Handing down his fifth budget, Treasurer Jim Chalmers faced a familiar choice: rely on temporary measures that soften short term pressures or undertake the more difficult task of tax reform to shape investment, productivity, and future living standards. This year, he chose to go hard on budget reform in the hope of strengthening the country’s tax system and making it fairer.
Working Australians have been put front and centre, with the Working Australian Tax Offset (WATO) and a range of cost-of-living relief measures targeting healthcare, housing investment, and fuel security. Long-running debates about negative gearing and the capital gains tax discount have been revisited, raising a raft of new considerations for both foreign and local investors.
Measures that shake up the R&D Tax Incentive were not on the radar until budget night but will have a significant impact on the country’s innovation agenda, particularly for start-up and early-stage companies.
The changes to capital gains tax, the taxation of trusts, and to a lesser extent, curbs on negative gearing will be controversial. If enacted, they represent an investment-decision-shifting trio, pushing investors towards yield assets and a preference for holding them in private companies.
There is no question that tax reform has been long overdue in Australia, and BDO has been calling for it for years. Talk of rebalancing the system, cutting regulatory costs, and levelling the playing field will be welcomed by many, but in a budget billed as the most ambitious of this Government, could the discussion have been broadened to include changes to the taxation of consumption? As it is, we are left with continued heavy reliance on personal income tax and an increase in taxes on investment.
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The question is whether the Treasurer’s hard line on reform will drive the taxpayer behaviours needed to create the simpler, more sustainable tax system the Government is striving for. The true test of how effective this budget’s agenda is will come in the years ahead.
The Government has delivered this budget during a difficult period of inflation and geopolitical uncertainty. Productivity, intergenerational equity, and budget sustainability were already central objectives, but the 2026 energy crisis has added an immediate need to improve economic resilience and ease cost-of-living pressures.
Read our assessment of the economic outlook.
On 14 May, BDO's expert Budget panel came together to deliver BDO’s post-Budget analysis webinar. The recording is now available if you missed the webinar, or would like to rewatch it.
Our analysis delivers clear, practical insights on the Budget priorities that matter most. Key discussion topics include the Budget’s economic implications, potential taxation changes for individuals and corporates, and practical takeaways for CFOs, business owners, and tax teams.
