2026 Federal Budget and Collections: Why FY27 Is the Pressure Zone

Treasurer Jim Chalmers handed down the 2026 federal budget on Tuesday night, and on the headline numbers, working Australians have something to look forward to. A new $250 tax offset, $1,000 instant work deduction, cheaper medicines, more aged care funding.

If you read the press release, it’s a cost-of-living budget.

Read the fine print and a different picture shows up.

Most of the meaningful relief doesn’t land until the 2027-28 income year. The temporary fuel excise discount ends in July. Treasury is forecasting inflation to peak at 5 per cent in the June 2026 quarter. Growth has been revised down to 1.75 per cent. And the Working Australians Tax Offset, the centrepiece of the cost-of-living package, won’t show up in anyone’s pocket until after July 2028.

For collections leaders, that gap is the story. The next 18 to 24 months are the pressure zone. Relief is on the way. It’s just not arriving in time to ease the squeeze your customers are feeling right now.

Key Takeaways

• Most cost-of-living relief in the 2026 budget lands in 2027-28, not now
• The $250 Working Australians Tax Offset (WATO) starts from the 2027-28 income year. Workers won’t see it until after July 2028
• Fuel excise relief ends 1 July 2026. Inflation is forecast to peak at 5 per cent in the June 2026 quarter
• Treasury has revised GDP growth down to 1.75 per cent, with three years of slower forecast growth
• Negative gearing and capital gains tax changes will reshape investor borrower behaviour from July 2027
• 160,000 NDIS participants will move off the scheme onto state-run support programs by 2030, creating a vulnerable cohort that intersects with hardship operations
• For collections leaders, FY27 hardship volumes are unlikely to ease before they get worse. Now is the time to pressure-test capacity, processes and controls

 

The Headline Numbers and the Real Timeline

The cost-of-living measures in this budget are real. They’re just not all immediate.

Here’s how the timing breaks down.

What lands in 2026-27

• $1,000 instant work-related tax deduction (no receipts required, average saving $205 for 6.2 million workers)
• Tax rate on income between $18,201 and $45,000 drops from 16 per cent to 15 per cent on 1 July 2026
• Cheaper medicines through the PBS, with the general co-payment dropping to $25
• Medicare levy low-income threshold lifted 2.9 per cent

What lands in 2027-28

• Tax rate on the same bracket drops again to 14 per cent on 1 July 2027
• $250 Working Australians Tax Offset for more than 13 million workers
• Combined value for a worker on average earnings ($79,000) of about $54 a week

The total package, once everything is in, is meaningful. An Australian on average earnings will be roughly $2,800 better off by 2027-28 compared to 2023-24 settings. But that’s a 2027-28 picture, not a 2026 one.

And as Shadow Treasurer Tim Wilson pointed out the morning after, the $250 offset is small relative to the inflation it’s meant to offset. Treasury’s own forecast is that headline inflation will hit 5 per cent in the June 2026 quarter, before easing to 2.5 per cent by mid-2027. That’s only if global oil prices behave. The budget itself flags a ‘severe’ Middle East scenario where oil hits US$200 per barrel and inflation peaks at 7.25 per cent.

Either way, the next financial year is going to be hard. The relief that matters most isn’t arriving until the year after that.

 

What This Means for Collections Operations

If you’re running a collections book in financial services, three things follow from the budget’s shape and timing.

1. Hardship Volumes Aren’t Going to Ease

The customers entering hardship today are doing so because real costs are still rising faster than incomes. Fuel relief is ending. Grocery prices are still being pushed up by global energy costs. Mortgage holders haven’t seen meaningful rate relief. And the tax cuts that would help aren’t landing in their pay packets for another 18 months.

The temptation is to read the budget as good news and assume conditions ease through the next financial year. They probably won’t. They’ll likely get harder before they get easier.

What this looks like in practice: A non-bank lender that has been managing hardship volumes 15 per cent above pre-pandemic levels for the last 12 months should plan for another 12 to 18 months at or above that level, not a gradual return to normal. Workforce planning, queue management, automation, and arrangements processes all need to be sized for the pressure zone, not the post-relief environment.

2. Investor and Landlord Borrowers Are About to Change Behaviour

The negative gearing and CGT changes are the most consequential reforms in the budget for lenders. Existing properties bought before budget night are grandfathered. From 1 July 2027, new purchases of existing dwellings can’t be negatively geared, and the 50 per cent CGT discount is replaced with an inflation-indexed version that has a 30 per cent minimum tax rate.

Treasury estimates the changes will lift 75,000 properties from investors to first home buyers over a decade, but cost roughly 35,000 in housing supply. That nets out to about 30,000 extra homes when paired with the $2 billion in infrastructure funding.

For collections operations, the read-through is more about behaviour than housing economics. Investor borrowers facing tighter tax economics on new acquisitions, combined with elevated rates, will be more sensitive to any dip in rental income. The risk profile of investor property loans is shifting, and so is the hardship profile of landlords who may have been treating negative gearing as a cushion against arrears.

What this looks like in practice: A lender with a meaningful investor property book should be looking at how it segments those borrowers in hardship triage. The customer who could absorb three months of vacancy two years ago may not be able to absorb the same in 2027 once the tax economics shift. Early-warning indicators on investor accounts will matter more, not less.

3. The NDIS Cohort Will Move, and So Will Hardship Patterns

Buried in the savings measures is one of the most operationally significant changes in the budget. The government plans to move more than 160,000 NDIS participants onto state-run support programs by 2030, saving $37.8 billion over the forwards. Spending growth on the scheme drops from about 10 per cent to 5-6 per cent long term.

This is a vulnerable cohort. Many will experience disruption as they transition between support systems. Some will have changes to the level and type of support they receive. For collections teams handling customers with disability or carer responsibilities, the practical implication is that the hardship and vulnerability profile of a portion of your book will shift over the next few years. Identifying it, responding to it consistently, and evidencing what you did will matter.

 

The Compliance Backdrop Hasn’t Gone Away

CPS 230 has been in force for nearly a year. ASIC’s focus on AI in credit and collections decisions is sharpening. The Banking Code, RG 271, and hardship obligations under the National Credit Code all sit on top of operational pressure that’s only going to intensify.

What that means in practice is that the cost pressure on collections teams runs in two directions. Volumes and complexity are going up, and the regulatory bar for how cases are handled has gone up with them. Operational resilience under CPS 230 is no longer a documentation exercise, it’s a question of whether your processes hold up at higher volume, in harder cases, with consistent customer treatment.

A controlled collections environment, with traceable actions, explainable decisions, visible exceptions and configurable suppression on hardship or complaint cases, is significantly more defensible under that kind of pressure than a manual process with inconsistent records.

 

What This Means for You

If You’re Already Set Up for Volume

Good. Use the next six months to pressure-test rather than expand. Run your hardship processes against a 20 per cent volume lift scenario and identify where they break. Test your contingency plans, not just document them. Look at where manual workarounds have crept in, because at scale, manual is where consistency falls over.

If You’re Mid-Transformation

The timing is awkward but the work matters. The temptation will be to defer process and platform changes because volumes are high right now. The risk of doing that is you spend FY27 fighting through the pressure zone with the same controls and tooling that are already stretched. Map what’s deliverable in the next two quarters and protect that runway.

If You’re Just Starting to Look at This

Start with the highest-volume, lowest-discretion processes. Payment arrangement tracking. Communication suppression for hardship and complaint cases. Audit trail for case activity. These aren’t glamorous but they’re where operational risk concentrates when volumes rise, and they’re the same areas APRA supervisors are pressure-testing under CPS 230.

 

The Bigger Picture

The 2026 budget is a long-game budget. Most of the cost-of-living relief lands beyond the next election. The tax reform centrepiece doesn’t take effect until 2027. The NDIS rebalancing plays out over five years. The benefits are real but they’re patient.

Collections operations don’t have that luxury. The pressure is now. The volumes are now. The compliance scrutiny is now.

The teams that come out of the next 18 months in better shape than they went in won’t be the ones waiting for the macro picture to ease. They’ll be the ones who used this period to tighten the operational base, embed the controls properly, and build the capacity to absorb harder cases with consistency.

If any of this is on your radar and you’d like to talk through what it means for your environment, get in touch with our team.

 

FAQs

When does the cost-of-living relief in the budget start?

Some elements start in 2026-27, including the $1,000 instant work deduction, the first 1 per cent drop in the 16 per cent bracket, cheaper medicines and the Medicare levy threshold lift. The largest element, the $250 Working Australians Tax Offset, doesn’t take effect until the 2027-28 income year, which means workers won’t see it until after July 2028.

Why is the WATO so delayed?

Treasurer Jim Chalmers attributed the delay to the need to avoid fuelling inflation in the near term. Treasury is forecasting headline inflation to peak at 5 per cent in the June 2026 quarter, and the government has stated it doesn’t want to add stimulus while inflation is still elevated.

How should collections teams be thinking about FY27 hardship volumes?

The combination of ending fuel relief, sticky inflation, slower growth and delayed tax relief points to elevated hardship pressure continuing through FY27. Planning on a return to pre-2022 conditions is optimistic. Sizing workforce, processes and controls for sustained pressure is more realistic.

What changes for investor property loans?

Properties owned before budget night are grandfathered. From 1 July 2027, new purchases of existing dwellings can’t be negatively geared, though new builds remain eligible. The 50 per cent CGT discount is replaced with an inflation-indexed version with a 30 per cent minimum tax rate. The behaviour change among investor borrowers is likely to start showing up well before the rules take effect.

Does CPS 230 still apply if conditions get harder?

Yes. Operational resilience obligations don’t ease in difficult conditions, if anything supervisors look more closely at how frameworks hold up under stress. Documentation that hasn’t been tested in practice is the gap APRA is increasingly focused on.

What about the NDIS changes? Do they affect collections?

For customers with disability or carer responsibilities, the planned movement of 160,000 participants onto state-run support programs by 2030 will create transition risk. Identifying vulnerable customers, responding consistently, and evidencing what was done will matter operationally and from a conduct perspective.

Is the $250 tax offset really going to make a difference?

Combined with the rest of the package, it’s meaningful over the medium term. In the immediate pressure zone of FY27, the offset itself is small relative to the inflation it’s offsetting. Customers in hardship are unlikely to feel materially different in the next 12 to 18 months.

How does 365 Collect help?

365 Collect is a collections and receivables management platform built on Microsoft Dynamics 365, Dataverse and the Power Platform. It supports collections teams to operate consistently at higher volume through configurable workflow controls, complete audit trail, communication tracking, controlled suppression on hardship or complaint cases, and exception visibility on planned versus actual activity. The platform doesn’t replace the broader operational resilience work CPS 230 requires, that always sits with the regulated entity, but it provides the operational control and evidence layer that makes parts of that framework workable day to day. If you’d like to talk through what that could look like in your environment, get in touch with our team.

You can find the full details on the budget from the government here.