercially and tax effective |
Trusts with corporate beneficiaries | Interaction with bucket company arrangements |
Investment trusts | Interaction with CGT reform and asset-holding decisions |
Professional or family businesses | Working capital retention and succession planning |
Asset protection structures | Whether commercial reasons still support the structure |
Primary production clients | Whether excluded income treatment is available |
The key message is that discretionary trusts may still have valid non-tax purposes, including asset protection, succession planning and commercial flexibility. However, the tax profile may change materially from 1 July 2028.
Adviser action
Firms should start preparing a trust review pipeline, but avoid rushed restructure advice.
Immediate review list
Discretionary trusts with material taxable income.
Family groups with repeated distributions to low-rate beneficiaries.
Trading trusts with retained working capital needs.
Trusts using corporate beneficiaries.
Trusts holding appreciating investment assets.
Trusts connected with property investment structures.
Trusts with primary production income or vulnerable beneficiary issues.
Review issues to model
Current distribution pattern.
Beneficiary marginal tax rates.
Corporate beneficiary arrangements.
Division 7A and UPE exposure.
Asset protection and succession objectives.
CGT consequences of restructuring.
Stamp duty and state tax consequences.
Whether a company or fixed trust structure is commercially appropriate.
Briefing Stream 6:
Employers, FBT and Practice Risk
Effective dates at a glance
Measure | Effective date | Firm workflow impact |
EVs above $75,000 and up to the fuel-efficient LCT threshold | From 1 April 2027 | Novated lease and salary packaging reviews |
EVs up to $75,000 | Full FBT discount continues if provided before 1 April 2029 | Employer fleet and employee packaging decisions |
Permanent 25% EV FBT discount | From 1 April 2029 | Long-term FBT planning and employer communication |
ATO counter-fraud funding | From 1 July 2026 | Practice risk controls, client verification and portal governance |
ATO intermediary fraud powers | From 1 July 2026, subject to implementation | Tax agent risk, debt recovery, fraud victim handling |
Key highlights
Key points
EV FBT discount
The Budget adjusts the electric car discount to maintain support for EV adoption while moving to more sustainable long-term settings. From 1 April 2029, a permanent 25% discount on FBT will apply for eligible electric cars valued up to and including the fuel-efficient luxury car tax threshold. This will be implemented through a 15% statutory formula rate.
Transitional arrangements will apply. Eligible electric cars valued up to and including $75,000 and provided before 1 April 2029 will continue to receive a 100% FBT discount, implemented through a 0% statutory formula rate. Electric cars valued above $75,000 and up to the fuel-efficient luxury car tax threshold, provided between 1 April 2027 and 1 April 2029, will be eligible for the 25% FBT discount.
Practice risk and ATO fraud controls
The Budget provides $86.3 million over four years from 1 July 2026, plus ongoing funding from 2030–31, for Phase 2 of the Counter Fraud Strategy. The measure is intended to modernise prevention and detection of fraud in the tax and super systems, including real-time fraud detection, additional fraud protections for individuals and live monitoring of fraudulent account access affecting tax agents, businesses and high-risk superannuation changes.
The Budget also indicates that the ATO will receive powers to pause recovery of tax debts for taxpayers who are victims of fraud by tax intermediaries, waive those debts in appropriate circumstances, and recover debts from tax intermediaries. Existing garnishee powers will also be expanded to jointly held assets where arrangements are being used to frustrate recovery action.
Firm impact
This stream has two practical angles for accounting firms.
1. Employer and salary packaging advice
EV salary packaging remains relevant, but firms need to be careful with timing, vehicle value and arrangement commencement dates.
Clients likely to need review include:
Client group | Firm focus |
Employers with EV fleets | FBT treatment, policy updates and employee communication |
Employees considering novated leases | Lease start date, vehicle value and reportable fringe benefit impact |
Businesses replacing vehicles | Asset choice, FBT cost and cash flow |
Payroll and HR teams | Salary packaging explanations and payroll reporting |
2. Practice governance and fraud risk
The ATO fraud measures should be treated as a practice governance issue, not just a Budget compliance item.
Firms should expect greater attention on:
client identity verification;
suspicious refund claims;
amended returns generating refunds;
bank account changes;
portal access and staff permissions;
high-risk superannuation changes;
documentation of client instructions.
Adviser action
For EV and FBT clients
Review clients with current or proposed EV salary packaging arrangements.
Identify vehicles above and below the $75,000 threshold.
Check arrangement commencement dates.
Prepare employer-facing guidance before the next FBT year.
Explain reportable fringe benefit implications to employees.
For practice risk
Review client onboarding and proof-of-identity procedures.
Tighten internal approval processes for bank account changes.
Review staff access to ATO Online Services for Agents.
Add extra review steps for unusual refunds and amended returns.
Document client instructions more carefully where refund direction or super details change.
Specialist and
Watch-list Measures
R&D, venture capital, foreign investment and international tax
Effective dates at a glance
Measure | Effective date | Firm workflow impact |
R&D Tax Incentive reforms | From 1 July 2028 | R&D client reviews, eligibility testing, refundable offset planning |
Venture capital tax incentive expansion | From 1 July 2027 | Start-up, fund and early-stage investment advice |
Eligible venture capital investor programme closure | Closed to new applications from 7:30 pm AEST, 12 May 2026 | Immediate watch point for affected investors |
Pillar Two side-by-side package implementation | From 1 January 2026 | Large multinational group reviews |
Foreign purchase ban on established dwellings | Extended to 30 June 2029 | Foreign investor and residency-related property advice |
Foreign resident CGT transitional concession for renewables | From first day of next quarter after Royal Assent until 30 June 2030 | Specialist foreign investor / infrastructure advice |
Key highlights
Key points
R&D Tax Incentive reforms
From 1 July 2028, the Government will reform the R&D Tax Incentive to simplify and better target support for business R&D. The Budget papers outline changes including a 4.5 percentage point increase in core R&D offset rates, a reduction in the intensity threshold from 2% to 1.5%, removal of supporting R&D expenditure from eligibility, an increase in the turnover threshold for the highest offset rate from $20 million to $50 million, and an increase in the minimum expenditure threshold from $20,000 to $50,000.
Venture capital tax incentives
From 1 July 2027, the Budget expands venture capital tax incentives. The VCLP investee asset cap will increase from $250 million to $480 million, the ESVCLP investee asset cap will increase from $50 million to $80 million, the ESVCLP tax incentive cap will increase from $250 million to $420 million, and the maximum ESVCLP fund size will increase from $200 million to $270 million. The eligible venture capital investor programme will close to new applications from 7:30 pm AEST on 12 May 2026.
Pillar Two and international tax
The Budget confirms amendments to Australia’s global and domestic minimum tax rules to implement the OECD/G20 Pillar Two side-by-side package. This is primarily relevant to large multinational groups and firms advising Australian subsidiaries of global groups.
Foreign investment and property
The temporary ban on foreign purchases of established residential dwellings will be extended to 30 June 2029, with exceptions continuing where purchases support housing supply and for certain exempt groups, including permanent residents and New Zealand citizens.Firm impact
This stream is mainly about client-base filtering.
For many accounting firms, these measures do not need to be front-page client alert items. However, they should be flagged internally so the right clients are identified.
Client type | Measure to watch | Firm focus |
R&D claimants | R&D Tax Incentive reforms | Eligibility, expenditure classification, refundable offset planning |
Start-ups | Venture capital incentives, start-up loss refundability | Funding pathways, investor readiness, company structuring |
Venture capital funds | VCLP / ESVCLP changes | Fund size, investee asset caps, new investment eligibility |
Large groups | Pillar Two changes | Global minimum tax exposure and reporting |
Foreign investors | Established dwelling ban and foreign resident CGT | Property acquisition advice and infrastructure disposals |
Renewable energy investors | Foreign resident CGT transitional concession | Disposal planning and concession eligibility |
Adviser action
Firms should treat these as specialist trigger points.
Add to internal review lists
Clients currently claiming or considering R&D incentives.
Technology, manufacturing, biotech and product development clients.
Start-ups seeking external investment.
Clients involved in VCLP or ESVCLP structures.
Australian subsidiaries of large multinational groups.
Foreign investors acquiring or disposing of Australian property.
Clients involved in renewable energy infrastructure assets.
Practical next steps
Do not include these in broad client emails unless relevant to the firm’s client base.
Flag affected clients for targeted advice.
Update R&D client review templates before 1 July 2028.
Review start-up and venture capital clients before 1 July 2027.
Monitor legislation and ATO/Treasury guidance for Pillar Two and foreign resident CGT measures.
Stay Ahead of Tax Reform
With NextGen iQ Practitioner Hub
The real work begins after the announcements.
For accounting firms, the next phase is where the pressure starts:
clients ask what the Budget means for them;
draft legislation starts to appear;
ATO guidance changes the practical interpretation;
tax software workflows are updated;
advisers need to translate technical changes into client-ready advice.
