Federal Budget 2026 — What It Means for Your Money
Treasurer Chalmers handed down the 2026–27 Federal Budget on Tuesday 12 May. Here's every measure that affects your household finances, explained in plain English — with calculators to see your exact numbers.
In this guide
1. The income tax cut — up to $268 per year
The headline change from Budget 2026 is a reduction in the marginal tax rate on income between $18,201 and $45,000 — from 16% to 15%. This 1 percentage point cut applies to income in that band, which means:
- The maximum saving is $268 per year (1% of $26,800 — the width of the band)
- Anyone earning more than $45,000 gets the full $268
- The saving phases in proportionally between $18,201 and $45,000
- People earning below $18,200 (the tax-free threshold) are unaffected
$268 per year works out to $5.15 per week — not transformational, but it's a genuine ongoing reduction for every working Australian above the minimum wage. For a couple both earning over $45,000, the combined household saving is $536 per year.
This follows the Stage 3 tax cuts already in place from 1 July 2024, which made more substantial cuts — particularly for middle incomes. The 2026 Budget cut adds to those rather than replacing them.
How it shows up in your pay packet
Your employer's payroll system should automatically update PAYG withholding from 1 July 2026. You don't need to do anything. If you're a sole trader or contractor paying PAYG instalments, the ATO will adjust your instalment amounts.
2. HECS-HELP 20% debt wipe
This is the biggest financial change for younger Australians and those still carrying study debt. Every outstanding HECS-HELP, VSL, SSL and other income-contingent loan balance will be reduced by 20% on 1 June 2025.
It's automatic — no application, no forms, no phone calls. On that date, your ATO debt records update and the new balance appears in myGov.
The new repayment rules for 2026–27
The debt reduction is paired with a restructure of how HECS is repaid. Key changes:
- New threshold: $67,000 — if you earn below this, no compulsory repayment
- Marginal repayment model: you pay a percentage only on income above the threshold — not on your whole income as before
- This means someone earning $70,000 pays on $3,000 of income, not $70,000
Example: Sarah earns $75,000 with a $28,000 HECS debt. Under old rules she paid 3.5% of $75,000 = $2,625/year. Under new rules: her debt drops to $22,400 (20% off), and her annual repayment is approximately 10% of ($75,000 − $67,000) = $800/year. She's $1,825 better off each year, and her debt is $5,600 lighter.
What about voluntary repayments?
The government has indicated that people who made voluntary repayments after 1 June 2023 won't be disadvantaged — a partial adjustment or compensation mechanism is being worked out. Watch the ATO's website for the exact mechanism as legislation proceeds.
3. Division 296 super tax — for balances over $3 million
From 1 July 2026, superannuation earnings on balances above $3 million will be taxed at an additional 15%, effectively doubling the tax on those earnings from 15% to 30%.
This is Division 296 of the tax law — named for the section that introduces it. It affects approximately 80,000 Australians, or about 0.5% of super fund members.
How it works
The tax isn't levied on the $3 million of the balance — it's on the earnings attributed to the portion of the balance above $3 million. "Earnings" for this purpose is calculated as the increase in fund value over the year, including unrealised gains. This is controversial — investors typically only pay CGT when they sell an asset, not when it appreciates in value.
Who's affected?
To have $3 million in super, you would typically need decades of contributions and strong investment returns. Most people in this category are business owners, executives, or inherited substantial balances. It does not affect the majority of Australians approaching retirement with $500,000–$1.5 million balances.
Can you restructure to avoid it?
Some options exist — withdrawing super above $3M and investing personally (foregoing concessional tax treatment), or splitting contributions with a spouse. Each has trade-offs. Speak to a financial adviser if your balance is approaching the threshold.
4. Energy bill relief & cost-of-living measures
The Budget extends the energy bill relief program for an additional year. Eligible households receive a $300 credit automatically applied to their electricity bill across four quarterly instalments — $75 per quarter. Small businesses receive $325.
Who gets the energy rebate?
The rebate applies to all residential electricity customers — there is no means-testing and no application required. It is applied directly by your electricity retailer, funded through a government subsidy scheme. You should see it appear on your next bill after 1 July 2026.
Other cost-of-living measures
- JobSeeker increase: A modest increase of $17.80 per fortnight for single recipients with no children
- Rent assistance: Maximum Commonwealth Rent Assistance rates increased by 10%, following the 15% increase in the 2023 Budget
- Bulk billing incentive extended: The tripling of the bulk billing incentive (to encourage GPs to bulk bill) continues through 2026–27
- PBS medicines: The maximum co-payment for Pharmaceutical Benefits Scheme medicines is maintained at $31.60 for general patients and $7.70 for concession cardholders
5. Housing and rent assistance
Housing affordability remains one of the most contested policy areas in Australian politics. The 2026 Budget includes several housing-related measures, though they are unlikely to materially shift the affordability dial in major cities.
Help to Buy scheme
The shared equity scheme — under which the government takes up to a 40% stake in a property to reduce the buyer's mortgage — is expanding. Income caps are $90,000 for singles and $120,000 for couples. Property price caps vary by state.
Social housing investment
An additional $1 billion has been allocated to the Housing Australia Future Fund, targeting construction of social and affordable housing. The fund is managed by the NHFIC and lends to community housing providers at lower rates.
Build-to-Rent tax incentives extended
The accelerated depreciation and reduced managed investment trust withholding tax for build-to-rent developments — introduced in the 2023 Budget — is extended and expanded. This is intended to attract institutional investment into rental supply.
What wasn't changed
There were no changes to negative gearing, the CGT discount, or stamp duty (a federal policy lever on states). First Home Guarantee places increase by 5,000 to 50,000 per year.
6. How 6 different households fare
Rather than abstract numbers, here's how the Budget's combined measures affect six representative Australian households.
7. What didn't change
Sometimes the most useful question after a Budget is what wasn't done. A number of widely-debated reforms were absent:
- CGT 50% discount: Not changed. The discount remains at 50% for assets held over 12 months. Labor's 2019 election policy to halve it was not revived.
- Negative gearing: No changes. Investors can continue to deduct rental losses against salary income.
- Super tax on earnings in pension phase: The earnings tax exemption in pension phase (0% tax on fund earnings when drawing a pension) was not touched, though Treasury commissioned a review.
- Stage 3 tax cuts rolled back: The existing rate cuts remain. The 2026 Budget only adds a further 1-point cut at the lower band.
- Fringe Benefits Tax rate: Unchanged at 47%. The FBT year still runs April to March.
- Superannuation Guarantee rate: Remains at 12% for 2025–26. No further increase legislated.