Australia: 2026 federal budget includes implementation of Pillar Two side-by-side package

Also includes reintroduction of two-year loss carry-back for companies and various R&D tax incentive changes

Australia’s 2026 federal budget, which was delivered on May 12, 2026, includes the following proposed tax measures:

Implementation of Pillar Two side-by-side package
Time-limited concession within foreign resident capital gains tax (CGT) regime for certain renewable energy investments
Reintroduction of two-year loss carry-back for companies
Permanent AU$20,000 instant asset write-off
Replacement of 50% CGT discount with cost‑base indexation supplemented by a 30% minimum tax on net capital gains for certain taxpayers, including most individuals and trusts
Various R&D tax incentive changes, including 25-50% increase to R&D tax offset rate (depending on the applicable corporate tax rate), decrease in R&D intensity threshold from 2% to 1.5%, and increase in annual cap from AU$150 to AU$200 million, countered by exclusion of supporting activities and increase in minimum R&D expenditure threshold to AU$50,000

Read a May 2026 report prepared by the KPMG member firm in Australia

Budget 2026 factsheets are also available on the Treasury’s budget website.

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Australia: 2026 federal budget includes implementation of Pillar Two side-by-side package

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