On Tuesday 12 May 2026, the Albanese Government announced the 2026-27 Federal Budget. As costs continue to rise, close attention from HR leaders and business owners is critical to navigate workforce pressure within the volatile global economy. This blog post provides an overview of the biggest impacts of the 26/27 Federal Budget on HR and business owners, and how you can prepare for the upcoming changes.
Tax Cuts
Under the new budget, employees will have five cumulative tax cuts which is forecasted to leave the average Australian worker who is on $81,245 up to $2,816 better off from 2027-28 when compared to FY23/24.
From 1 July 2026, the tax rate between $18,201 and $45,000 will drop from 16% to 15%, and then again to 14% from 1 July 2027.
A new Working Australians Tax Offset (WATO) of up to $250 / year will kick in from 2027-28 to benefit more than 13 million workers. This will be on top of the two upcoming rounds which had previously been announced for the 2025-26 budget. Additionally, a $1,000 instant tax deduction that requires no receipts will also be implemented from 2026-27.
For your business, this means that you will need to ensure systems, including payroll, are updated to reflect the changes to taxation. Additionally, distributing employee communications regarding the new tax setting is always of benefit to maintain transparency and limit employee confusion and questioning.
Wages and Gender Equity
The Fair Work Commission made a decision to phase out junior pay rates for retail, fast food and pharmacy workers aged 18 to 20 which is now supported by federal policy direction. This reinforces the need to begin planning workforce cost adjustments and updating systems to reflect these changes.
The government has also supported the recent gender undervaluation review of five modern awards across female dominated industries (including childcare, health and social services). As a result, you should be prepared for further award changes as the review progresses.
Additionally, an amendment of the Fair Work Act 2009 allowing the FWC to issue orders adjusting pay rates of road transport workers in response to fuel price movements was implemented by the Government, potentially setting precedent for potential cost-linked wage adjustments in the future.
Migration and Workforce Planning
In attempt to address the critical staff shortages across construction, health and infrastructure, the budget is committing $85.2 million to support the acceleration of skills assessments for migrant trade workers and occupational licensing. A reform to the permanent migration points test also signals a longer-term shift in Australia’s talent pipeline strategy.
Furthermore, through a National Credit Recognition Framework, university students with relevant TAFE qualifications will have the ability to complete degrees faster to get skilled people working in the industry sooner, possibly impacting graduate recruitment timelines and workforce planning, which needs to be considered.
Additionally, apprenticeship incentives for large employers (with 200 or more employees) have been removed to prioritise providing incentives toward small to medium businesses. As a result of the removal, it could deepen existing skills shortages with an anticipated five to eight per cent decline in commencements of apprenticeships.
How to Prepare
1. Stay informed
As an employer, it is important you stay informed on the under the 2026-27 Federal Budget. Having a deep understanding is critical to inform decisions you make as an employer or business owner.
2. Communicate to staff
Not only is it important for you to stay informed, but it is important that your staff are informed. Communicate the changes that are taking place to your team. Discuss how any changes will impact your workplace. Additionally, ensure that people in critical roles are aware of what adjustments might need to be made to align with any changes, such as running a test pay run to ensure the PAYG calculations are aligned with new policy.
3. Update systems
Finally, it is crucial to ensure that your internal systems, such as payroll, are up to date. Be prepared to make adjustments to systems so they are reflective of any new changes which will be impactful to your business.
If you would like more information on the Federal Budget and the implications on your business, contact us via the link below.