A federal budget was presented to the House of Representatives by Treasurer Jim Chalmers on 12 May 2026. It was the first budget of the Albanese government since winning the 2025 federal election and its fifth since being elected to government in 2022.
The budget contains a tax cut for Australian workers along with the partial removal of the capital gains tax discount and negative gearing.
Background In the 2025 budget, the government funded a new tax cut for low and middle-income earners to apply from 1 July2026. The government also revealed that they would fund a $150 energy rebate for households and small businesses. The government also expanded the availability of childcare services to parents with threedays of subsidised care.
In the Mid-Year Economic and Fiscal Outlook (MYEFO) for the 2025 budget, treasurer Jim Chalmers revealed that the deficit had reached $36.8billion, $5.3billion lower than forecast in March 2025. The update also expected the economy to grow by more than $8billion over the next fouryears. In the MYEFO update, the government confirmed additional savings totalling $20billion would be made over the next fouryears.
Pre-budget announcements The Sydney Morning Herald has reported that the government will not invest any further money in renewable energy projects in the budget. This puts a halt to an upwards trend in renewable energy investment since Labor came to power in 2022.
The news media has speculated that the capital gains tax discount may be reduced in order to improve housing affordability. The Sydney Morning Herald has reported that the government is considering cutting the capital gains tax concession to 33percent or 25percent from the current 50percent, cutting the discount to 25percent was Labor's policy in the 2016 and 2019 elections. The Sydney Morning Herald also stated that the government may also consider grandfathering the changes so that current investors are not affected, or implement a larger cut in income tax to commence on 1 July 2026. Labor MPs such as Mike Freelander have called on the government to take action in relation to the capital gains tax discount. The Sydney Morning Herald has also reported that the Liberal Party has signalled opposition to any changes, while the Greens appear supportive. The Sydney Morning Herald previously reported that the government asked Treasury for modelling before the 2025 budget regarding a cut to the capital gains tax and negative gearing but these proposals were not ultimately followed through on by the government.
On 30 March, the government cut the fuel excise by 26.3cents per litre in consultation with the National Cabinet in addition to removing the Heavy Road User Charge, both were reduced for three months. This decision will cost the budget $2.55billion and aims to reduce the price of a 65litre tank of petrol by $19. All states except for Queensland and Victoria subsequently agreed on a GST (Goods and Services Tax) deal to reduce the cost of fuel by a further sixcents per litre.
On 9 April, Guardian Australia reported that the government was preparing to cut spending to the National Disability Insurance Scheme (NDIS), the taskforce making the cuts will be led by former Treasury official Anthea Long.
The federal government is giving consideration to all options they can use to improve fuel supplies amidst the supply shock of the Iran war such as speeding up the electrification of Australia's light vehicle fleet, extracting more natural resources or an increase to fuel storage capacity. The government has estimated that increasing the fuel reserve from 30days of diesel and 40days of petrol to 90days would cost $20billion over four years. Energy minister Chris Bowen has stated this is a medium to long term priority. The treaty Australia signed up to authored by the International Energy Agency requires that Australia store 90days of oil onshore.
On 15 April, the government announced that defence spending would rise to threepercent of GDP by 2033 with a $53billion boost over 10years.
On 22 April, the government announced that they would reverse reforms made in November 2025 and fully subsidise assistance with showering, dressing and incontinence care in aged care plans. The government also announced that the NDIS would be made more affordable to the budget by reducing the number of participants by 160,000 from 760,000 by 2030 by diverting many participants to the Thriving Kids. The government will also reduce a rebate for Australians over 65 using private healthcare, the government marketed this change as being part of their tax reform agenda.
The budget will contain $10 billion to provide a 10 day increase to the national fuel stockpile from 20–32 days to 37 days while jet fuel and diesel will be set at 50days, in addition to providing funding for the assessment of new fuel refineries, this package will also contain a measure to establish a government-owned fuel reserve with onebillion litres of emergency diesel and aviation fuel.
The Sydney Morning Herald has reported that the government may cut tax breaks for EVs.
On 8 May, the government announced that they would provide Victoria with $3.8 billion of funding for their Suburban Rail Loop project.
The Sydney Morning Herald revealed that the budget would include $2 billion for critical infrastructure developments required to support housing with a quarter of the funds being used to support regional housing developments which the government says will support the creation of 65,000 new homes, in addition to $3.1 billion to build 100,000 new homes and $1.2 billion for states and territories to support new housing infrastructure.
On 11 May, ABC News reported that the government would fund a new artificial intelligence (AI) tool at a cost of $105.9million to help developers submit environmental assessments faster. The government announced that they would spend $50 million to fund upgrades to the Sydney to Canberra rail line, with $25 million contributions from the New South Wales and Australian Capital Territory governments to take the total expenditure to $100 million.
Policies Taxation From July 2028, the government will provide working Australians with a $250 tax offset, the change was not implemented for this financial year to avoid fuelling inflation, this will only apply to those earning income from wages or a salary, not investments. This measure will cost the budget $6.4 billion over four years. The government will also introduce a $1,000 instant tax deduction for work-related expenses.
The 50% discount on the capital gains tax has been replaced with a 30% tax adjusted to inflation by 1 July 2027. This means that an additional tax will be applied to asset sales such as cryptocurrencies, investment properties, shares or collectible items such as artwork. Pensioners and people on income support will be exempt from this revised system of taxation.
Housing As previously reported, the government restricted eligibility for negative gearing and the capital gains tax. The budget changed the capital gains tax system to a discount based on inflation rather than the previous 50% discount, the budget has also implemented a 30% minimum taxation rate, pensioners and people on income support will not be subject to the 30% tax rate. The government estimates that these changes will help 75,000 people enter the property market and will reduce supply of homes by 35,000.
Foreign investors will remain banned from buying property until mid-2029, existing investors will be unaffected. The budget also contains $2 billion for councils and utility companies to build new infrastructure that will support new homes. The government will also fund the creation of a new AI tool to help developers navigate environmental assessment applications and speed up approvals.
The budget contains a $60 million Youth Housing Supplement that aims to unlock social housing opportunities for 4,000 people. Defence $53 billion will be allocated to defence spending, with Australia aiming aiming to reach 3% of GDP according to the NATO methodology by 2033. There is also $5billion in savings, necessitating the withdrawal of the Royal Australian Air Force's fleet of 10 C-27 Spartan aircraft. Government programs The annual growth rate of the NDIS will be cut from 10% to 5–6% in the long term. Cost-cutting in the NDIS mean that 160,000 participants will be removed from the scheme by 2030, these changes will save the budget $37.8 billion. The government will also spend $2 billion working to start the Thriving Kids program.
The government is aiming to crack down on providers that maliciously utilise services like Medicare, the NDIS and the Pharmaceutical Benefits Scheme (PBS). The government forecasts savings of more than $5.42 billion.
The government will spend $1.7 billion on social services, aiming to improve service delivery at Centrelink, other department of the government have been asked to find reductions in staffing levels of 5% per year. Trusts There government is introducing a minimum 30% tax on discretionary trusts from 1 July 2028. A provision will be made for small businesses to move away from discretionary trusts in three years starting from 1 July 2027 and move funds into companies or fixed trusts.
Sports The government will offer players and staff of the Papua New Guinea Chiefs NRL team a tax break.
The government will spend an additional 5% on sports over the next four years, some of this spending will go to infrastructure preparation for the Brisbane 2032 Olympic Games. The government will spend $307 million over two years on a program aimed at training elite athletes.
Travel Australians travelling overseas will be required to pay an exit fee of $80, up from $70 in the previous financial year. There government expects to raise $755million from this change.
Energy The budget removes funding from a program that is intended to accelerate the development of Australia's green hydrogen industry. The budget also removes funding from programs known as Solar Sunshot and Battery Breakthrough. These policies will save the budget $1.3 billion over the next decade.
Migration The migration system will be maintained at 185,000 places in the coming financial year, with prioritisation being given to migrants already in Australia. About 55,000 places will be allocated towards high-skilled migrants. The Working Holiday Maker visa program will also be controlled more tightly.
Healthcare The budget cuts funding to a private health care subsidy for older Australians, this means that Australians aged over 65 will receive the same subsidy for private health care as other age ranges. The government has allocated $450 million of funding for Australians aged over 75 and Indigenous Australians age over 60 to receive a free RSV vaccination.
The budget has allocated an additional $1 billion for 5,000 more residential aged care beds, the government has also reversed a decision that meant older Australians would have to pay more for aged care services.
Public hospitals are being allocated an extra $25 billion over five years as the result of a funding deal agreed upon with the states and territories.
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