Changes to Personal Tax Rates

As announced in the Federal Budget, the government will provide a modest tax cut for taxpayers, and this will result in the following new rates and thresholds as of 1 July 2026. The Government will provide a further tax cut from 1 July 2027. No further changes to the rates and thresholds have been announced.

Medicare Levy

There will be an increase in Medicare Levy for low-income thresholds as this will increase by 2.9% as of 1 July 2026

Private Health Insurance Rebate

There will be no more age-based up-lift of the Private Health Insurance Rebate from 1 April 2027.

Currently, individuals aged 65 and above are entitled to a higher rebate percentage.

Instant $1,000 Tax Deduction

You will be able to claim an instant tax deduction of a maximum of $1,000 for work-related expenses without any receipts from 1 July 2026, only if you earn income from work. Please be advised this is not a $1,000 refund, this is a deduction and the benefit is dependent on your marginal tax rate. You can claim other deductions separately, such as accounting fees, income protection, donations, professional associations and memberships, as well as motor vehicle expenses.

If you can have expenses greater than $1,000, but you will need to provide substantiation in the usual way.

Expenses Covered

The standard deduction generally covers:

• General work-related expenses
• Depreciation of work-related assets
• Repairs to work-related assets

Expenses Excluded

The following can still be claimed separately and in addition to the $1,000 deduction:

• Donations/gifts
• Tax agent fees
• Income protection insurance
• Union and professional membership fees
• Investment-related deductions

Working Australians Tax Offset (WATO)

The Working Australian Tax Offset is a $250 tax offset to any Australian resident whose income is derived from working as an employee, contractor or a sole trader. This offset will automatically be included in your tax return from 1 July 2027.  This will effectively increase the tax-free threshold by approximately $1,800 for workers and this can increase if you are also eligible for Low Income Tax Offset.

Negative Gearing

Negative gearing is no longer available for any established property purchased after 1 July 2027. Property purchased and contracts signed prior to 12 May 2026 at 7:30pm are grandfathered for negative gearing. This means the old negative gearing rules will apply where losses from the investment can offset other income. Property purchased after the budget night can be negatively geared until 30 June 2027 and starting from 1 July 2027 you will not be able to negatively gear the property meaning cannot offset losses against other income.

However, losses from properties will instead be carried forward and used to offset future net profit from your investment property when sold. This loss can be utilised to offset any future capital gains when the property is sold.

Please note, purchasing a new build property at any given time you will continue to have the negative gearing benefits.

If you decide to make your permanent residence a rental property after 1 July 2027 you will still be able to access negative gearing on this property, as long as this property was purchased prior to 12 May 2026.

Properties in widely held trusts and superannuation funds will be excluded.

Capital Gains Tax

From 1 July 2027, 50% Capital Gains Tax discount for all assets will be replaced with cost base indexation which is adjusted for inflation for all assets (houses, shares, crypto) etc. This includes all assets purchased even pre- 20 September 1985 which are held by individuals or trusts. There are no changes made to Self-Managed Superfunds.

All assets held before and after 1 July 2027 will need a valuation for 1 July 2027. Everything prior to this date can access the 50% discount if the asset was held for more than 12 months. From 1 July 2027, the value will be adjusted for inflation.

When assets are sold the minimum capital gain tax rate of 30% on the net gain, to prevent capital gain realisation years where the individual marginal tax rates are low. This applies to all except where exemptions apply. 

Investors who purchase a new residential property have the option to choose either 50% discount or cost base indexation at the point of sale, however the minimum of this capital gain tax needs will be 30%.

Note: income support payments recipients (including age pension recipients) are exempt from the minimum tax of 30%.

Moving forward keeping records of all purchases of shares, crypto, property will be significant and more improtant than ever for the calculations to be completed at the time of sale.

PAYG Instalments

Taxpayers have the option where reporting and paying PAYG Instalments can be made monthly instead of quarterly or yearly. However, the ATO can make a taxpayers PAYG instalment monthly where the taxpayer has demonstrated history of non-compliance required to report and pay PAYG instalments on time.

Trust Distributions

From 1 July 2028, trustees will pay a minimum tax of 30% on the taxable income of discretionary trusts. Beneficiaries (other than corporate beneficiaries i.e. companies or other trust) will receive non – refundable credits for tax payable.

This minimum tax of 30% will not affect other types of trust such as fixed and widely held trusts (including fixed testamentary trust), complying superannuation funds, special disability trusts and deceased estates.

Note: if the trust distribution received by the individual does not exceed the individuals marginal rate to be over 30% the individual will not receive the refundable credits it will just be lost.

Trustees that receive franking credits from dividends will be required to use their franking credits to pay the minimum tax. This means the franking credits which used to flow to beneficiaries which would have resulted in refunds if the individual marginal tax rate was below 30%. Now those franking credits at a beneficiary level cannot be claimed as refunds.

Expanded rollover relief will be available for three years from 1 July 2027 to support small businesses and others that wish to restructure out of discretionary trusts to another entity type such as a company or a fixed trust.

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