Australian Federal Budget 2026-27
Balancing today's pressures against tomorrow's future.
On 12 May, the Federal Treasurer, Jim Chalmers, handed down the 2026-27 Budget.
Overview
Set within the context of global turmoil and an inflation challenge, and after expectations for ambitious reform had been raised over the past year, this was one of the most anticipated Federal Budgets for some time.
The Budget reveals an underlying cash deficit of $28.3 billion is estimated for 2025-26, an improvement of $8.5 billion compared to the expectation in the Mid-Year Economic and Fiscal Outlook (MYEFO) in December 2025. Over the five years to 2029-30, the forecast of the underlying cash balance has improved by a cumulative $44.8 billion, thanks primarily to a windfall revenue gain of $41.1 billion over the same period.
The Budget also announced some modest but meaningful changes to the tax system, including on capital gains, negative gearing of residential property and discretionary trusts.
Federal Budget 2026-27
Key takeaways from this year’s Budget include:
- Budget position improves materially, with a $45 billion stronger bottom line over five years, driven by higher tax receipts and NDIS savings.
- Fiscal stance adds modestly to inflationary pressure, with $18.3bn more flowing into the economy in 2026-27, potentially complicating the RBA’s inflation challenge.
- Productivity reforms in the form of changes to research and development tax incentives, expanding venture capital tax incentives, and introducing a loss carry back regime for certain businesses.
- Targeted but limited tax reforms in respect of capital gains, negative gearing and discretionary trusts will broadly impact wealthy Australians but pose implementation challenges.
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We would like to acknowledge the contributions of our authors and contributors in preparing this report.
Authors: Stephen Smith, Meghan Speers, Cathryn Lee
Contributors: Peta McFarlane (Director – Tax & Legal), Dan Weber (Associate Director – Deloitte Access Economics), Amy Rossi (Senior Consultant – Tax & Legal), Diana Carosi (Manager – Tax & Legal) and Amy Kerrigan (Consultant – Deloitte Access Economics).