Budget 2026: What to expect

No one really knows what will be announced in the upcoming Federal Budget on Tuesday at 7.30pm AEST except the people putting it together. Traditionally, every Federal Budget features a few pre-Budget announcements, a few leaks to fly concepts up the flagpole to see who salutes, and a few vote winners and tough measures on Budget night.

We’ll bring you an update on just the key issues the morning after the Budget (if you have not subscribed, you can subscribe here).

Here’s as much as we know, and what has been speculated:

Announcements

• Scaling back FBT exemption for electric vehicles – see Electric vehicle FBT exemption scaled back.
  
  

• Instant $1,000 tax deduction instead of claiming work related expenses – see Swapping receipts for a $1k instant tax deduction.

• 1% tax cut – announced in the 2025 Federal Budget. The tax cuts reduce the $18,201 to $45,000 tax bracket from a 16% tax rate to 15% from 1 July 2026, and from 15% to 14% from 1 July 2027.
  
  

• $20k instant asset write-off made permanent –the $20,000 instant asset write-off for small business will be made permanent replacing the existing $1,000 write-off threshold that is amended up almost every budget. The Treasurer made the announcement via social media.
  
  

• Health insurance subsidy scrapped for over 65s – The Minister for Health and Ageing announced the changes in a Press Club speech. Over 65s will access the same rebate as other taxpayers.
  
  

• Reigning in costs of NDIS – The Minister for Health and Ageing announced cost and fraud prevention measures.

Expected 

While not announced and no details provided, the government has confirmed changes to the following areas in Budget 2026:

• 50% CGT discount – likely to be replaced with indexation. Superannuation funds will be left untouched by the changes. Expectations are that primary producers and investments that increase the housing stock will be able to choose either the 50% discount or the indexation method.
  
  The government took the changes to the CGT discount to the election in 2025. In Labor’s election policy, the CGT discount was to be scaled back to 25%, except for superannuation funds and small business.
  
  
• Tax paid by discretionary trusts – the government has signalled that changes will be made to the taxation of discretionary trusts but has not indicated how. However, the taxation of discretionary trusts is a measure that the Labor Party has pursued in the past. The previous plan was to apply a standard 30% tax rate on all discretionary trust distributions made to beneficiaries over the age of 18. The tax rate would apply to the total trust distribution not the marginal tax rate of the individual receiving it. Primary production income would be exempt as would distributions from charitable trusts, deceased estates and testamentary trusts.
  
  
• Negative gearing scaled back – Negative gearing will be targeted, we’re just not sure how. Abolishing negative gearing for all but new housing builds was an election promise in 2025. Under that policy, negative gearing arrangements (which allow deductions for investment losses to be made against non-investment income) for all non-business investment assets held by individuals, superannuation funds, partnerships, trusts and companies, will be abolished except for non-business-related investments in the construction and purchase of new dwellings. The intention was to grandfather the changes so that they would only apply to new investments post Budget night.

Speculation

• Earned income offset – a $200 to $300 tax offset for every salary and wage earner. The tax offset is seen as a compromise to inflationary policies that deliver a direct cash bonus.
  
  
• R&D tax incentive - The cap on R&D tax incentives is expected to increase the expenditure threshold of $150 million.