In the lead-up to the Australian Federal Budget next week, several pre-budget announcements have been made, including the proposed A$1,000 standard deduction for individual taxpayers. For more detail, refer to our article on the proposed standard deduction for individuals from 30 June 2027.
Other per-budget announcements include a proposed reduction in the FBT tax exemption for certain electronic vehicles from April 2027.
According to last year’s 2025 Federal Budget, total receipts were forecast at A$735 billion, with an expected budget deficit of A$42.1 billion in 2025/26, narrowing to A$35.1 billion in 2026/27.
The May 2026 Federal Budget will provide a further update on the overall health of the Australian economy, given the war in the Middle East, rising inflation and last week’s Reserve Bank of Australia interest rate rise.
What other Federal tax policy concessions are in play?
There has been significant national media commentary in recent months regarding potential modifications to the capital gains tax (CGT) discount and also (potentially) a change in the taxation of trusts (as reported in the Weekend Australian on Saturday, 2 May 2026). However, the data below highlights the relative scale of existing concessions.
On 12 May 2026, we anticipate some amendments to CGT discount in the Budget.
Based on Budget Paper No 1 (2025), the ten largest Federal tax concessions, each valued between approximately A$5 billion and A$29 billion are outlined below:
- A$29.15 billion – Superannuation (budget code C2): Concessional taxation of employer superannuation contributions
- A$27.0 billion – CGT (budget code E8): Main residence exemption – discount component
- A$26.5 billion – Rental deductions
- A$24.5 billion – CGT (budget code E7): Main residence exemption
- A$22.7 billion – CGT (budget code E15): Discount for individuals and trusts
- A$22.2 billion – Super (budget code C4): Concessional taxation of superannuation earnings
- A$11.4 billion – Income (budget code A26): Exemption for National Disability Insurance Scheme amounts
- A$11.3 billion – Deductions: Work-related expenses
- A$9.5 billion – GST (budget code A25): Food
- A$5.4 billion – GST (budget code H17): Health – medical and health services
Our Nexia Australia, Federal Budget publication will provide a practical summary of the key tax policy changes and implications arising from the May 2026 Budget.
Next steps
Our Federal Budget Insights report will provide a high‑level summary of key Budget announcements and will be released the morning after the Budget on Wednesday, 13 May 2026. Subscribe to our mailing list below to receive a copy.
To learn more about the Budget outcomes and what they may mean for you, please contact your Nexia Adviser. They can help you understand how the Budget measures may apply to your specific circumstances.
