BDO’s key recommendations for the 2026–27 Federal Budget
BDO’s key recommendations for the 2026–27 Federal Budget
As Australia continues to recover from the prolonged economic impacts of the COVID‑19 pandemic, including supply chain disruptions, higher living costs, and persistently low productivity, our pre-Federal Budget submission outlines a series of practical, evidence‑based reforms aimed at strengthening the tax system and supporting a more resilient economic future.
Building on previous submissions and informed by the OECD’s 2026 Economic Survey for Australia, BDO’s recommendations focus on meaningful structural reform while also identifying interim measures that can be implemented within the existing tax framework.
Key recommendations in our submission include:
1. Establish an ongoing Tax Reform Commission
BDO continues to advocate for a permanent, independent Tax Reform Commission with responsibility for holistic review of federal and state taxes. This aligns with OECD recommendations for a more consistent and expert‑driven review process. We recommend a statutory requirement for governments to publicly respond to the Commission’s recommendations.
2. Rebalance the tax mix
Echoing OECD findings that Australia relies heavily on labour taxes, BDO recommends:
- Increasing the GST rate to 15 per cent, while broadening its base
- Reducing personal income tax rates and indexing thresholds
- Providing compensation for low‑income households through tax and transfer mechanisms
This approach would improve efficiency, reduce complexity, and rebalance Australia’s tax bases toward more sustainable sources.
3. Corporate tax reform
To strengthen competitiveness and stimulate investment, BDO recommends reducing the corporate tax rate to a single 20 per cent rate. This aligns with the OECD average and supports international competitiveness. BDO also notes that enhanced resource rent taxation could support such a reduction while ensuring equitable revenue generation.
4. Superannuation
While supportive of recent changes targeting very high balances, BDO does not support further reductions in contribution caps. Instead, we propose lifting the concessional contributions cap to $50,000, particularly to benefit individuals with low balances or nearing retirement.
5. Housing affordability and supply
Australia’s acute housing challenges require tax settings that encourage new supply, not unproductive investment in existing stock. BDO recommends:
- Considering the replacement of stamp duties with broad-based land tax
- Carefully examining the impact of CGT discounts and negative gearing
- Allowing negative gearing only for newly constructed residential properties (prospectively), to incentivise new supply
- Encouraging policies that increase the proportion of owner‑occupied housing
6. Environmental and transport taxes
BDO supports the OECD’s recommendation to increase fuel taxes to support climate objectives and anticipates the future need for comprehensive road‑user charging frameworks.
7. Compliance reform for Significant Global Entities (SGEs)
BDO calls for a review of the disproportionate compliance and penalty regime applying to SGEs, particularly where small Australian subsidiaries face excessive penalties despite limited risk. Revisiting the SGE definition (e.g., excluding entities under $10 million turnover) would support business continuity and investment.
8. Research & Development incentives
BDO supports enhancing the effectiveness of R&D support programs but urges careful consultation before making changes to the R&D tax incentive, especially given global competitiveness and broader reform priorities.
9. GST treatment for Build‑to‑Rent (BTR)
BDO recommends allowing GST credit recovery for BTR developments to better align with income tax concessions and support greater investment in new rental housing supply.
Contact your local BDO adviser from our tax services team if you would like further information on our submission.