Each May, the Australian government releases the Federal Budget, outlining how the country plans to tax, spend, and regulate for the year ahead. For international businesses operating in Australia, the Federal Budget often signals where compliance obligations, investment opportunities, and operational risks are heading next.
The 2026-2027 Federal Budget delivered by Treasurer Jim Chalmers focused heavily on domestic priorities such as housing affordability and cost-of-living pressures. However, beneath the headline announcements are several important measures directly affecting foreign-owned Australian subsidiaries, branches, and expanding overseas businesses.
Some changes provide genuine opportunities. Others require immediate planning ahead of 1 July 2026, when several major reforms commence simultaneously. There are also longer-term developments businesses should begin monitoring now, particularly around research and development incentives, climate reporting, and international tax. Below are some of the key announcements likely to affect your Australian operations.
Four key compliance changes take effect on 1 July 2026
Several major compliance reforms will commence simultaneously on 1 July 2026, including the increase in superannuation contributions to 12%, Payday Super obligations, expanded Anti-Money Laundering requirements, and new climate-reporting rules.
International businesses with Australian operations should begin reviewing payroll systems, reporting processes, governance frameworks, and superannuation workflows well before the new financial year to avoid compliance disruption.
Loss carry-back returns and expands
The government will permanently reinstate and expand the loss carry-back regime, allowing eligible companies to offset current-year tax losses against previously taxed profits and receive cash refunds. Eligibility expands to businesses with aggregated turnover of up to $1 billion, providing additional cash-flow flexibility for companies navigating uneven trading conditions or investing into Australian growth.
Instant asset write-off becomes permanent
The $20,000 instant asset write-off will become a permanent measure for eligible businesses with turnover below $10 million. The measure allows immediate deductions for eligible asset purchases and remains useful for smaller Australian subsidiaries investing in operational equipment and technology upgrades.
Pillar Two continues to impact multinationals
While the government introduced no major new multinational tax measures, recent international developments continue reshaping Australia’s Pillar Two framework. Large multinational groups, particularly US-parented businesses with global revenue exceeding €750 million, should continue monitoring how Australia implements the Organisation for Economic Co-operation and Development’s (OECD) ‘side-by-side’ agreement and related global minimum tax rules. The OECD is an international organisation based in Paris that sets global tax and economic standards.
Skilled visa salary thresholds increase
The government confirmed increases to salary thresholds for employer-sponsored visa programs. The Core Skills Income Threshold will rise from $76,515 to $79,499. The Specialist Skills Income Threshold will increase from $141,210 to $146,717. International businesses planning to sponsor overseas workers should review recruitment timing carefully, particularly where current salary offers sit close to existing thresholds ahead of 1 July 2026.
Electric vehicle tax concessions narrow from 2027
From April 2027, electric vehicles priced above $75,000 will no longer receive full Fringe Benefits Tax exemption, with eligibility currently tied to the $91,000 luxury car tax threshold. Businesses should review electric vehicle fleet and salary-sacrifice arrangements ahead of the change.
R&D incentive changes are coming
Major Research and development (R&D) tax incentive changes apply in FY2028, including a $50 million refundable threshold, $200 million expenditure cap, 1.5% intensity requirement, and $50,000 minimum project size.
Climate-reporting obligations expand
Climate reporting under AASB S2 extends to Group 2 entities from 1 July 2026, with thresholds of $200 million revenue, $500 million assets, or 250+ employees, potentially capturing standalone Australian operations.
Foreign investment and energy-sector incentives
From 1 July 2027, new incentives include a 10% refundable offset for critical minerals processing and $2/kg for renewable hydrogen, alongside up to $53 billion in defence spending over the next decade, with continued support for critical minerals, hydrogen, and renewable energy investment.
What is not changing
Several core aspects of Australia’s tax and compliance framework remain unchanged:
Company tax rates remain at 25% for eligible smaller companies and 30% for larger companies
Franking-credit rules remain unchanged
Thin-capitalisation rules remain in place
Transfer-pricing obligations continue unchanged
Australian companies must still maintain at least one Australian-resident director
The 2026–2027 Federal Budget introduces a mix of compliance reforms, investment incentives, and forward-planning considerations for international businesses operating in Australia.
For many foreign-owned Australian subsidiaries, the immediate priority will be preparing for the simultaneous reforms commencing on 1 July 2026. Businesses that prepare early will be better positioned to manage compliance efficiently while taking advantage of available opportunities in the Australian market.
Last updated: 13th May 2026
About the Author
Aaron Garry is the Managing Director of ABN Australia, where he leads the firm’s strategic growth and client service delivery. A Chartered Accountant with deep local and international experience, Aaron has supported hundreds of global businesses in establishing and growing their presence in Australia. His expertise spans market entry, compliance, and commercial advisory.
Aaron Garry
Managing Director