2026–27 Financial Year Tax Changes: What Australians Need to Know
The new financial year brings important changes for employees, property investors, SMSF trustees and business owners. Here is a practical overview of the major reforms and the dates worth planning for.
The 2026–27 financial year has started with several significant changes to Australia's tax and superannuation system. Some measures apply now, while others have been legislated to commence from 1 July 2027.
For individuals, one of the most immediate changes is another reduction in the personal income tax rate. There are also new rules affecting work-related deductions, while investors and business owners need to start thinking ahead about changes to capital gains tax and residential property deductions.
Key Takeaways
- The tax rate applying to taxable income between $18,201 and $45,000 reduced from 16% to 15% from 1 July 2026.
- A new $1,000 standard deduction for eligible work-related expenses applies from the 2026–27 income year.
- Major capital gains tax reforms commence from 1 July 2027, including inflation-based indexation and a minimum tax rate on certain real capital gains.
- Negative gearing restrictions for some established residential properties commence from the 2027–28 income year.
- New SMSF limited recourse borrowing arrangements for residential property were restricted from 10 August 2026.
- Further changes are designed to expand access to the small business 50% active asset CGT reduction from 1 July 2027.
Personal Income Tax Changes
One of the changes Australians will notice first is a reduction in the personal income tax rate applying to the income band between $18,201 and $45,000.
From 1 July 2026, this rate is 15%. A further reduction to 14% is scheduled from 1 July 2027.
Taxpayers earning above $45,000 receive the full benefit of the rate reduction, while taxpayers earning within the affected income range receive a proportional benefit.
The actual impact on your take-home pay depends on your taxable income and other circumstances, so it is worth looking at your overall tax position rather than focusing only on the headline rate.
The New $1,000 Work-Related Expense Deduction
From the 2026–27 income year, eligible workers can use a standard deduction of up to $1,000 for work-related expenses without separately substantiating each expense in the usual way.
The measure is intended to simplify tax returns for employees whose genuine deductible work expenses are relatively modest.
What if your deductions are more than $1,000?
If your genuine deductible expenses exceed the standard amount, the standard deduction does not mean you are limited to $1,000.
You may instead claim your actual eligible expenses under the ordinary deduction rules, provided you satisfy the relevant requirements and retain the necessary records.
If you regularly incur substantial expenses for tools, travel between workplaces, professional subscriptions, home-office costs or other deductible items, keeping proper records may still produce a better tax outcome than relying on the standard deduction.
Capital Gains Tax Reform from 1 July 2027
Investors should pay particular attention to the capital gains tax reforms scheduled to operate from 1 July 2027.
Under the new framework, the existing flat 50% CGT discount is replaced for affected future gains by an approach that adjusts the cost base for inflation. The intention is to tax the real economic gain after allowing for inflation.
Inflation-based cost-base adjustment
Instead of simply reducing an eligible capital gain by 50%, the revised system uses indexation to recognise inflation when determining the real gain.
This means the outcome may vary significantly depending on how long an asset is held, the rate of inflation and how strongly the asset increases in value.
Minimum tax rate on certain capital gains
The reforms also introduce a minimum 30% tax rate for certain real capital gains from 1 July 2027, subject to the detailed rules and available exemptions.
What happens to assets you already own?
The reforms are prospective. Gains that accrued before the commencement of the new regime are not simply converted into gains under the new rules.
For taxpayers holding significant property, shares or business interests, reliable records and valuation evidence may therefore become increasingly important as 30 June 2027 approaches.
If you own a substantial investment or business asset, consider reviewing your cost-base records, acquisition documents and valuation requirements well before the new CGT rules begin.
Negative Gearing Changes for Residential Property
Residential property investors also face significant changes from 1 July 2027.
Under the new rules, negative gearing of residential property is generally directed towards eligible new builds, while different treatment applies to certain established properties acquired after the Government's announced cut-off.
Existing investments
Grandfathering provisions protect qualifying investments held before the Government's relevant announcement time, meaning existing owners should not assume that all negatively geared properties suddenly lose their deductions.
Established properties purchased later
For affected established residential investments, rental losses may no longer be available to reduce unrelated income such as salary and wages once the new regime applies.
Instead, losses can generally be applied within the residential property investment framework and may be carried forward where the rules permit.
New builds
Eligible new residential construction receives different treatment because the reforms are intended to encourage investment that contributes to additional housing supply.
SMSF Borrowing for Residential Property
Self-managed super fund trustees also need to be aware of changes to limited recourse borrowing arrangements, commonly known as LRBAs.
From 10 August 2026, new LRBAs involving residential property are restricted under the new legislation.
What is an LRBA?
An LRBA is a specialised borrowing structure that can allow an SMSF to borrow to acquire a single asset while limiting the lender's recourse to that asset.
These arrangements are highly regulated and have traditionally required careful structuring, documentation and compliance.
Superannuation, borrowing, related-party transactions and property investment rules can interact in complex ways. Do not restructure an SMSF transaction solely on the basis of a general article.
Changes for Small Business
Business owners also have several changes worth monitoring during 2026–27.
Permanent $20,000 instant asset write-off
Eligible small businesses with aggregated turnover below $10 million can access the $20,000 instant asset write-off for qualifying assets, with the Government moving to make the measure a permanent feature of the small business tax system.
The threshold generally operates on a per-asset basis, so eligible businesses may be able to immediately deduct the business portion of multiple qualifying assets costing less than the threshold.
Small business CGT active asset reduction
From 1 July 2027, the turnover threshold associated with the 50% small business active asset reduction is increasing from $2 million to $10 million.
This expands access to that particular concession for substantially more businesses.
Business CGT concessions can interact with each other and have detailed eligibility conditions. Planning before signing a sale contract can be far more valuable than reviewing the tax consequences after the transaction has already occurred.
Important 2026–27 Dates to Keep in Mind
Tax obligations vary according to your circumstances, lodgement method and reporting cycle, but these dates provide a useful starting point for planning.
| Date | What to watch |
|---|---|
| 1 July 2026 | 2026–27 financial year begins and the 15% personal income tax rate for the relevant income band takes effect. |
| 1 July 2026 | New work-related standard deduction arrangements apply for the 2026–27 income year. |
| 28 July 2026 | Final quarterly super guarantee payment for the April–June 2026 quarter was due. |
| 10 August 2026 | New restrictions on SMSF residential property LRBAs commence. |
| 31 October 2026 | Common individual tax-return deadline for self-lodgers where no later due date applies. |
| 1 July 2027 | Further personal tax changes, CGT reform, negative gearing changes and other scheduled reforms begin. |
What Should You Do Now?
Most people do not need to radically change their financial affairs because of a single tax announcement. What matters is understanding which changes actually apply to you and planning early enough to make informed decisions.
Compare the new standard deduction with the genuine work-related expenses you normally claim.
Ensure purchase contracts, cost-base records and improvement costs are properly documented.
Understand how the future negative gearing rules could affect a planned residential investment.
Consider timing and eligibility before relying on the instant asset write-off for new assets.
Obtain specialist advice before proceeding with any property or borrowing arrangement through an SMSF.
Avoid leaving major tax, CGT and business decisions until the final days of the financial year.
The Bottom Line
The 2026–27 financial year represents more than a routine rollover of the tax calendar. Changes to personal income tax, work-related deductions, superannuation, investment property and future CGT treatment mean different taxpayers will be affected in different ways.
Employees may benefit from simpler deductions and lower tax rates, while investors and business owners have more complex future changes to prepare for.
The best response is not necessarily to make an immediate transaction. It is to understand your position early, maintain reliable records and seek advice before making decisions that could have long-term tax consequences.
Need help preparing for the new financial year?
Whether you're reviewing your individual tax position, managing a business or planning an investment, we can help you understand the numbers and your next steps.
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