Contentious changes to negative gearing, capital gains tax, and a gutting of the National Disability Insurance scheme are all on the table as the Albanese government prepares to hand down its fifth budget on Tuesday night.
The government has called it their most ambitious budget to date, and Treasurer Jim Chalmers has flagged there will be $64 billion in savings across the agenda.
While the bulk of the budget will be under wraps until Chalmers addresses parliament on Tuesday evening, here’s everything we know will be coming for Australian taxpayers.
Tax
Income tax cuts – From July 1, income tax cuts of around $5 per week for people earning more than $45,000 will come into effect. The lowest tax bracket, for income between $18,200 and $45,000, will be reduced from 16 per cent to 15 per cent. This was a key promise from Labor at the 2025 election that was rejected by then opposition leader Peter Dutton and his shadow treasurer, now Liberal leader, Angus Taylor. The opposition’s rejection of the measure allowed the government to argue they were offering lower taxes than the Coalition, a decisive message in Labor’s sweeping win at the polls. The cut will double in the subsequent budget, set to be delivered in May 2027.
One-off tax cut – A one-off tax cut of around $300 per worker is expected to be put into the budget; however, cabinet sources have told this masthead it would be handed to voters at tax time in 2027, not this year.
Instant tax deduction – Workers will be able to instantly claim a $1000 tax deduction without needing to supply receipts. Labor anticipates this will affect 6.2 million Australians, with an average tax saving of $205.
Capital gains tax – When Australian residents sell assets, they can reduce their capital gains bill by 50 per cent if they owned the asset for at least 12 months through the contentious capital gains tax discount. The government will return to the 1999 model, created at the introduction of the discount by then treasurer Paul Keating. Keating’s model had assets taxed at an inflation adjusted rate, meaning tax was applied only to the “real” increase in value of the asset.
Negative gearing – Treasurer Jim Chalmers appears ready to alter the long-standing policy many see as foundational to the housing crisis, negative gearing. The policy allows investors to deduct losses on an investment, such as a rental property, from their taxable income. Changes could include a cap on the number of properties an investor could negatively gear.
Instant asset write-off – Small businesses with an annual turnover of less than $10 million will have a temporary write-off measure made permanent. The instant asset write-off limit was previously increased from $1000 to $20,000 on a temporary basis that was set to expire at the end of the financial year.
Family trusts – Labor is expected to introduce a minimum 30 per cent tax rate on discretionary trust distributions. Discretionary trusts hold assets for a group of people, often a family, and the distribution of income from those assets can be channelled to an individual. Distributions are taxed at that individual’s marginal tax rate, meaning the tax burden from that income can ostensibly be reduced to zero.
Research and development – The government will increase tax breaks for business investment in research and development. Currently, businesses can claim tax offsets on up to $150 million of investment. However, in a move to boost productivity the cap could be increased to between $250 and $300 million.
Electric vehicles – Tax discounts for electric vehicles purchased under a novated lease will be rolled back. Fringe benefits tax will apply to vehicles over $75,000 from next year, and on all vehicles from 2029.
Health, aged care and the NDIS
Medicare Urgent Care Clinics – Labor’s bulk-billed walk-in centres designed to divert patients from overrun GPs and hospitals will receive an additional $1.8 billion in funding over the next five years.
Private health insurance and aged care –Subsidies for over 65s purchasing private health insurance will be cut, increasing bills by around $240 a year. Savings of around $3 billion will be diverted to aged care, delivering 5000 beds per year and making showering, dressing and continence management free during at-home care. Dementia care units will receive an additional $200 million a year.
The National Disability Insurance Scheme – Around 300,000 people will be removed from the scheme and participants’ plan budgets will be cut as the government seeks to save $35 billion over the next four years. Growth will be slowed to 2 per cent per year, saving up to $150 billion over the decade.
Fraud reduction – The government will allocate $674 million to the reduction of fraud in the Medicare Benefits Schedule and the Pharmaceutical Benefits Scheme.
Productivity reform
A series of reforms, largely taken from five Productivity Commission reports and other inquiries conducted in recent months, that the government estimates will cut red tape by $10.2 billion a year and boost the economy by $13 billion annually.
Red tape – The $20,000 instant asset write-off for small business will be made permanent while the government will move to “dynamic” monthly tax instalments which allow a business to pay their tax incrementally. New rules to enable more electronic record keeping by businesses. Cap on banks’ covered bond issuance increased.
Building – Mandatory Australian standards will be made free for construction and occupational health and safety firms, saving up to $1600 per standard. Overhaul of planning and zoning regulations to enable quicker methods of construction.
Migration – Making it easier and quicker to recognise skills of migrant trade workers. Overhaul of the permanent migration points test for skilled visas to bring in better educated, higher skilled migrants.
Housing
Labor will invest $2 billion over the next four years supporting local councils, power providers and water utility businesses in building critical infrastructure to support the construction of up to 65,000 homes across the country. A quarter of the investment will be reserved for regional areas. Another $500 million will go towards fast-tracking approvals for housing, critical minerals and energy projects.
Defence and security
Defence – The defence budget will be boosted by $53 billion over the next 10 years, with $14 billion of that invested in the next four years. This is roughly a 5 per cent increase over the next four years. Around $5 billion in spending will be diverted from planned programs to dole out more for drones and advanced technologies.
Counterterrorism – The new Counter Terrorism Online Centre will receive $74 million over the next two years to fight against the radicalisation of young people.
Fuel
Australia’s reserves of diesel and jet fuel will be boosted to a 50-day supply, through a $10 billion funding package. Investment of $3.2 billion will go towards the purchasing of 1 billion litres of fuel, with the remainder of the package being used to financially support private companies to manage storage. A study into the construction of new refineries will receive $10 million.
Iran war
Treasury will release analysis of how the economy and budget will be affected by the US and Israel’s ongoing war against Iran. The last mid-year economic and fiscal outlook (MYEFO) made forecasts based on oil costing $US66 a barrel. In the past month, oil peaked at just over $US118 a barrel.
Debt
Gross debt is expected to reach $1 trillion for the first time in the upcoming financial year.
Infrastructure
Rail – Equity funding in the order of $1.75 billion to the Australian Rail Track Corporation will be reprioritised, out of a larger pool of $14.5 billion. The halting of the Inland Rail project at Parkes will reduce gross debt by $4 billion. The contentious Suburban Rail Loop in Melbourne’s outer suburbs will receive $3.8 billion in funding, and the study into high-speed rail links between Sydney and Melbourne will be funded. At least $50 million will go into improvements to the Sydney-Canberra rail link.
Roads – The West Australian government will match $552 million in funding towards roads to the Kwinana cargo port.
Migration
Net overseas migration forecasts will be increased from the forecast of 225,000 presented in the last mid-year economic and fiscal outlook. The figure has become increasingly contentious, with the Coalition calling for the level to be cut to between 150,000 and 200,000.
The public service and consultants
The government will offer voluntary redundancies for public servants in key departments such as Prime Minister and Cabinet, Home Affairs, Education and Social Services. The bill for consultants and non-wage spending in the public service will be cut by $2.7 billion.
Education and research
Research – Uncommitted funding in the order of $800 million for Australia’s Economic Accelerator – a $1.6 billion program to translate and commercialise university research – will be redirected to other science and research measures.
Compliance – Activities to safeguard investment in schooling, including the provision of integrity payments for students with disability will receive $463 million.
Departmental grants
The government will cancel uncommitted grants from various of departments, including $405 in the Department of Climate Change, Energy, the Environment and Water; $276 million from Department of Industry, Science and Resources; $221 million from communications and regional grant programs.
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