A federal budget will be announced by Treasury Secretary Jim Chalmers on Tuesday evening, and it is touted to be the most responsible budget in history.
The budget promises major tax reforms and increased austerity measures as well as an emphasis on making the nation resilient.
This will be the budget for 2026 to 27 and the first since Labor won the election last year.
It promises to strike a balance between controlling high inflation levels while reducing pressure on individuals and families whose financial situation has been strained due to increased interest rates and ongoing conflicts in the Middle East that have seen fuel prices rise.
According to Treasurer Chalmers, who told in a pre budget statement, “People shouldn’t expect there to be big, near term cash splashes in the budget.”
The treasurer also indicated that the package will include a productivity element, a saving component and a review of taxation policies for investment income and assets.
Tax changes take centre stage
It appears that tax will make the headlines.
According to reporting from the Australian Financial Review, the government plans to narrow the 50% capital gains tax discount and revert to an inflation adjusted system, with grandfathering for assets bought prior to budget day.
There are also reforms being considered regarding negative gearing and family trust taxation, but the exact details have yet to be determined.
This is a reversal of Labor’s election promise in 2025 that they would leave both of these policies untouched.
There is also another tax reform being implemented separately that will impose a 40% levy on superannuation accounts over $10 million.
Income tax cuts for low and medium income households were also announced at budget day last year and are due to take effect from July 1.
Budget restraint is set to hinge upon the National Disability Insurance Scheme.
The government intends to implement measures that will see reduced growth of the scheme, as well as a decrease in the number of participants by around 160,000 by 2030, compared to current levels of 760,000.
Also Read: Victorian Budget 2026: All the winners and losers from this year’s budget
The crossbenchers argue that the strain may cause costs to spill into the health and aged care sectors if the Thriving Kids initiative is not operational by then.
Starting from April 2027, only electric cars that are priced at less than $75,000 will benefit from this measure fully. The budget saving is expected to reach up to $1.7 billion over four years.
Refundable R&D threshold is bound to rise, possibly by raising it to a range of $250 million to $300 million.
The measure, however, falls short of what was advocated for in the ambitious Australia review by Robyn Denholm.
Last week, the Reserve Bank lifted the cash rate to 4.35%, marking its third hike this year, citing oil price shocks related to disruption in the Strait of Hormuz.
The Treasury isn’t predicting a recession, but slower growth as the global uncertainty weighs on the domestic economy.
