On Tuesday 12 May 2026, Treasurer Jim Chalmers delivered the Australian Federal Budget for 2026-27. The Budget focuses on six themes covering fuel security, cost of living, productivity, tax reform, care and opportunity, and security and investment.
For Asia Pacific groups actively planning entry into the Australian market, the most relevant measures arise across three of those themes: Productivity, Tax reform, and Security & Investment. Collectively, the measures signal structural change to the taxation of investment income, balanced by targeted efforts to attract inbound capital into strategically important sectors.
This article sets out the measures we believe most warrant the attention of our clients in China, Hong Kong, Indonesia, Malaysia, Singapore, Thailand and Vietnam. We also indicate where the detail will only become clear once draft legislation is released and where the Senate composition may shape the final form of the reforms.
A more navigable pathway for inbound investment
The clearest signal to inbound capital is the package of measures intended to accelerate foreign investment approvals. The Budget commits the Government to accelerating environmental, low-risk foreign investment, resources and telecommunications approvals, and to strengthening the Investor Front Door for nationally significant projects. A stronger Investor Council will support that work, with up to $125 billion to be deployed through the Government’s specialist investment vehicles.
For Asian groups that have expressed frustration with the duration and predictability of past Foreign Investment Review Board processes, this is a welcome development. The Investor Front Door pilot is already engaging four projects, several of which have clear Asian export relevance, including a Western Australian green hydrogen project oriented to Asian and European markets.
We expect the practical benefit of these changes will be felt most by:
- Manufacturing, infrastructure and renewables groups that do not raise national security concerns and have been waiting on FIRB timelines for routine acquisitions.
- Resources and critical minerals groups participating in projects aligned with the Government’s strategic agenda.
- Technology and telecommunications businesses where the historical approvals environment has been less predictable.
The Investor Front Door will not remove the substantive FIRB regime, and groups should still expect detailed review of any transaction with national security or critical infrastructure dimensions. What it should do is provide a clearer single point of contact and a quicker decision pathway for transactions outside those categorie
Three structural changes to the taxation of investment
Three proposed reforms in this Budget may reshape how Asian investors structure their Australian holdings.
Capital gains tax (CGT). The 50 per cent CGT discount is proposed to be replaced with a discount based on inflation, together with a minimum tax rate of 30 per cent applying to gains from 1 July 2027. Broadly, only post-1 July 2027 gains are expected to be subject to the new methodology. Investors in new builds are expected to retain the option to choose between the existing 50 per cent discount and the proposed new arrangements.
This proposal is consequential. The current 50 per cent discount has been a fixture of Australian investment taxation since 1999, and its replacement with an inflation-indexed model meaningfully alters the after-tax economics of long-hold investment, particularly in real property, infrastructure and resources.
The proposed change also sits alongside the previously announced strengthening of the foreign resident CGT regime, which expands the range of assets subject to Australian CGT for foreign residents and introduces a proposed $20 million notification threshold to the Australian Taxation Office on disposals.
Negative gearing. From 1 July 2027, negative gearing is proposed to be limited to new builds. Properties held before Budget night are intended to be grandfathered.
Investors who purchase established residential property after 12 May 2026 are expected to remain able to deduct losses against residential property income, with unused losses carried forward. However, those losses would no longer be deductible against wages or other income.
For Asian investors who have used Australian residential property as a long-term store of value, or as part of a broader Australian market entry strategy, this is a material change. It further tightens the regulatory and tax environment for foreign buyers of Australian residential property, alongside the existing restrictions applying from April 2025 to March 2027.
Discretionary trusts. A minimum tax of 30 per cent will apply to discretionary trusts from 1 July 2028, with some exceptions. Three years of rollover relief is proposed to be available from 1 July 2027 to assist small businesses and others wishing to restructure.
Many of our Asian family enterprise clients hold their Australian interests through discretionary trust structures. The rollover relief window is generous, but planning needs to commence well before 1 July 2027 if restructuring is contemplated, and any restructure needs to be considered alongside the position in the family’s home jurisdiction.
Measures that support inbound business establishment
Alongside the structural changes, the Budget introduces a set of business tax measures that, in our view, materially improve the position of Asian groups entering Australia.
The reintroduction of loss carry back is significant. From 2026-27, eligible companies that make a loss in the current income year will be able to use that loss to claim a refund against tax paid in the prior two years. The Government estimates this will benefit up to 85,000 companies. For Asian groups whose Australian subsidiary is investing heavily during initial market entry and dips into a tax loss after a profitable year, this is direct cash flow relief.
Loss refundability for start-ups will apply from 2028-29, allowing small start-ups in their first two years of operation to obtain a refund for tax losses up to the value of fringe benefits tax and withholding tax paid on employee wages.
The $20,000 instant asset write-off will be made permanent for businesses with turnover up to $10 million. While modest in headline amount, the certainty of permanence assists with multi-year capital expenditure planning.
The Research and Development Tax Incentive is being made more generous and more targeted from 1 July 2028. The offset for experimental core R&D will increase by around 25 to 50 per cent, the intensity threshold reduces to 1.5 per cent, the turnover threshold for the higher refundable offset rises to $50 million, and the maximum expenditure cap rises to $200 million. Refundability will be limited to firms operating less than ten years.
The higher expenditure cap is one of the clearer signals that Australia is seeking to attract substantive R&D activity onshore, and aligns more closely with the scale of well-funded Asian corporate R&D programmes in technology, biotechnology and advanced manufacturing.
Venture capital tax incentives will be expanded from 1 July 2027 to align with modern company valuations, with changes to the Early-Stage Venture Capital Limited Partnership and Venture Capital Limited Partnership programs.
Clear sectoral signals
Several sector-specific commitments warrant attention from Asian investors.
Critical minerals. The Government has confirmed the establishment of the Critical Minerals Strategic Reserve, initially focused on antimony, gallium and rare earth elements. The Reserve draws on $1 billion from the expanded $5 billion Critical Minerals Facility, with a further $150 million for selective stockpiling and $20.4 million to support its operation.
This is a coordinated signal to allied Asian partners, in particular Japan, Korea and Singapore, on supply chain alignment.
Defence. The 2026 National Defence Strategy adds $53 billion over ten years, reaching three per cent of GDP by 2033. The Integrated Investment Program includes up to $77 billion for the enhanced surface combatant fleet, including upgraded Japanese Mogami class frigates, and an initial $12 billion for the Henderson Defence Precinct in Western Australia. The explicit naming of the Mogami class is a meaningful industrial signal for Japanese suppliers and integrators.
Gas. From 1 July 2027, LNG producers will be required to reserve 20 per cent of their export volumes for Australian users.
This is material for Asian LNG buyers and for Asian-backed upstream investors in Australian gas. Long-term contracted volumes and pricing assumptions will need careful re-examination.
Trade and tariffs. A second tranche of 497 nuisance tariffs will be abolished from 1 July 2026, on top of the 457 tariffs abolished from 1 July 2024. Once this second round takes effect, around 1,000 tariffs will have been removed across the two years, saving businesses approximately $157 million a year in compliance costs in total. The Australian Trusted Trader program is being expanded and biosecurity border processes are being streamlined. These measures are most useful to Asian importer-exporter groups managing high-volume, low-margin supply chains.
A more accommodating compliance environment
From an audit and assurance perspective, one announcement deserves particular attention. The Government is reducing financial sector compliance costs by $780 million a year through 14 legislative reforms, including increasing company reporting thresholds.
For Australian subsidiaries of Asian parents, an increase in reporting thresholds may change whether the local entity is classified as a large proprietary company, which in turn affects audit and lodgement obligations. The detail will ultimately depend on the legislation, but groups currently sitting close to the existing thresholds should consider the possibility of a different classification from the next financial year. For groups preparing consolidated financial reports in Australia, the change may simplify the local component without affecting the broader group obligation.
What was not in this Budget
There were no new multinational tax measures specifically targeting BEPS, thin capitalisation or Pillar Two were announced on Budget night based on the materials released by the Government.
The previously announced strengthening of the foreign resident CGT regime, which was deferred at the 2025-26 Budget, has not been the subject of a fresh deferral in the materials currently available. We will confirm the position once Budget Paper 2 has been fully analysed.
There were no changes to the headline corporate tax rate of 30 per cent, nor to the 25 per cent rate that applies to base rate entities.
What we suggest our Asia Pacific clients consider next
For groups already established in Australia, we suggest three immediate actions:
First, model the impact of the CGT and negative gearing changes on any planned divestments or restructures that fall after 1 July 2027. The transition rules are likely to favour careful sequencing.
Second, for groups holding Australian interests through discretionary trusts, begin the conversation now about whether a restructure is appropriate within the 1 July 2027 to 1 July 2030 rollover window.
Third, review whether the business is well placed to benefit from loss carry back from the 2026-27 income year. The mechanics will reward groups that have visibility of their two-year tax position.
For groups planning entry into Australia, we recommend reviewing the Investor Front Door pathway for any project of national significance, and reconsidering R&D footprint decisions in light of the more generous and targeted incentive arrangements from 1 July 2028.
A closing word
This Budget contains material changes for international investors, and the legislative detail will matter. Several of the most significant measures, including the CGT, negative gearing and discretionary trust reforms, are subject to passage through the Parliament. We will follow the progress of that legislation closely and will continue to share our analysis with our clients and contacts across the Asia Pacific region as the detail becomes available.
If you would like to discuss what the 2026-2 Budget means for your business specifically, please contact us through the Moore Australia Asia Desk. We are happy to host conversations in English, Mandarin, Cantonese or Bahasa, and to draw in our colleagues across the Moore Global network in your home market.
About the Authors
Lisa Canale is a Director in the Business Advisory team at Moore Australia, based in Adelaide. She has more than twenty-five years of experience supporting high net worth individuals, family businesses, and small to medium enterprises, with particular focus on family business services.
Vanessa Wu is a Director in the Business Advisory team at Moore Australia, based in Melbourne. She has more than twenty years of experience advising listed entities, property developers, foreign subsidiaries and high-net-worth family groups on tax, restructuring, succession and cross-border M&A. She is fluent in Mandarin.
Both Lisa and Vanessa are active members of Moore Australia’s Asia Desk.
This article is general in nature and does not constitute professional advice. Clients should seek specific advice on the application of any of the measures discussed above to their individual circumstances.
