Federal Budget 2026: First reactions from tax and economics experts at BDO

BDO tax partner, Mark Molesworth, responds to tonight’s Federal Budget announcement:

“This Budget fundamentally shifts how income from investment assets is taxed, with 30 per cent emerging as the new floor. Over time, that will reshape investment structures with more new investments and businesses likely to be held through companies rather than trusts or personal structures. As always, the devil will be in the detail, particularly around transitional measures.

“The changes to the R&D tax incentive make it less supportive of early stage innovation. By narrowing eligibility and time-limiting refundable offsets, the Budget shifts the benefit toward mature, profitable firms. Even though the headline benefit has been increased, the changes risk reducing Australia’s already low R&D investment over time.”

Interestingly, there was no mention of GST or superannuation in the Treasurer’s speech tonight but more interrogation of the budget papers will take place over coming hours, said Molesworth.

“This Budget focusses very much on income tax, particularly the taxation of investments, and avoids the other big levers – for example there’s nothing on GST. It’s not a reimagining of the system by any stretch, but it will materially change behaviour, and investor confidence will hinge on how clearly and quickly the details of these changes are released and legislated.”

BDO chief economist, Anders Magnusson responds to tonight’s Federal Budget announcement:

“This Budget largely delivers on its productivity intent, particularly through investment incentives and regulatory reform. The challenge now is turning those commitments into measurable gains in output, wages and living standards,” said BDO chief economist Anders Magnusson.

Investment incentive relativities: “Most of the benefit from the current CGT discount flows to owners of existing residential property. Reducing it shifts incentives toward other assets, which should, over time, support more business investment and innovation.”

NDIS saving implementation risk: “NDIS savings are substantial, but implementation will be challenging without shifting the costs into other jurisdictions or programs. This will need to be closely monitored if the Government is to deliver the bottom-line improvements it has described.”

Optimistic forecasts:  “Treasury’s growth forecasts are more optimistic than the RBA’s earlier this month. That gap creates risk around whether the Budget ultimately achieves the bottom line improvements it projects.”

Minor tax burden shift: “The Budget shifts some tax burden away from workers and towards asset owners through the Working Australian Tax Offset and changes to the CGT discount. However, this only claws back the last couple of years of increases to the effective tax rate for the average working Australian.”

Readers are encouraged to review BDO’s expert analysis.

Jane Ward
Senior Manager, Media
E: Jane.Ward@bdo.com.au
Ph: +61 7 3173 5424