The Hon. Jim Chalmers handed down the 2026-27 Federal Budget on the second Tuesday of May 2026. While global economic headwinds persist (China slowdown, metals price volatility), the Treasurer’s focus was squarely on cost-of-living relief without adding to inflation, funded by significant reforms to capital gains tax concessions.
This blog breaks down every major tax change, from the completion of the Stage 3 tax cuts to the controversial reduction of the Australia CGT Discount Reduction (click to read our deep dive).
1. The New Personal Income Tax Scales (Post-Stage 3)
The 2024 Stage 3 cuts are now fully matured. The 2026 Budget locks in the following marginal rates for residents. The key change? Indexation of thresholds has been paused for 2 years to fund the defense and Medicare boosts.
| Taxable Income | Tax Rate | Key Change from 2025 |
|---|---|---|
| $0 – $18,200 | 0% | Unchanged |
| $18,201 – $45,000 | 16% | Rate cut from 19% in 2024 |
| $45,001 – $135,000 | 30% | Threshold frozen (was $120k in 2024) |
| $135,001 – $190,000 | 37% | Rate cut from 37% (previously 37% started at $180k) |
| $190,001+ | 45% | Unchanged (Medicare Levy applies separately) |
Data stat: A worker earning $100,000 will pay $2,529 less tax in 2026 than they did in 2023. However, bracket creep is returning due to frozen thresholds, eroding 0.7% of disposable income by 2027.
2. The Big Shock: CGT Discount Reduced to 33.3%
The headline revenue raiser. Effective 1 July 2026, the general CGT discount for assets held longer than 12 months drops from 50% to 33.3% (one-third) for all assets acquired after 1 July 2026.
- Existing assets (Pre-July 2026): Grandfathered. Still qualify for 50% discount.
- New assets (Post-July 2026): Only 33.3% discount.
- Superannuation funds: Discount drops from 33.3% to 20% (to align with pension phase taxation).
Internal Link: For a full legal breakdown of the grandfathering provisions and active asset reduction, read our specialist guide on the Australia CGT Discount Reduction.
The Math: How this hits investors
- Scenario: Sell an investment property for a $300,000 capital gain (held 5 years, bought July 2026).
- Old law (50% discount): $150,000 added to income.
- New law (33.3% discount): $200,000 added to income.
- Extra tax payable (top bracket 45%): $50,000 x 0.45 = $22,500 extra tax.
3. The “Medicare +” Levy: 1% Bump
To fund bulk-billing GP visits and dental for pensioners, the Medicare Levy rises from 2% to 3% for income above $32,500. Low-income thresholds are raised by 5% to protect the vulnerable.
- New Levy: 3% of taxable income (was 2%).
- Impact: Someone earning $90k pays an extra $900/year.
4. Superannuation: The $4M Cap Hardens
The Division 296 tax (30% on super earnings for balances > $3M) has been expanded. From 2026, the “Taxable Earnings” definition includes unrealized capital gains.
- New threshold: Total super balance > $4 million.
- Tax rate on earnings: 45% (up from 30% proposed in 2025).
- Data stat: Treasury estimates this affects only 0.8% of accounts (approx. 20,000 individuals) but raises $2.1B over 4 years.
5. Instant Asset Write-Off: Extended but Tapered
Small business entities (AGG turnover < $50M) can continue instant write-offs, but the threshold drops.
| Financial Year | Threshold | Eligible Assets |
|---|---|---|
| 2024-25 | $30,000 | All but cars (capped at 20k) |
| 2025-26 (Past) | $25,000 | All |
| 2026-27 (New) | $20,000 | General pool only |
| 2027-28 | $15,000 (then index) | General pool only |
6. Housing: The “Help to Buy” Tax Offset
A new non-refundable tax offset for first-home buyers on incomes under $100k ($150k for couples).
- Offset: $5,000 per year for 5 years ($25k total).
- Caveat: Can only be claimed on properties under $850k (metro) or $600k (regional).
- Clawback: 100% clawed back if sold within 3 years.
Summary Table: 2026 vs 2025 Tax Calculator (Individual)
| Metric | 2025 (Old Law) | 2026 (Budget) | Difference |
|---|---|---|---|
| Tax-free threshold | $18,200 | $18,200 | Nil |
| Highest marginal rate | 45% (+2% Medicare) = 47% | 45% (+3% Medicare) = 48% | +1% |
| CGT discount (investor) | 50% | 33.3% (New assets) | -16.7% |
| Super cap tax trigger | $3M balance | $4M balance (45% rate) | Higher cap, harsher rate |
| Low-income tax offset (LITO) | $700 | $825 | +$125 |
Frequently Asked Questions (FAQ)
Q1: Do I have to pay the new 33.3% CGT on my property I bought in 2019?
A: No. The reduction only applies to assets acquired on or after 1 July 2026. Your 2019 property remains grandfathered under the 50% discount, even if you sell it in 2027.
Q2: Is the Stage 3 tax cut finish in 2026?
A: Yes, the architectural changes (removing the 37% bracket for middle incomes) are complete. However, because thresholds are frozen until 2028, you will pay more tax if your salary increases (bracket creep).
Q3: I earn $200,000. Will my tax go up or down?
A: Down on income tax (due to the 37% bracket extending to $190k), but up overall because the Medicare Levy increased to 3% for all income above $32k. Your net disposable income rises approximately 0.4%.
Q4: Does the CGT discount apply to crypto or shares held for 12 months?
A: Yes, but the new 33.3% rate applies to crypto and shares if you buy them after July 1, 2026. HODLers from 2025 are safe at 50%.
Q5: Can I use the $25k Help to Buy offset with the First Home Super Saver (FHSS) scheme?
A: Yes, but you cannot double-dip on the same dollar. The FHSS allows you to withdraw voluntary super contributions (taxed at 15% entry). The $5k/year offset reduces your income tax liability. Most first-home buyers should use FHSS first, then the offset.
Q6: Is the small business $20k instant write-off available for a $50k ute?
A: No. The $20k threshold is per asset. For a $50k vehicle, you must depreciate the remaining $30k under the general pool rules (15% first year, 30% thereafter). Also, car cost limits apply ($68,108 for 2026).
