Federal Budget 2026-27: Tax Cuts, Superannuation Changes, and What Australians Should Do Before May

The Budget Arrives at a Sensitive Moment

The 2026-27 Australian Federal Budget, due 12 May 2026, will be delivered into an economy under significant strain. The RBA raised the cash rate to 4.10% in March, APRA’s new debt-to-income restrictions are tightening lending, and global uncertainty from ongoing Middle East tensions and US trade policy is weighing on business confidence and the ASX.

At the same time, the Albanese government returns with a fresh mandate from the 2025 federal election and a set of policy commitments it wants to advance. This budget is expected to balance cost-of-living relief, structural tax changes, and ongoing investment in housing supply.

Here’s a detailed preview of what’s expected, what’s already legislated, and what every Australian should be doing before 12 May.

What Is Already Confirmed for July 2026

Not everything in the budget is a surprise. Several changes are already legislated and take effect on 1 July 2026 regardless of what’s in the budget papers.

Superannuation Guarantee Rises to 12%

The Superannuation Guarantee (SG) rate increases from 11.5% to 12% on 1 July 2026, completing the decade-long phase-in schedule. For an employee earning $90,000, this means employer super contributions rise from $10,350 to $10,800 per year, an additional $450.

Payday Super Comes Into Effect

One of the most significant superannuation reforms in years takes effect on 1 July 2026. Under the new payday super rules, employers must pay superannuation at the same time as wages rather than quarterly.

What this means in practice:

For an employee who starts a job in August 2026, their July superannuation is paid in July, not in October. Over a 40-year career, more frequent compounding adds meaningfully to retirement balances.

For employers: You need to ensure your payroll software is updated before 1 July. Businesses that pay wages weekly but remit super monthly will need to change their processes. The ATO will be monitoring via Single Touch Payroll data from day one.

Transfer Balance Cap Rises to $2.1 Million

The general transfer balance cap (TBC) will increase from $1.9 million to $2.1 million from 1 July 2026, indexed in $100,000 increments. This allows retirees to move up to $2.1 million into a tax-exempt retirement phase pension, with any excess remaining in accumulation phase at 15% earnings tax.

Note: Individual transfer balance caps are personalised once you begin a retirement phase pension. If you started an ABP prior to the indexation date, your personal cap may be between $1.6 million and $2.1 million depending on your history.

Super Contribution Caps: No Change Expected

Based on ABS CPI data and Treasury indexation methodology, the concessional contribution cap is expected to remain at $30,000 and the non-concessional cap at $110,000 for 2026-27 (no automatic indexation trigger reached at time of writing).

What the Budget Is Expected to Announce

Tax Cuts of Up to $268 in 2026-27

KPMG’s pre-budget analysis indicates that Australian taxpayers may receive an additional income tax cut of up to $268 for the 2026-27 income year, rising to up to $536 per year from 2027-28. These cuts are expected to apply broadly to working Australians, with adjustments to the income tax brackets or offsets.

The Stage 3 tax cuts already flattened the rate at the 37% bracket and raised the 32.5% threshold to $135,000. Further incremental adjustments are expected to continue easing middle-income tax burden.

Estimates based on KPMG pre-budget analysis. Actual amounts confirmed on 12 May 2026.

Medicare Levy Threshold Adjustments

Alongside income tax cuts, the budget is expected to raise the Medicare levy low-income threshold. In 2024-25, the threshold was $26,000 for individuals. An increase to approximately $27,000–$28,000 is expected, removing more low-income earners from the levy and providing modest cost-of-living relief.

Capital Gains Tax: The Big Unknown

No issue generates more pre-budget speculation than CGT reform. The 50% discount on capital gains for assets held more than 12 months has been part of Australia’s tax system since 1999 and disproportionately benefits higher-income investors, according to government reviews.

Options on the table include:

• Reducing the discount from 50% to 33%
• Limiting the discount to specific asset classes (e.g. not investment properties)
• Applying a cap on the total CGT discount per taxpayer per year
• No change (status quo)

If you hold assets with significant unrealised gains, the window before 12 May is relevant. A sale completed before the budget could still benefit from the current 50% discount, while waiting risks a rate change. However, crystallising a gain unnecessarily to avoid a hypothetical change is not sound tax planning. Talk to your accountant.

Housing and Property Measures

The housing supply crisis remains the central domestic policy challenge for the Albanese government. The budget is expected to include:

Help to Buy Shared Equity Scheme

The Help to Buy scheme, which allows the government to co-purchase up to 40% of a home alongside a first home buyer (reducing deposit requirements), is expected to receive funding commitments in the budget. The scheme applies to properties up to:

• $800,000 in NSW, ACT, and VIC
• $700,000 in QLD, SA, WA, TAS
• $600,000 in NT

Eligible buyers must have an income under $90,000 (individual) or $120,000 (couple) and a minimum 2% deposit.

Housing Australia Future Fund

The $10 billion Housing Australia Future Fund, which finances social and affordable housing construction, will see new deployment commitments. The government has committed to building 1.2 million new homes by 2029, but industry bodies like the HIA and Master Builders Australia consistently report that approvals and completions are running well short of that trajectory.

Small Business: What to Watch For

Small business conditions in 2026 are challenging. The RBA’s rate rises, APRA’s tightened lending standards, and cost inflation have contributed to elevated insolvency rates. The budget is expected to address some of this pressure.

Instant Asset Write-Off

The $20,000 instant asset write-off for small businesses (turnover under $10 million) has been legislated year-by-year as a temporary measure. Extension into 2026-27 is expected but not yet confirmed. If extended, businesses can immediately deduct the cost of eligible depreciating assets under $20,000 rather than depreciating them over several years.

Energy Cost Relief

Small businesses have faced sharp increases in electricity costs. Targeted energy bill relief payments for small businesses have been used in prior budgets, and further measures are expected.

ATO Debt and Payment Plans

The budget is also expected to address the substantial ATO debt owed by small businesses accumulated during the COVID-era payment deferral period. The ATO now charges interest at a rate of approximately 11.38% (shortfall interest charge) on outstanding debts, and as of April 2026, ATO interest charges are no longer tax deductible for businesses (effective from the 2025-26 income year). This has significantly increased the cost of ATO debt, and businesses carrying legacy ATO balances should prioritise repayment before EOFY.

Pre-Budget Action List

With the budget six weeks away at time of writing, here is a practical action checklist.

For Individuals

• Review your investment portfolio for assets with large unrealised gains. Discuss timing of any planned sales with your adviser.
• Maximise concessional contributions before 30 June 2026. The $30,000 cap includes employer SG (rising to 12%). If your employer SG is $10,800, you have $19,200 headroom for salary sacrifice.
• Review non-concessional contributions. If you have a total super balance under $1.9 million, you may be able to contribute up to $110,000 (or $330,000 bring-forward) in non-concessional contributions before 30 June 2026. Consider front-loading before any potential super tax changes.
• Check your transfer balance cap position. If you’re approaching retirement and thinking about starting a pension, the cap rises to $2.1 million on 1 July 2026. Timing matters.

For Business Owners

• Pay off ATO debt urgently. ATO interest at ~11.38% is no longer deductible. This is now one of the most expensive forms of business debt.
• Prepare payroll for payday super. Ensure your accounting/payroll software will support weekly or fortnightly super payments from 1 July 2026.
• Review asset purchase timing. If the instant asset write-off is extended in the budget, purchasing eligible assets before 30 June 2026 may be advantageous.
• Check your business structure. Pre-budget is an ideal time to review whether your trust, company, or sole trader structure is still optimal, particularly if CGT reform affects how you plan to exit the business.

For Property Investors

• Model CGT scenarios. If you’re planning a property sale in the next 12 months, ask your accountant to model outcomes under the current 50% discount and under a reduced discount (say 33%). Understand the range of outcomes.
• Review negative gearing position. No negative gearing changes are expected in this budget (the government ruled this out during the election), but the deduction landscape may shift over time. Document and substantiate all property expense claims.

The Bigger Picture: Budget in a High-Rate Economy

The 2026-27 budget is being written against a backdrop of:

• RBA cash rate at 4.10%, the highest in 14 years
• Annual inflation at approximately 3.7% (February 2026 CPI)
• ANZ research forecasting capital city house price growth of 2.8% (down from 4.8% previously)
• Global equity market volatility linked to Middle East tensions and US trade uncertainty

The Treasurer has limited fiscal headroom. Cost-of-living relief must be balanced against not adding fuel to inflation. The tax cuts already confirmed are modest for this reason.

What this means for individuals and businesses is that waiting for the budget to solve financial pressure is unlikely to be a winning strategy. Getting ahead now, whether through tax planning, super contributions, debt reduction, or structural review, is more valuable than reactive changes post-12 May.

WealthWorks connects Australians with verified accountants, financial advisers, and tax specialists. As the Federal Budget approaches, now is the best time to review your position and plan. Find a professional who can help you navigate the 2026-27 changes before they land.

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