Budget 2026-27: Business and Industry Insights

The 2026-27 Federal Budget has some big ambitions – to deliver intergenerational equity through an overhaul of negative gearing and the capital gains tax discount, aimed at giving first home buyers a leg up the property ladder. 

A new tax offset for working Australians runs alongside fuel relief and supply resilience measures to help the country weather the fifth economic shock in less than 20 years, this one caused by the oil crisis from the Middle East war.

Policy announcements are primarily directed at reducing intergenerational inequity, property tax reforms and improved fuel security, alongside housing, productivity and savings.   

Overall, the Budget’s initiatives will bring change to several industry sectors in Australia, including home building, health, defence, retail trade and hospitality.

Here are the 2026 Budget impacts for some key sectors of the Australian economy.

Real estate and construction

At the centre of the debate about intergenerational wealth inequity is housing policy. Capital gains tax discounts and negative gearing have long been criticised for skewing housing ownership towards older wealthy investors, while young people struggle to buy homes.

The Federal Budget has introduced significant changes to the tax treatment of residential property investment. The key reform targets negative gearing. From 1 July 2027, it will be limited to new builds that add to housing supply, with losses on established properties able to be quarantined and carried forward against future residential rental income or residential property capital gains.

The second major change is to capital gains tax. From 1 July 2027, the existing 50% CGT discount will be replaced with indexation and a 30% minimum tax rate. Replacing the 50% discount with indexation does not always increase the tax burden, with the effect depending on the relationship between inflation and house price growth.

“This may lead to some uncertainty in the near term around housing transactions, as investors understand the implications of the new policy announcements,” says Belinda Allen, Head of Australian Economics, CommBank.

Changes to negative gearing and capital gains tax discounts may lead to some uncertainty in the near term around housing transactions, as investors understand the implications of the new policy announcements.” – Belinda Allen, Head of Australian Economics, CommBank

“So, there is a risk that maybe over the next 12 months or so, housing turnover could be dampened as a result.”

However, Allen doesn’t expect this to have much impact on house prices. CommBank forecasts house prices will be 3% lower than they would’ve been without the changes, but the impact will come over a few years.

There is significant support in the Budget for building new homes.

Investors will still be able to negatively gear newly built homes – and to get the 50% capital gains tax discount. Plus, the government is spending $2 billion over four years to expedite the delivery of housing-enabling infrastructure such as roads, power, sewage and water for new housing developments. Budget reforms will lift the total investment in housing to a record $47 billion, with $2 billion dedicated to the infrastructure needed for about 65,000 homes.

The Budget is also aiming to accelerate building approvals and reduce regulatory costs.

“That's hopefully setting construction up for more success, but there are challenges in the near term around rising costs of construction and higher interest rates,” says Allen.

Less red tape is hopefully setting construction up for more success, but there are challenges in the near term around rising costs of construction and higher interest rates.” – Belinda Allen, Head of Australian Economics, CommBank

Retail trade and hospitality

From 2026-27, a new $250 Working Australians Tax Offset (WATO) will put more money into the pockets of 13.3 million workers. The offset will begin from the second half of 2027 and be paid each year, ongoing and automatically in tax returns. Workers will not receive their first instalment until July 2028 at the earliest.

Also, workers will receive a $1000 instant tax deduction and it won’t be until then that retail trade and hospitality receive any benefit from this year’s Budget, says Ryan Felsman, Senior Economist – Business and Industry Economics, CommBank.

Consumers will have to choose whether to save or spend that extra money, which will add $2.6 billion to household budgets over four years.

Household budgets will be further boosted by an estimated $6.4 billion over five years from the $250 tax offset for every taxpayer from 2027-28.

“It’s unknown what consumers will do,” says Felsman. “At the moment, if you look at consumer confidence surveys, consumers are worried about their finances due to cost-of-living pressures and higher mortgage repayments, so they're more likely to save, but unemployment remains low, so they may continue to spend.”

If you look at consumer confidence surveys, consumers are worried about their finances due to cost-of-living pressures and higher mortgage repayments, so they're more likely to save, but unemployment remains low, so they may continue to spend.” – Ryan Felsman Senior Economist – Business and Industry Economics, CommBank

Allen notes that consumer spending has so far been quite resilient in the face of the Middle East conflict and cost-of-living challenges. The tax relief for households will start flowing at about the same time CommBank expects the Reserve Bank of Australia to start cutting interest rates, in late 2027, which should provide further support for retail trade and hospitality spending. However, CommBank acknowledges there is a high degree of uncertainty over the path for rates from here.

Health

The Budget brings crosswinds for the health sector, with a mixture of cuts and spending.

Spending cuts are focused mainly on the NDIS, with the government concerned that spending growth on the disability support program is unsustainable. The government is aiming to reduce growth in NDIS spending by $37.8 billion over four years. While the reduction will impact service providers to the scheme, the NDIS will continue to grow at a little over 2% a year.

Against that are several other large health spending increases, including a $25 billion increase in public hospital funding and $5.9 billion towards listing more medicines on the Pharmaceutical Benefits Scheme, which will support pharmaceutical companies.

The government is also allocating $1.8 billion to permanently fund 137 Medicare urgent care clinics.

Defence

The defence sector is one of the major beneficiaries from this year’s Budget, with the government planning to raise defence spending to around 3% of gross domestic product by 2033. This translates to an extra $14 billion in defence spending over the next four years and an extra $53 billion over the next decade.

“Defence is a clear winner. We're already seeing the impact of stronger defence spending on parts of the Australian economy, particularly South Australia,” says Allen. “Western Australia will also benefit, with $12 billion allocated to establish the Henderson Defence Precinct for naval shipbuilding and maintenance.”

“Defence is a clear winner. We're already seeing the impact of stronger defence spending on parts of the Australian economy, particularly South Australia.” – Belinda Allen, Head of Australian Economics, CommBank

Defence contractors and manufacturers will benefit from the increased spend, although a significant portion of defence-related machinery is imported.

Much of the government’s focus is on drones and counter-drone systems, with additional spending of between $2 billion to $5 billion.

“The initiatives complement the 2026 National Defence Strategy and Integrated Investment Program announced in April,” says Felsman.

Regional Australia and agribusiness

The chief benefit for regional Australia in this year’s Budget is in the $10.7 billion National Fuel Security Plan to increase fuel resilience.

It includes establishing a permanent, $3.2 billion government-owned fuel reserve that will increase petrol, diesel and jet fuel stocks to around 50 days.

Halving of the fuel excise will help drivers and the agricultural sector with soaring prices at the bowser, at a cost of $2.5 billion to the Budget.

“Farmers and the broader agricultural sector can rest a bit easier with the measures to improve fuel and fertiliser security, in wake of persistent global energy supply disruptions,” says Felsman. 

“Farmers and the broader agricultural sector can rest a bit easier with the measures to improve fuel and fertiliser security, in wake of persistent global energy supply disruptions.” – Ryan Felsman Senior Economist – Business and Industry Economics, CommBank

Another positive outcome for the bush is additional funding for general practitioners and rural generalist training in regional Australia.

But regional leaders will be disappointed by the government’s decision to axe funding for the Melbourne to Brisbane Inland Rail project beyond the NSW central west regional town of Parkes, thanks to a blowout in the project’s cost to $45 billion. The line will now connect Beveridge on the outskirts of Melbourne to Parkes, instead of going all the way to Brisbane.

Professional services

Accountants should see an increase in demand for their services because of the added taxation complexity of the changes to CGT, negative gearing and discretionary trust users. The government will hit trusts with a minimum rate of 30% on taxable income from the start of the 2028 financial year.

Some businesses will also have more complex tax affairs, particularly those affected by the changes to the R&D Tax Incentive, expanded tax incentives for venture capitalists and the re-introduction of the ‘loss carry-back’ policy.

As mentioned above, the government will expand tax incentives for venture capital. It will better target and simplify the R&D Tax Incentive by increasing offsets by about 25–50% for core projects.

By reintroducing a pandemic measure that will allow businesses with a turnover of up to $1 billion to claim back losses made over the past two years, the government wants to improve the cash flow at those businesses and reduce the tax system’s bias against risky investments.