budget-12Tax reform

Source: https://budget.gov.au/content/04-tax-reform.htm # Tax reform Tax reform for workers, businesses and future generations Print or save page On this page ## A better tax system for workers, first home buyers and future generations The Government is reforming the tax system to help more Australians realise the dream of home ownership, better encourage productive investment and help fund a new $250 tax offset for workers. ### Cutting taxes for working Australians - The Government is introducing a $250 Working Australians Tax Offset from 2027-28, providing an ongoing annual tax cut for over 13 million Australian workers. - This is on top of the three tax cuts the Government has already legislated and the $1,000 instant tax deduction. - For an Australian worker on average earnings, the combined benefit of the Government’s five tax cuts could be up to $2,816 per year, helping every Australian worker keep more of what they earn. Tax explainer - New tax cuts for Australian workers [PDF 432 kB](/content/factsheets/download/tax-explainers-new-tax-cuts-workers.pdf) [DOCX 253 kB](/content/factsheets/download/tax-explainers-new-tax-cuts-workers.docx) ### Negative gearing The Government will limit negative gearing to new builds from 1 July 2027, to focus tax support on new supply. Existing arrangements will remain unchanged for all properties held before Budget night, and investors who buy new builds will still be able to deduct losses from other income. Investors who buy established housing after Budget night will still be able to deduct losses against residential property income. They will be able to carry forward unused losses to future years but won’t be able to deduct them against other income like wages. Tax explainer - Negative Gearing and Capital Gains Tax Reform [PDF 432 kB](/content/factsheets/download/tax-explainers-negative-gearing-capital-gains-tax.pdf) [DOCX 182 kB](/content/factsheets/download/tax-explainers-negative-gearing-capital-gains-tax.docx) ### Capital gains tax The Government will replace the 50 per cent Capital Gains Tax (CGT) discount with a discount based on inflation and introduce a minimum 30 per cent tax on gains from 1 July 2027. This reform means that investors will only pay tax on their real capital gain, restoring the original intent of the CGT arrangements. The CGT reforms will only apply to gains arising after 1 July 2027. Investors in new builds will be able to choose the 50 per cent CGT discount or the new arrangements. ### Fairer tax arrangements for discretionary trusts The Government will introduce a minimum tax of 30 per cent on discretionary trusts from 1 July 2028 with some exceptions. Rollover relief will be provided for three years from 1 July 2027 to assist small businesses and others that wish to restructure. Tax explainer - Minimum tax on discretionary trusts [PDF 358 kB](/content/factsheets/download/tax-explainers-minimum-tax-discretionary-trusts.pdf) [DOCX 170 kB](/content/factsheets/download/tax-explainers-minimum-tax-discretionary-trusts.docx) Tax explainer - Small business Capital Gains Tax and Discretionary Trusts [PDF 466 kB](/content/factsheets/download/tax-explainers-cgt-trusts-impacts.pdf) [DOCX 735 kB](/content/factsheets/download/tax-explainers-cgt-trusts-impacts.docx) ## A better tax system for businesses ### Boosting resilience and dynamism The Government is reintroducing loss carry back to support business risk taking and resilience. From 2026-27, eligible companies that make a loss in the current income year will be able to use that loss to get a refund against tax paid in the prior two income years. This will benefit up to 85,000 companies, mostly small businesses. The Government is also introducing loss refundability to support new start‑up businesses. From 2028-29, small start‑ups in their first two years of operation will be able to get a refund for tax losses, up to the value of fringe benefits tax and withholding tax paid on employee wages. This will benefit up to 25,000 young companies each year, providing valuable cash flow support. The Government is also improving cash flow for small businesses by permanently extending the $20,000 instant asset write‑off from 1 July 2026. Small businesses with turnover up to $10 million will be able to immediately deduct eligible assets costing less than $20,000, helping them to make their investment decisions with confidence. This is estimated to improve cash flow for small businesses by around $890 million over the next five years. These reforms form part of the Government’s strategy to improve economic resilience, support productivity and promote employment.  #### How small businesses can benefit from instant asset write‑off and loss carry back Dining Co runs a local restaurant with $1 million in turnover. It generated $50,000 in taxable profits and paid $12,500 tax in 2025-26 (at the 25% tax rate). In 2026-27, Dining Co decides to supply ready‑cooked meals to local supermarkets. It purchases new equipment for a total of $65,000, with each piece costing less than $20,000. Due to the instant asset write‑off , these items can be immediately deducted. Without these new investments, Dining Co would have reported a $50,000 profit in 2026-27. However, with the instant asset write‑off deductions, it reports a $15,000 tax loss and pays no tax. Further, Dining Co will now be able to carry back that tax loss to the previous year’s tax paid, generating a $3,750 tax refund ($15,000 × 25% tax rate). This provides timely cash flow to the company as it seeks to expand. ### Expanding venture capital incentives From 1 July 2027, the Government will expand venture capital tax incentives to align with modern company valuations. Changes to the Early‑Stage Venture Capital Limited Partnership and Venture Capital Limited Partnership programs will support start‑ups and high‑growth businesses to unlock greater access to capital and industry knowledge. ### Better targeting the Research and Development Tax Incentive The Government will better incentivise core R&D that benefits the broader economy, in response to recommendations of the Ambitious Australia Report. From 1 July 2028, the Government is: - Increasing the offset for experimental core R&D by around 25 to 50 per cent and removing eligibility for expenditure that only supports R&D. The intensity threshold will reduce to 1.5 per cent, providing higher offsets to firms undertaking substantial core R&D. - Providing greater support to young, fast‑growing firms by increasing the turnover threshold for the higher, refundable offset to $50 million. Refundability will be limited to firms operating less than ten years, with older firms eligible for an equivalent, non‑refundable offset. - Increasing the maximum expenditure cap to $200 million, encouraging more R&D onshore. - Improving assurance by increasing the minimum expenditure threshold to $50,000. R&D below this must be undertaken with a Research Service Provider or Cooperative Research Centre. ## A simpler and more sustainable tax system The Government is making Australia’s tax system simpler and more sustainable by making tax easier to manage for businesses and individuals. ### Making tax easier for workers and small businesses From 2026-27, a new instant tax deduction of up to $1,000 will simplify work‑related expense deductions. This will deliver 6.2 million workers an average tax benefit of $205 for 2026-27 and reduce compliance costs by around $380 million a year. The $20,000 instant asset write‑off for small business will be made permanent, simplifying tax obligations, improving cash flow and saving small businesses around $32 million per year in compliance costs. The Government is also boosting business cash flow by making it easier for businesses to change their pay as you go (PAYG) instalments when business conditions change, by: - providing businesses with flexibility to opt in to monthly PAYG instalments from 1 July 2027, and - expanding access to the ATO’s dynamic instalments pilot using business software to more accurately calculate PAYG instalments. The Government will work with states on reforms to payroll tax administration. ### More sustainable settings to support take‑up of electric cars The Government will transition the arrangements to support electric cars to a permanent 25 per cent fringe benefits tax (FBT) discount, for eligible electric cars over $75,000 from 1 April 2027 and for all eligible electric cars from 1 April 2029. Electric cars costing up to $75,000 will continue to receive a full FBT exemption provided the fringe benefit arrangement commences before 1 April 2029. ## Budget themes [Fuel supply and security](01-fuel-supply-and-security.htm) [Cost of living](02-cost-of-living.htm) [Productivity](03-productivity.htm) Tax reform [Care and opportunity](05-care-and-opportunity.htm) [Security and investment](06-security-and-investment.htm) [Back to top](#masthead-top)