Key Takeaways from the 2026–27 Federal Budget

Treasurer Jim Chalmers delivered the 2026–27 Federal Budget on 12 May, describing it as a budget of “resilience and reform” in response to the fifth economic shock in under 20 years, caused by the closure of the Strait of Hormuz. This wrap focuses on the measures most relevant to NIBA members and their clients.

Federal Budget 2026–27

Headline inflation is forecast at 5 per cent through the year to the June quarter of 2026, easing to 2.5 per cent by June 2027. Growth slows to 1.75 per cent in 2026–27, then recovers the following year. The deficit for 2026–27 is $31.5 billion. A $14.8 billion Strengthening Australia’s Fuel Resilience package is at the centre of the immediate response, including $2.9 billion in fuel excise relief that more than halves the rate and reduces the heavy vehicle road user charge to zero.

General insurance products

The headline general insurance measure is $3.4 million over four years from 2026–27 to “place downward pressure on property insurance costs and reduce unintentional underinsurance”. Funding includes $2.4 million for Treasury to legislate standard definitions of natural hazard terms used in property insurance contracts and improve clarity around how home and contents premiums are set, and $1.0 million for the Australian Securities and Investments Commission (ASIC) to maintain the North Queensland home insurance comparison website. ASIC will recover its costs through industry funding.

Standardised natural-hazard definitions have been a long-standing industry priority. Clearer policy wording makes it easier for brokers to advise clients on cover gaps, especially in flood, storm, and bushfire-prone areas.

The Government is also increasing the Australian Prudential Regulation Authority (APRA) delegated approval threshold for banks and insurers from $5 billion to $10 billion. This will allow smaller insurers to achieve economies of scale and secure quicker prudential approvals, fostering competition. Brokers should monitor for downstream effects on capacity, appetite, and product innovation.

The Cyclone Reinsurance Pool guarantee, supported by the Australian Reinsurance Pool Corporation's guarantee of $10 billion, remains listed as unchanged in the Statement of Risks. No design modifications or additional top-ups have been announced, despite the 2025–26 summer forecast increasing disaster-relief expenses by $2.5 billion.

Brokers and advice delivery

Several measures will be material for broker businesses and their small business clients.

The $20,000 instant asset write-off becomes permanent from 1 July 2026 for small businesses with a turnover of up to $10 million. The permanent two-year loss carry-back is reintroduced for all companies with a turnover of up to $1 billion, with the Government estimating up to 85,000 companies will benefit. From 2028–29, loss refundability will be available for start-ups in their first two years, allowing them to claim a refund for tax losses up to the amount of Fringe Benefits Tax and other in-scope remittances.

A new $250 Working Australians Tax Offset will start in 2027–28 for over 13 million workers, including about 1.5 million sole traders. $2.9 billion in fuel excise relief and a zero heavy vehicle road user charge will support SMEs and the transport industry. The exemption for the Small Business Responsible Lending Obligation is extended for ten more years, and the ACCC maximum penalties for unlawful SME and consumer exploitation are increased to $100 million.

The federal government has identified $780 million annually in regulatory burden reductions for the financial sector, including raising thresholds for large proprietary companies, enhancing the efficiency of climate-related financial disclosures, and modernising business communications with ASIC. The Australian Financial Complaints Authority is removing the duplicative membership requirement for over 40,000 authorised credit representatives, who will now depend on their responsible licensee’s membership.

The tax package also introduces structural changes for clients with investment properties or trust structures. From 1 July 2027, the 50 per cent capital gains tax discount will be replaced by inflation-adjusted indexation plus a 30 per cent minimum tax on net capital gains, and negative gearing on established residential properties will be limited (with grandfathering for properties purchased before tonight). From 1 July 2028, a 30 per cent minimum tax will be applied to discretionary trusts. Brokers should advise clients to review their risk and asset-protection plans.

ASIC and APRA each receive new funding to enhance their capabilities on a cost-recovery basis, with implications for industry funding levies on AFSL-holding brokers in the FY27 levy notices. The Compensation Scheme of Last Resort, broker-side AFCA funding, measures from the Quality of Advice Review follow-up, and professional indemnity are not covered.

Disaster insurance and resilience

The Government will fund initiatives to boost Australia’s resilience to natural hazards, partly using the Disaster Ready Fund. The package includes $6.0 million in 2026–27 for the National Emergency Management Agency (NEMA), to enhance high-speed mobile broadband for emergency response, a new national cell broadcast messaging system, and extra funding for the national aerial firefighting fleet and surge capabilities.

These commitments accompany the Disaster Recovery Funding Arrangements, with an extra $2.5 billion in disaster-relief funding allocated for the 2025–26 summer. The Disaster Ready Fund remains at its current limit of $200 million annually. Uncommitted Future Drought Fund money is cut by $52 million over four years.

The Hazards Insurance Partnership is not mentioned in the Budget papers, the speech, or the factsheets. Brokers and the industry should take note of this absence, especially given its role in bringing together the federal government, insurers, brokers, and state governments on disaster insurance design.

Brokers in disaster-prone areas should make sure clients have up-to-date sums insured and clear policy wordings before the 2026–27 summer.

Other measures of note

The Government will allocate $42.7 million over four years to Standards Australia for free public read-only access to standards referenced in Commonwealth, state, and territory legislation. A separate $2 billion investment in housing infrastructure is expected to support around 65,000 new homes over the decade.

Coalition Response

The Shadow Treasurer is expected to deliver a Budget reply on Thursday night.

You can view the full Budget papers at the Australian Federal Budget website.