The 2026 - 27 Federal Budget places a significant emphasis on housing supply, workforce capability and improving business productivity, with a range of measures expected to influence the construction and property sectors over the coming years. While many initiatives are aimed at stimulating new housing development and supporting small business investment, several proposed tax reforms will also reshape the investment landscape for property owners and developers.

One of the key pre-Budget announcements was the Government’s commitment to provide free access to standards referenced in Australian legislation. While further operational detail is still being clarified, the initiative is expected to reduce compliance costs across the construction sector. We are continuing to seek additional information on how the scheme will function in practice and will provide updates as more detail becomes available.

Below is an overview of the major Budget measures relevant to the construction and development industry.

·       Housing and Property Tax Reforms

·       Capital Gains Tax (CGT)

The Government will replace the current 50 per cent Capital Gains Tax discount with a discount linked to inflation and introduce a minimum 30 per cent tax on gains from 1 July 2027.

Under the proposed reform, investors will only pay tax on the “real” capital gain after accounting for inflation, aligning the regime more closely with the original intent of the CGT system. Importantly, the reforms will only apply to gains arising after 1 July 2027.

Investors purchasing new builds will have the option to choose between the existing 50 per cent CGT discount or the new inflation-based approach.

Negative Gearing

From 1 July 2027, negative gearing concessions will be limited to newly constructed properties in an effort to direct investment toward increasing housing supply.

Properties owned prior to Budget night will retain existing arrangements. Investors purchasing new builds after the changes commence will still be able to deduct losses against other income sources.

For investors acquiring established properties after Budget night, losses may only be offset against residential property income. Unused losses can still be carried forward to future income years; however, they will no longer be deductible against wage and salary income.

Measures Supporting Business Investment and Cash Flow

The Budget also includes several initiatives designed to streng then business resilience, encourage investment and improve liquidity for small and emerging businesses.

Loss Carry Back Measures

From 2026–27, eligible companies that incur losses will be able to offset those losses against tax paid in the previous two income years.The measure is expected to benefit up to 85,000 companies, predominantly small businesses.

In addition, from 2028–29, small start-up businesses in their first two years of operation will be able to receive refunds for tax losses, up to the value of fringe benefits tax and withholding tax paid on employee wages. The Government estimates this will assist approximately 25,000 young companies annually by improving early-stage cash flow.

Permanent $20,000 Instant Asset Write-Off

The Government will permanently extend the $20,000 instant asset write-off from 1 July 2026.

Businesses with turnover up to $10 million will continue to immediately deduct eligible assets costing less than $20,000. The measure is estimated to improve small business cash flow by approximately $890 million over five years while also reducing compliance costs by around $32 million annually.

PAYG Instalment Flexibility

To improve business cash flow management, the Government will make it easier for businesses to vary PAYG instalments as trading conditions change by:

allowing businesses to opt into monthly PAYG instalments from 1 July 2027; and

expanding the ATO’s dynamic instalment pilot through business software integration to calculate PAYG instalments more accurately.

The Government will also continue working with the states on payroll tax administration reforms.

Building More Homes and Reducing RegulatoryBarriers

Housing supply remains a major focus of the Budget, with targeted investment aimed at unlocking additional residential development opportunities.

The Government will fund “last mile” infrastructure projects intended to unlock up to 65,000 homes across states and territories. Key initiatives include:

·       accelerating planning and development approvals;

·       preparing more land for residential development; and

·       modernisingt he National Construction Code.

The Budget also seeks to simplify building regulation by making all standards referenced in Australian legislation freely accessible. The Government estimates this could save small businesses and tradespeople upto $1,600 annually.

Additional reforms are aimed at reducing barriers to modern methods of construction and supporting innovation in housing delivery.

Faster Approvals and Project Delivery

A broader push to improve project delivery and reduce administrative delays includes measures to accelerate:

·       environmental approvals;

·       low-risk foreign investment approvals;

·       telecommunications approvals; and

·       approvals for major resource projects.

More than $500 million has been allocated toward approval system reforms, including greater use of AI, reducing duplication between state and federal systems, and increasing the use of strategic assessments and bio regional planning.

The Investor Front Door initiative will also be strengthened to support nationally significant projects.

Workforce and Skills Initiatives

Recognising ongoing labour shortages across the construction sector, the Government is investing $85.2 million to speed upskills assessments for migrant tradespeople and accelerate occupational licensing processes.

Migration reforms will also focus on attracting younger, higher-skilled and better-educated migrants through changes to the permanent migration points test.

In the education sector, university students with relevant TAFE qualifications will benefit from quicker degree pathways under a new National Credit Recognition Framework.

Building a More Integrated National Economy

The Government has reiterated its intention to work with the states to improve labour mobility and streamline occupational licensing across jurisdictions.

Payroll tax administration reforms are also expected to form part of broader efforts to create a more efficient single national market.

·       Personal Income Tax Measures

·       Working Australians Tax Offset (WATO)

The Budget introduces the Working Australians Tax Offset (WATO), providing an additional tax cut of up to $250 annually from the 2027–28 income year.

The offset will apply to more than 13 million Australian workers and sits alongside previously legislated tax cuts from earlier Budgets.

The Government estimates that 97 per cent of eligible workers will receive the full $250 benefit. The offset effectively increases the tax-free threshold by nearly $1,800 to $19,985, or up to $24,985 for workers eligible for the Low-Income Tax Offset.

Further Tax Cuts from 1 July 2026

The Government will also implement two additional rounds oftax cuts:

from 1 July 2026, the 16 per cent tax rate applying to income between $18,201 and $45,000 will reduce to 15 per cent; and

from 1 July 2027, that rate will reduce further to 14 percent.

These changes are expected to deliver tax reductions of up to $268 from 1 July 2026 and up to $536 annually from 1 July 2027, compared with 2024 - 25 tax settings.

Overall, the 2026 - 27 Budget reflects a strong policy focus on increasing housing supply, improving construction sector productivity and supporting business investment. While many measures are designed to stimulate development activity and ease workforce pressures, the proposed tax reforms will also reshape investment decisions across the property market in the years ahead.