Electric Car Discount – more sustainable fringe benefits tax treatment of electric cars
From 1 April 2029, a permanent 25 per cent discount on fringe benefits tax (FBT) will be available for all electric cars valued up to and including the fuel efficient luxury car tax threshold, implemented through a 15 per cent rate in the FBT statutory formula.
The following transitional arrangements will be put in place:
- All eligible electric cars will retain the FBT discount rate that was in place when the arrangement commenced;
- All electric cars valued up to and including $75,000 that are provided before 1 April 2029 will continue to be eligible for a 100 per cent discount on FBT, implemented through a 0 per cent rate in the FBT statutory formula; and
- Electric cars valued above $75,000 and up to and including the fuel efficient luxury car tax threshold that are provided between 1 April 2027, and 1 April 2029 will be eligible for a 25 per cent discount on FBT, implemented through a 15 per cent rate in the FBT statutory formula.
The existing 20 per cent statutory rate will continue to apply for all other cars, including electric cars costing more than the fuel efficient luxury car tax threshold.
Reportable fringe benefits will continue to be determined for eligible electric cars as if a 20 per cent FBT statutory formula rate or cost basis method applied.
Foreign Investment – extending the ban on foreign purchases of established dwellings
The Government will extend the temporary ban on foreign purchases of established residential dwellings by two years and three months until 30 June 2029. The ban was originally implemented for two years from 1 April 2025. The extension of the ban will mean Australians will be able to buy homes that would have otherwise been bought by foreign persons, while encouraging foreign persons to boost Australia’s housing supply.
Current limited exceptions to the ban for purchases of established dwellings that support housing supply will continue. General exemptions from foreign investment screening will also continue to apply for purchases of established dwellings, including for permanent residents and New Zealand citizens.
Global Anti Base Erosion Rules (Pillar Two) Side-by-Side Package Implementation
The Government will amend Australia’s global and domestic minimum tax legislation, introduced in 2024, to implement the side by side package agreed by the OECD/G20 Inclusive Framework on Base Erosion and Profit Shifting on 5 January 2026.
Implementing the side by side package will ensure Australia’s global minimum tax rules are consistent with those of other implementing jurisdictions and will deliver on the Government’s commitment to support the OECD/G20 efforts to reform the international corporate tax system.
The side by side package will apply from 1 January 2026.
Personal Income Tax – increasing the Medicare levy low income thresholds
The Government will increase the Medicare levy low income thresholds for singles, families, and seniors and pensioners by 2.9 per cent from 1 July 2025.
The increase in the thresholds provides cost of living relief by continuing to exempt low income individuals and families from paying the Medicare levy.
The threshold for singles will be increased from $27,222 to $28,011.
The family threshold will be increased from $45,907 to $47,238.
‘For single seniors and pensioners, the threshold will be increased from $43,020 to $44,268.
The family threshold for seniors and pensioners will be increased from $59,886 to $61,623.
The family income thresholds will increase by $4,338 for each dependent child or student, up from $4,216.
Strengthening the Foreign Resident Capital Gains Tax Regime transitional arrangements
The Government will provide a time limited, targeted concession in the foreign resident CGT regime for investment in the renewables sector as part of the implementation of the 2024–25 Budget measure Strengthening the foreign resident capital gains tax regime.
The transitional arrangement will apply to foreign investors disposing of certain renewable energy infrastructure assets from commencement, being the first day of the next quarter after Royal Assent, until 30 June 2030.
This concession balances ongoing Government support for Australia’s practical action on climate change, with the need to ensure the tax treatment of these assets aligns with the treatment of other assets in the longer term.
The Government will also ensure the concept of ‘real property’ in Australia is determined by Commonwealth legislation rather than state and territory laws, with effect from 12 December 2006, when the regime was introduced. As this clarification is intended to protect existing revenue, the revenue impact is estimated to be nil.
Taking Pressure Off Australians – temporary reduction of fuel excise and heavy vehicle road user charge
The Government has temporarily reduced the excise and excise equivalent customs duty rates (excise rates) applying to most fuel products and the road user charge for heavy vehicles, for 3 months from 1 April 2026.
The excise rates have been reduced by a total of 60.9 per cent, equating to a 32 cent per litre reduction for petrol and diesel. States and territories have agreed to provide the Commonwealth up to $400 million to enable increased GST revenue to be returned through lower excise, which equates to 5.7 cents per litre of the cut for petrol and diesel. The road user charge for heavy vehicles has also been reduced from 32.4 cents per litre to zero.
Tax Reform – cutting taxes with a Working Australians Tax Offset
The Government will deliver a new tax cut for every working Australian taxpayer by introducing a $250 Working Australians Tax Offset from the 2027–28 income tax year.
The Working Australians Tax Offset will provide a permanent annual tax offset for Australians for their income derived from work, such as wages and salaries and the business income of sole traders, from 1 July 2027. This will help Australian workers keep more of what they earn, delivering further targeted cost of living relief and helping to incentivise workforce participation.
The Working Australians Tax Offset will increase the effective tax free threshold for income derived from work by nearly $1,800 to $19,985 (or up to $24,985 for workers eligible for the Low Income Tax Offset). This is the largest permanent increase in the effective tax free threshold since 2012–13.
This new tax relief is in addition to the tax cuts for every Australian taxpayer that will come into effect on 1 July 2026 and 1 July 2027, and the $1,000 instant tax deduction.
Tax Reform – better targeting the Research and Development Tax Incentive
The Government is reforming the Research and Development Tax Incentive (R&DTI) to simplify and better target Government support for business R&D.
From 1 July 2028, the Government will:
- Increase the offset for core R&D expenditure by around 25 to 50 per cent, through a 4.5 percentage point increase in core R&D offset rates;
- Reduce the intensity threshold from 2 per cent to 1.5 per cent, enabling more firms that engage in substantial core R&D to qualify for higher offset rates;
- Remove eligibility of supporting R&D expenditure for the R&DTI;
- Enable growing firms to retain access to the refundable tax offset for longer by increasing the turnover threshold for the highest offset rate from $20 million to $50 million;
- For firms below the $50 million turnover threshold, maintain older firms’ eligibility for the higher offset rate while limiting refundability to firms under 10 years of age;
- Lift the maximum R&DTI expenditure threshold from $150 million to $200 million; and
- Improve assurance on smaller claims by lifting the minimum expenditure threshold from $20,000 to $50,000, with research activities valued below this amount required to be undertaken with a registered Research Service Provider or Cooperative Research Centre to be eligible for the R&DTI.
Tax Reform – expanding venture capital tax incentives
The Government will expand the venture capital tax incentives to better facilitate venture capital investment and support early stage and growth businesses.
From 1 July 2027:
- The venture capital limited partnership (VCLP) cap on the asset size of the investee business at the time of investment will be increased to $480 million, from $250 million;
- The early stage venture capital limited partnership (ESVCLP) cap on the asset size of the investee business at the time of investment will be increased to $80 million, from $50 million;
- The ESVCLP tax incentive cap on the asset size of the investee business, at which investment returns can be fully tax exempt, will be increased to $420 million, from $250 million; and
- The maximum fund size of ESVCLPs will be increased to $270 million, from $200 million.
- The increases will apply to new and existing funds and to new investments they make, including where funds make further investments in businesses already held. ESVCLPs must remain in compliance with their existing investment plans or seek approval for a replacement plan.
The eligible venture capital investor program will be closed to new applications from 7.30PM (AEST) 12 May 2026.
Tax Reform – introducing a $1,000 Instant Tax Deduction
The Government will introduce an instant tax deduction of up to $1,000 from the 2026–27 income tax year to make the tax system simpler while also delivering more cost-of-living relief.
Australian tax residents who earn income from work will be eligible for the instant tax deduction and will not need to itemise and claim work related expenses if claiming less than $1,000.
Individuals who incur work related expenses greater than the instant tax deduction can continue to claim their deductions in the usual way. Charitable donations, union and professional association membership fees and other non work related deductions can still be itemised separately and claimed on top of the instant tax deduction.
Tax Reform – loss refundability reforms for businesses and start ups
The Government will provide tax relief to businesses and start ups by reforming the treatment of tax losses. This will encourage investment and sensible risk taking and improve the resilience of firms through temporary shocks.
For tax years commencing on or after 1 July 2026, companies with aggregated annual global turnover of less than $1 billion will be able to carry back a tax loss and offset it against tax paid up to two years earlier. Loss carry back will apply to revenue losses only and will be limited by a company’s franking account balance.
Reintroducing loss carry back is estimated to decrease receipts by $2.3 billion over the five years from 2025–26.
The Government will also introduce loss refundability for small start up companies. For tax years commencing on or after 1 July 2028, start up companies with aggregated annual turnover of less than $10 million that generate a tax loss in their first two years of operation will be able to utilise the loss to generate a refundable tax offset. The offset will be limited to the value of fringe benefits tax and withholding tax on wages paid in respect of Australian employees in the loss year.
Tax Reform – making tax simpler for businesses
The Government is making the tax system simpler so businesses can spend more time running their business and less time on tax.
From 1 July 2026, the Government will permanently extend the $20,000 instant asset write off for small businesses with turnover up to $10 million. Assets valued at $20,000 or more can continue to be placed into the small business simplified depreciation pool. The provisions that prevent small businesses from re entering the simplified depreciation regime for 5 years after opting out will continue to be suspended until 30 June 2027.
From 1 July 2027, small and medium businesses will be able to opt in to reporting and paying PAYG instalments monthly and to using an ATO approved calculation embedded in accounting software to calculate and vary their instalments.
Tax Reform – Boosting Home Ownership – reforming negative gearing and capital gains tax
The Government is reforming negative gearing and capital gains tax (CGT) arrangements to improve the fairness of the tax system, support home ownership and help fund new tax cuts for workers.
Improving Tax Arrangements for Capital Gains
From 1 July 2027, the 50 per cent CGT discount will be replaced by cost base indexation for assets held for more than 12 months, with a 30 per cent minimum tax on net capital gains. These changes will apply to all CGT assets, including pre 1985 CGT assets, held by individuals, trusts and partnerships.
Transitional arrangements will limit the impact on existing investments by ensuring the changes only apply to gains arising on or after 1 July 2027. The 50 per cent CGT discount will continue to apply to gains arising before 1 July 2027. Capital gains on pre 1985 assets arising before 1 July 2027 will remain exempt from CGT.
To maintain incentives for new housing supply, investors in new residential properties will be able to choose either the 50 per cent CGT discount, or cost base indexation and the minimum tax. Income support payment recipients, including Age Pension recipients, will be exempt from the minimum tax.
Reforming Negative Gearing to Support New Housing Supply
The Government will limit negative gearing for residential property to new builds. From 1 July 2027, losses from established residential properties will only be deductible against rental income or the capital gains from residential properties. Excess losses will be carried forward and able to be offset against residential property income in future years.
These changes will apply to established residential properties acquired from 7:30PM (AEST) on 12 May 2026. Properties acquired prior to this time (including contracts entered into but not yet settled) will be exempt from the changes until disposed of.
Eligible new builds will be exempt from the changes, ensuring the benefits of negative gearing are directed to investment that increases the housing stock. Properties in widely held trusts and superannuation funds will be excluded, alongside targeted exemptions for build to rent developments and private investors supporting government housing programs.
Tax Reform – introducing a minimum tax on discretionary trusts
The Government will introduce a 30 per cent minimum tax on discretionary trusts to improve the fairness of the tax system and help fund new tax cuts for workers.
From 1 July 2028, trustees will pay a minimum tax of 30 per cent on the taxable income of discretionary trusts. Beneficiaries, other than corporate beneficiaries, will receive non refundable credits for the tax payable by the trustee.
The minimum tax will not apply to other types of trusts such as fixed and widely held trusts (including fixed testamentary trusts), complying superannuation funds, special disability trusts, deceased estates and charitable trusts. Some types of income such as primary production income, certain income relating to vulnerable minors, amounts to which non resident withholding tax applies, and income from assets of discretionary testamentary trusts existing at announcement will also be excluded.
The Government will provide expanded rollover relief for three years from 1 July 2027 to support small businesses and others that wish to restructure out of discretionary trusts into another entity type, such as a company or a fixed trust.
Important: This is not advice. Clients should not act solely on the basis of the material contained in this Bulletin. Items herein are general comments only and do not constitute or convey advice per se. Also changes in legislation may occur quickly. We therefore recommend that our formal advice be sought before acting in any of the areas. The Bulletin is issued as a helpful guide to clients and for their private information. Therefore it should be regarded as confidential and not be made available to any person without our prior approval.
