Federal Budget 2026 live broadcast

The Commonwealth Government has laid down a Budget that seeks to generate additional tax revenue to help pay for an expanding range of goods and services being provided to the Australian population. Broadly, this additional ask on Australian tax payers is not unreasonable; we as a nation pay relatively less in tax than the OECD average, and as good and services become more expensive it is reasonable for the Government of the day to seek more from those that can afford to pay.

However, couching this as a tax reform budget is generous. Tax reform incorporates principles of simplicity, equity, efficiency and revenue adequancy and argubly the tax changes proposed in this budget, largely under the ratrionale of improving ‘intergenerational equity’, fall short of some of these ideals. This can be readily seen through the Government’s increased reliance on income based taxes, which riseto 77.9% of total tax revenue comparedto the previous 10-year average of 75.6%. However, the budget’s productivity and investment package is a step in the right direction and is commendable. 

Treasury’s GDP growth forecasts presented in the Budget appear a little optimistic, both in terms of the RBA’s and KPMG’s latest forecasts. The likelihood of economic uncertainty extending beyond next financial year as a consequence of the current oil price shock is considered high. That, combined with higher than expected interest rates, is likely to pull down consumption and business investment more than what is anticipated in Treasury forecasts. 

The 2026 Federal Budget includes key policies that reveal how Australia is navigating the volatile geopolitical environment. As the open, rules-based global trading order continues to fracture, the Treasurer has announced a series of measures that aim to make Australia more resilient to global shocks.

For example, the Budget includes new spending commitments to reduce Australia’s vulnerability to volatile energy markets that have recently been disrupted by conflict in Iran. These measures include a focus on increasing refined fuel and fertiliser stockpiles and domestic fuel refining. There is also support for solar, batteries, and clean liquid fuels, all of which meet decarbonisation objectives as well as contribute to greater energy sovereignty.

The government has also pursued greater energy security by signing ‘landmark supply chain agreements’ with Brunei Darussalam, Japan, the Republic of Korea and Singapore.

These measures are part of a broader global trend that impacts energy, agriculture, tech and defence industries. Countries all over the world are trying to end dependence on unreliable suppliers, increase self-sufficiency, and build trusted networks with closely aligned partners. As Australia navigates these shifts, we can expect additional targeted support for these domestic industries – and for partnerships with like-minded countries – in the years ahead. 

Pillar Two side-by-side package implementation

The government will amend Australia’s global and domestic minimum tax legislation to implement the side-by-side package agreed on 5 January 2026 by the OECD/G20 Inclusive Framework on Base Erosion and Profit Shifting.

This will ensure Australia’s rules remain aligned with other jurisdictions in supporting a globally coordinated minimum tax framework, reflecting the government’s sustained commitment to the multinational tax reform agenda.

The amendments will apply from 1 January 2026 and will impact large multinational groups operating in Australia, with particular significance for groups headquartered in the United States. 

Foreign resident capital gains tax (CGT) concession for renewables

As foreshadowed in exposure draft legislation released for consultation on 10 April 2026, the government will introduce a time‑limited, targeted concession within the foreign resident CGT regime for certain investments in renewable energy infrastructure. The concession will apply to eligible disposals from the first day of the next quarter after Royal Assent. Notwithstanding robust industry submissions calling for a longer period in support of Australia’s net zero targets, the concession period will only apply to CGT disposals occurring until 30 June 2030. The concession reflects the government’s continued support for investment in the renewables sector while maintaining alignment with the longer‑term tax treatment of other assets. The government will also clarify that the concept of Australian ‘real property’ is determined under Commonwealth legislation (rather than state and territory laws), with effect from 12 December 2006. Again, this is despite substantial stakeholder feedback regarding the problematic nature of this retrospective aspect of the measure.

Accelerating foreign investment approvals

The government will provide $47.5 million over four years from 2026–27 (and $3.9 million per year ongoing) to the Treasury and the ATO to strengthen and streamline Australia’s foreign investment framework. The reforms include a new performance target to finalise all low‑risk foreign investment applications within 30 days from 1 January 2027, and the removal of ineffective conditions on existing approvals.

Protecting the tax system against fraud

The government will provide $86.3 million over four years from 1 July 2026, and $9.7 million per year ongoing from 2030–31, to continue delivery of the Counter‑Fraud Strategy. The measure will enhance the ATO’s real‑time fraud detection and monitoring capabilities across the tax and superannuation systems, strengthen protections for individuals, businesses and tax agents, and expand the ATO’s powers to address fraud by tax intermediaries, including pausing, waiving and recovering tax debts in appropriate cases. Additional targeted compliance activity will be undertaken from 2026–27, including in relation to the Research and Development Tax Incentive.

Notably, the Budget does not refer to ongoing funding for the ATO’s Tax Avoidance Taskforce, which has been a consistent feature of recent budgets.

Loss carry-back and loss refundability

The government will provide tax relief to businesses and start-ups by reforming the treatment of tax losses.

From income years commencing on or after 1 July 2026, companies with aggregated turnover of less than $1 billion will be able to carry back tax losses and offset them against tax paid in the previous two income years, subject to franking account limits.

From 1 July 2028, the government will also introduce loss refundability for eligible start-ups with aggregated turnover of less than $10 million.

Previously announced measures not in the Budget

There are no further developments in relation to a number of previously announced but unenacted measures, including:

• The significant expansion of the general anti-avoidance rule to schemes that access a lower withholding tax rate or have a dominant purpose of obtaining a foreign tax benefit (announced in the 2023-24 Budget).
• New penalties for mischaracterised or undervalued royalty payments to which withholding tax would otherwise apply (announced in the 2024-25 Budget), and mischaracterised or undervalued dividends or interest payments (announced in the 2024-25 MYEFO).
• Amendments to the Managed Investment Trust (MIT) regime to clarify that trusts ultimately owned by a single widely held institutional investor (such as a foreign pension fund) can continue to qualify for MIT withholding tax concessions, following the ATO’s release of Taxpayer Alert TA 2025/1 (announced in the 2025-26 Budget). 
• Reforms to corporate tax residency rules to move to a “significant economic connection to Australia” test which would bring long-sought certainty to corporate residency (announced by the previous government in the 2020-21 Budget).

R&D Tax Incentive (RDTI)

Almost every aspect of the RDTI and every claimant will be impacted from 1 July 2028.

The new measures announced broadly align with the Ambitious Australia report recommendations; from narrowing eligibility to increasing the benefit for activities that qualify.

These changes will bring greater complexity to the program on several fronts, including by limiting refundability based on the age of a firm rather than its size.

It is critical that government consults widely with stakeholders before enacting the enabling legislation.

Government Grants

The Budget highlights a rebalancing of government grant funding away from legacy or uncommitted allocations towards a more tightly targeted set of national priority programs.

$1.3 billion has been repurposed from uncommitted funding across Battery Breakthrough Initiative, Solar Sunshot, and Hydrogen Headstart, and $164.4 million from the Powering the Regions Fund.

The Budget reinforces support for strategic and high-impact sectors, and regional-based economic development, including:

• $781.6 million for Growing Regions Program and Thriving Suburbs Program
• $59.1 million for strengthening capability in defence and security
• $30.1 million for Stronger Communities Program to support capital projects that deliver social benefit for local communities
• Increasing annual disbursements from the Medical Research Future Fund from $650 million to $1.0 billion over five years.
• Prioritise funding to support specific national priority outcomes such as critical minerals production incentive for downstream processing, energy security, fuel and supply chain resilience, emissions reduction and integration with global partner markets.

Start-ups and venture capital

From 1 July 2027, the current limitations on both venture capital limited partnerships (VCLPs) and early-stage venture capital limited partnerships (ESVCLPs) will be relaxed; asset size of the investee business to increase (to $480 million and $80 million respectively) and the tax exemption cap for ESVCLPs will increase to $270 million.

Surprisingly, there are no similar changes to relax or increase the benefit under the early stage investor tax incentive (for investment in early stage innovation companies) or employer share scheme startup concessions.

Net overseas migration has already declined by around 45% from its peak in 2022–23, and is forecast to continue to drop over the next two years to 225,000. 

Key elements of the strengthened migration integrity announcements include additional scrutiny of onshore and offshore student visa applications; and new visa refusal and cancellation powers linked to antisemitism, hate and extremism. 

Reforms have been flagged for the ‘Working Holiday Maker Program’. The proposal includes expanding the use of ballots to improve management of the program. 

Significant savings are signalled across the education portfolio, including $472.1 million over four years from 2026–27 (and $203.3 million per year ongoing).

The government is reforming negative gearing and capital gains tax (CGT) concessions. Negative gearing will be limited to new builds for residential properties (subject to grandfathering), and the 50% CGT discount will be replaced with cost base indexation and a 30% minimum tax on net capital gains, from 1 July 2027. These reforms are expected to support an additional 75,000 first home buyers over the decade.

The government is providing $2.0 billion of funding over four years via states and territories (states) to expedite the delivery of housing enabling infrastructure. The provision of funding is contingent on states committing to reforms to improve productivity in the housing sector, including faster and simpler approvals, releasing more land ready to build homes, and delivering a national construction code. 

The government is making all mandatory Australian standards free, including across construction, occupational health and safety, and product safety, saving small electrical, plumbing and construction firms up to $1,600 in access fees. 

Under National Competition Policy, the government is delivering new agreements with states to remove barriers to modern methods of construction in housing and streamline commercial planning and zoning regulations.

The Budget is focused on delivering against the government’s commitment to meet growing demand for health and aged care services with a focus on affordability and system efficiency. This includes investments for initiatives to expand aged care capacity.  

A commitment of $220.3 billion in funding to states and territories for public hospital services and to support implementation of the 2026–2031 Addendum to the National Health Reform Agreement (NHRA). The largest component of this funding, $24.4 billion over five years from 2026–27, focuses on the Commonwealth contributions to hospital costs. Other allocations target Aboriginal and Torres Strait Islander health outcomes, digital health reforms and cross-border hospital arrangements. 

To support access to affordable primary care the government is investing $1.8 billion to fund Medicare Urgent Care Clinics, making them a permanent feature of the health system providing bulk billed care for urgent, but non life threatening conditions.

Pharmaceutical Benefits Scheme initiatives aim to reduce out of pocket costs for patients with measures focused on expanding access to innovative and high-cost therapies targeting both unmet clinical need and complex diseases. 

Investment of $447.9 million to strengthen health protection and system preparedness, including the National Medical Stockpile, Emergency Health Resilience Preparedness Fund and efforts to eliminate HIV transmission.

Commitment of $241.5 million over five years for First Nation’s Health initiatives, including supporting Aboriginal Community Controlled Health Services, construction of dialysis units for First Nations People, and Birthing on Country programs.

In response to the Residential Aged Care Accommodation Pricing Review there is a commitment of $606.5 million over four years and an additional $3 billion from 2030-31 to 2035-36 to increase aged care beds and support equity of access. 

The government is committing $1.4 billion over four years from 2026–27 (and $377.3 million per year ongoing) to improve home care affordability, with the largest share of $1 billion to fully fund personal care services. A further $389.8 million will refine the Support at Home program. 

Investment of $565.1 million over four years will continue to strengthen aged care regulatory, governance and quality arrangements including workforce support. 

The Budget sets out a clear path for a fundamental reset of the NDIS to deliver a fairer more sustainable scheme, with greater clarity on eligibility, funded supports and the role of state-based systems. 

Investment of $1.7 billion over five years from 2025–26, with ongoing funding of $110.9 million per year aimed at ensuring the NDIS remains sustainable. Alongside this, $2 billion over five years is committed to the introduction of a new program Thriving Kids to support children to transition from the NDIS to community-based child development services. The majority of this funding will be directed to states and territories to deliver these supports ($1.4 billion), alongside targeted investment in early childhood settings, early identification of developmental delays through a Medicare-funded health check for three-year-olds, and information and advice for parents. The package also includes funding for a digital child health record, workforce training, public awareness, implementation, and community engagement.

In addition, the Budget outlines provisions of $3 billion to establish Foundational Supports for those with lower support needs (to be matched by states and territories). These reforms are anticipated to reduce growth in NDIS payments by $37.8 billion over the next four years.

To improve safety outcomes for women and children who experience FDSV, the Government is committing $218.3 million over five years (from 2025-26) to support the implementation of actions under the Our Ways – Strong Ways – Our Voices: National Aboriginal and Torres Strait Islander Plan to End Family, Domestic and Sexual Violence 2026-2036 to address unacceptably high levels of family violence experienced by First Nations women and children. This includes funding for a national network of Aboriginal Community Controlled Organisations to deliver FDSV services.

An additional $61.2 million over four years has been committed to boost funding for the frontline FDSV workforce through the next phase of the 500 Workers initiative.

Further funding of $182.6 million will strengthen the Child Support system, addressing financial abuse, non compliance and system misuse, to improve safety and financial security for families.

Investment of $171.7 million over five years will support stronger outcomes for families and communities through enhanced frontline delivery of prevention and early intervention services to support children’s development and wellbeing, empowering parents, caregivers and families, as well as building capacity in the family and communities sector.

The Budget has confirmed the $53 billion increase in Defence spending over the next decade announced with the release of 2026 National Defence Strategy and Integrated Investment Program in April 2026.

The budget and National Defence Strategy/Integrated Investment Program concentrates opportunity for industry in priority areas rather than spreading growth evenly across the sector. The largest investment bands: undersea warfare ($94 to $130 billion), maritime sea denial ($62 to $77 billion), guided weapons and explosive ordnance ($26 to $36 billion), long range strike ($28 to $35 billion), space and cyber ($27 to $38 billion) and missile defence ($21 to $30 billion) favour organisations with strong systems integration, sovereign production and sustainment depth. 

The Budget translates strategic intent into targeted Defence industrial enablers across precinct infrastructure, the nuclear enterprise and workforce pipelines. It confirms that the National Defence Strategy/Integrated Investment Program measure includes part of the $12 billion Henderson Defence Precinct commitment and provides $30 million in 2025–26 to support design and early works for interim facilities which is an explicit stimulus for Western Australian maritime sustainment and supply chain scaling. It further provides an equity injection to Australian Naval Infrastructure over four years from 2026–27 to support the Nuclear Powered Submarine Construction Yard. 

The Budget strengthens the industrial base and talent pipeline through $863.8 million over four years for continued nuclear program resourcing across the Australian Submarine Agency and regulators, plus $218.4 million over eight years including workforce initiatives and submarine industrial base uplift, and $106.4 million over six years in grants to support defence industry pathways (internships and school pathways) and the strategic policy sector.

The Government Response to the Antisemitic Bondi Terrorist Attack measure shapes the more significant features of the national security spending in this budget. The government has made a commitment to responding to the interim findings of the Royal Commission and complementary programs, with a $604.2 million package. Over $200 million will be dedicated to supporting the Jewish community and bolstering the security of Jewish institutions. $207.4 million is also allocated over five years to broader counter terrorism and violent extremism initiatives including $80 million to establish the Counter-Terrorism Online Centre.

A $167.4 million migration integrity package will complement the productivity-focused migration reforms. Priorities include funding courts to address protection visa misuse, enhancing system capabilities, improving migrant worker awareness of rights, and increasing scrutiny of student visa applications both onshore and offshore. These initiatives should also help improve the efficacy of, and public support for, the migration program.

The courts, law enforcement and emergency management functions of the Commonwealth have received minor investments to top up necessary activities and delay more expensive reforms. Notably the budget provides over $50 million to investigate war crimes allegations. There will be ongoing spending on disaster resilience and response by supporting emergency communications, a national cell broadcast system, and an aerial firefighting capacity, funded largely through existing programs and reprioritisation.

Cyber security is now a permanent feature of the budget, albeit this year at a more modest level. Cyber security uplift across the Commonwealth is the main winner with a $160.4 million investment into Services Australia, further advancing objectives under the 2023-2030 Australian Cyber Security Strategy.

Recognising the increasing strategic contest in the Indo-Pacific, $550 million has been allocated over 10 years to support high-quality, climate-resilient infrastructure in the Pacific and Timor-Leste through the Australian Financing Facility for the Pacific. DFAT again enjoys a modest budget uplift, reflecting this Government’s focus on sustained, strategic engagement in the region and globally as Australia faces into challenging global headwinds.

Productivity

Investment in technology-enabled productivity measures has increased in this Budget under the Boosting Productivity theme. This is evident in the $198.1 million commitment to streamline regulatory systems within the Treasury portfolio, particularly through enhancements to Australia’s business registers and expanding the Consumer Data Right. This investment is a targeted intervention to reduce friction in regulatory processes and improve data accessibility for the Australian economy.

The government has also allocated $105.9 million to modernise data and systems across the Department of Climate Change, Energy, the Environment and Water (DCCEEW) and for a new National Environmental Protection Agency (NEPA),the only reference in the Budget to the government’s internal artificial intelligence adoption, indicating a cautious and highly selective approach to AI use.

The most notable measure under the government’s boosting productivity theme is $654.3 million to sustain the Digital ID system. This investment underscores its strategic importance as both a productivity enabler and key input for national resilience. By strengthening secure identity infrastructure, the government is positioning Digital ID as a foundation for more efficient service delivery while reinforcing trust and security.

Resilience

The Budget reinforces the government’s priority to strengthen government resilience through targeted investment in security and system reliability. This includes $160.4 million allocated for Services Australia's Cyber Security Uplift Program and additional funding to improve the functionality, availability, and security of the MyGov platform. Additionally, $598.3 million is allocated to support the continued operations of My Health Record, delivering improvements that will underpin implementation of future legislative reforms.

Targeted investment of $259.9 million is also provided to the Department of Health and Aged Care to sustain core aged care ICT systems and ensure service continuity. This is alongside a further $33.7 million to improve the Aged Care Quality and Safety Commission’s ICT governance, delivery processes and internal cyber security capability. Separately, $26.1 million is allocated to Department of Finance to support the sustainment of core systems underpinning whole-of-government budget and financial management platforms. The Department of Home Affairs and Department of Parliamentary Services also received funding to increase resilience by strengthening the migration system ($46.4 million), and parliamentary ICT systems respectively (funding not for publication).

Collectively, these measures prioritise system availability, integrity and security, with funding focused on sustainment and risk reduction to ensure continuity of critical government services in response to increasing government security obligations.

Fraud prevention

Government spending continues to prioritise fraud detection and prevention, with a particular focus on health, disability, and care support settings. The government has committed $358.5 million of continued funding to the National Disability Insurance Scheme and $146.8 million of new funding to Medicare, to support payment integrity and compliance. These measures reflect a sustained interest in ensuring public funds are used appropriately in health and disability programs.

Emerging technologies

The Budget includes new funding to accelerate the development and commercialisation of AI researchers and businesses by making up to $70m available through upcoming rounds of the Cooperative Research Centres and CRC-P program starting in 2026 and 2027 for an ‘AI Accelerator’. Beyond the already announced funding for PsyQuantum in the 2024-25 Budget, there has not been any additional spending pledged for Quantum technologies.