Treasurer Jim Chalmers has unveiled a federal Budget that delivers up to $2800 back to wage earners at tax time, while tightening tax breaks for property investors and trusts. The centrepiece is a new Working Australian Tax Offset worth $250 annually for 13 million workers, combined with a $1000 instant asset write-off for small businesses and previously announced tax cuts. By 2027-28, the average worker will be up to $2816 better off.
Tax Reforms Target Property Investors
From July 2027, negative gearing will only apply to newly built properties, and the capital gains tax discount will be replaced by an indexation system with a minimum 30% tax rate. Existing investment properties are grandfathered. These changes are expected to help 75,000 first-home buyers over a decade and spur construction of 30,000 extra homes. A 30% minimum tax rate on discretionary trusts will apply from July 2028.
Budget Deficit and Savings
The Budget forecasts a $31.5 billion deficit for 2026-27, improving by nearly $3 billion from December. Cumulative deficits over four years total $122.2 billion, with a return to surplus projected for 2034. Savings of $63.8 billion, including $1 billion in real cuts to the NDIS, underpin the improvement. Spending falls from 26.8% to 26.2% of GDP over four years.
Business Incentives and Productivity
A $3.5 billion business package makes the $20,000 instant asset write-off permanent for small businesses, extends loss carry-back for firms with turnover up to $1 billion, and provides tax refunds for start-up losses in their first two years. Red tape savings are estimated at $10.2 billion annually.
Economic Risks from Middle East Conflict
Treasury warns that prolonged Middle East conflict could push inflation to 7.3% and delay recovery, under a scenario where oil prices hit $200 a barrel. The baseline assumption is that oil peaks at $100 a barrel and falls from mid-2026.
Dr Chalmers acknowledged the reforms break election promises but argued they are necessary to address housing affordability and tax system imbalances. “We’re delivering a fairer tax system for workers, first home buyers and future generations,” he said.
