Will the 2026 budget help or hinder businesses and workplaces?

While there are some welcome measures for employers in this year’s federal budget, myriad issues will remain.

On the evening of Tuesday, 12 March, Treasurer Jim Chalmers handed down his fifth federal budget, which he called “the most important and ambitious budget in decades”. This year’s papers contain fundamental changes to the taxation of capital gains and trusts, incentives for small businesses and an overhaul of the R&D tax incentive, among other key tax changes and measures.

Treasurer Chalmers said the reform packages for both tax and productivity within the budget were “ambitious” and will help “build a better tax system for businesses”.

“This budget includes the most significant tax reform package in more than a quarter of a century,” he said.

The Business Council of Australia welcomed what it called “strong action” on national resilience, productivity, research and development, and the cutting of red tape, while saying changes to capital gains tax and negative gearing will deter investment and add complexity.

BCA chief executive Bran Black said: “The budget contains welcome resilience announcements and several important reforms long advocated by the BCA to lift business investment and living standards, with measures on productivity and innovation and a commitment to reduce red tape by $10 billion a year. Importantly, the budget does not include a cash flow tax or gas export tax, both of which would have increased costs across the economy and put pressure on prices for Australian households and businesses.”

“We remain concerned about the complexity and net impact of changes to CGT and negative gearing in terms of making Australia a less desirable place for investment, as well as implications for housing supply, [and] Australia’s housing affordability challenge will only be solved by materially increasing housing supply, supported by faster approvals, better infrastructure and more investment in new housing.”

“Ultimately, this budget, like most budgets, includes measures that support businesses to invest and grow and measures that don’t. At a time when the world around us is increasingly uncertain and our key competitor nations are doing everything they can to attract mobile capital, we simply can’t afford to miss any opportunity to dramatically improve our investment fundamentals.”

Karlie Cremin, the chief executive of Dynamic Leadership Programs Australia, said that while it was “great” to see support of small businesses via tax changes, “it is hard to imagine that those levels of cuts will overcome the burden of workplace legislation we have”, particularly for medium-sized businesses that still have that burden but seem to have missed out on the tax incentives.

“The goal of increasing productivity and employment seems to be impossible whilst the cost and compliance burden of employment itself remains unchanged. Obviously, a budget wasn’t going to deal with that landscape, particularly as there is the state-based legislation – but to put forward tax incentives of this sort knowing that those frictions remain and will do so for the foreseeable future seems naïve,” she said.

“On another note, applying these measures to ‘small business’ according to turnover and not headcount is just asking for the rise of zombie businesses, as in the COVID Jobkeeper days.”

If it’s about productivity, she continued, then “surely there should be a minimum headcount requirement”.

“There’s a lot of sole traders operating as proprietary limited entities. For productivity purposes, it doesn’t make sense to incentivise those businesses,” she said.

“They are more likely to be unprofitable and operate just to collect the tax benefits on what would otherwise be personal income. Once the incentive goes, they just wind up. It would make more sense to me to incentivise businesses that have five or more employees as a minimum – and not forget medium-sized businesses [that] tend to be squeezed from both sides.”

This budget gives businesses more ways to invest, innovate and access skilled workers, Cremin went on, but added that the missing link is leadership capability.

“Productivity gains do not happen automatically. They happen when leaders can set direction, communicate change, build trust and help teams perform. If Australia wants these reforms to translate into real workplace outcomes, leadership development cannot be treated as optional,” she said.

“We also need to be careful not to confuse technology or tax incentives with innovation itself. Innovation is human before it is technical. It requires curiosity, courage, adaptability and leadership. The most productive thing many businesses can do right now is invest in the people who are responsible for leading change.”

Looking ahead, Remote APAC go-to-market lead Nick Martin said that while the government has a role to play in creating the conditions for productivity growth, employers also need to look at the levers within their own control.

Remote’s research, he said, found that 75 per cent of Australian businesses feel that current regulations increase compliance burden without improving outcomes. Instead, he said, productivity is being held back by skills shortages, payroll complexity and compliance burden.

“These are not abstract economic issues,” Martin said.

“They affect how quickly businesses can hire, how confidently they can expand, and how much time HR and payroll teams spend on administration, rather than more strategic work. We welcome the government reducing red tape and investing $85.2 million to accelerate skills assessments for migrant workers to make it faster for them to enter the workforce.”

“As teams become more distributed across regions, states and international markets, businesses need stronger workforce infrastructure. That means being able to access the right talent, manage employees compliantly, and pay people accurately, wherever they are.”

Jerome Doraisamy

Jerome Doraisamy is the managing editor of Momentum Media’s professional services suite, encompassing Lawyers Weekly, HR Leader, Accountants Daily, and Accounting Times. He has worked as a journalist and podcast host at Momentum Media since February 2018. Jerome is also the author of The Wellness Doctrines book series, an admitted solicitor in NSW, and a board director of the Minds Count Foundation.

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