The Australian government is set to make several important policy changes in 2026 that will affect taxpayers, investors, and industries across the country. From fuel tax credit reforms to possible changes in property tax rules and environmental funding, these updates could reshape how money flows through the economy and impact everyday Australians in various sectors.
Fuel Tax Credits: The $10.8 Billion Question
One of the biggest government policy issues in 2026 revolves around the fuel tax credits scheme. This scheme refunds certain businesses for the fuel excise they pay on diesel and petrol, and it’s costing taxpayers nearly $30 million every single day. That adds up to about $10.8 billion in this financial year alone — a huge chunk of public money going out the door.
To put that in perspective, the government spends less than this amount on the entire Royal Australian Air Force, foreign aid, and First Nations’ health combined. For example, the 2024-25 Defence budget allocated approximately $10 billion for the Air Force, while foreign aid was around $5 billion, and First Nations health funding was under $3 billion. The fuel tax credits scheme dwarfs these important areas.
The scheme mainly benefits miners, farmers, and some other industries that use fuel for machinery or vehicles on private roads. These businesses get refunds because they’re not meant to be paying for public road maintenance through fuel excise.
But the problem is the excise itself is 52.6 cents per litre on petrol or diesel, and the fuel tax credits refund businesses for that amount. That’s a big subsidy that keeps fuel costs lower for these sectors.
Supporters argue this is fair because these businesses aren’t primarily using public roads, which is supposedly what fuel excise funds. Yet, only about 5% of fuel excise revenue is actually dedicated to roads by law. The rest just goes into the general budget, funding a range of government services. This disconnect has led to increasing calls to wind back or even abolish the fuel tax credits, especially as it’s seen as a fossil fuel subsidy that undermines efforts to reduce emissions.
Environmental groups and some economists say the scheme encourages higher fuel consumption, working against Australia’s climate commitments. The government hasn’t announced firm decisions yet, but the debate around this scheme is heating up. Some proposed reforms include capping the scheme, reducing the refundable rate, or phasing it out entirely over several years — all aimed at cutting the $10.8 billion cost and pushing industries to consider cleaner alternatives. Given the scale of the expenditure, this issue is likely to be a major policy focus through 2026.
Negative Gearing and Capital Gains Tax Under Review
The Albanese government is also looking closely at the rules around negative gearing and capital gains tax discounts as part of broader efforts to address housing affordability and raise revenue. These rules have long been contentious as they influence property investment and the housing market.
Negative gearing allows property investors to deduct losses from their taxable income, effectively reducing their tax bills. Currently, there's no limit to how many properties can be negatively geared, and this has been blamed for driving up housing prices by encouraging more investment demand. Reports in early 2026 suggest the government is modelling changes to restrict negative gearing to just two investment properties per person.
Limiting negative gearing could reduce demand for additional investment properties, potentially easing pressure on housing prices. However, it would also mean some investors pay more tax, which could impact rental prices. The government aims to strike a balance between improving affordability for first-home buyers and maintaining rental market stability.
On the capital gains tax front, investors currently receive a 50% discount on capital gains if they hold an asset for more than 12 months. The government is considering reducing this discount to 25%, which would increase the tax payable on profits from property sales and other investments. According to Treasury modelling, such a change could raise billions in additional revenue over the next decade, helping fund social programs or infrastructure.
These tax changes are expected to be detailed further in the 2026-27 Budget, with consultations ongoing through the year. They’re part of a broader push to make the tax system fairer and generate funds for housing assistance, but they also face opposition from property investor groups and some economists who warn about possible negative impacts on the property market.
Environmental Funding and Emissions Targets
Another key focus for the government in 2026 is ramping up environmental funding to meet Australia’s climate targets. The country has committed to reducing greenhouse gas emissions by 43% below 2005 levels by 2030, and 2026 is a critical year for stepping up action.
The government plans to increase funding for clean energy projects, including solar and wind farms, battery storage, and hydrogen development. The 2025-26 Budget allocated around $5 billion towards these initiatives, and further funding is expected in the upcoming budget to accelerate the transition away from fossil fuels.
Also, there are plans to boost support for energy efficiency programs in homes and businesses. Rebates and grants for installing solar panels, heat pumps, and insulation are set to expand, aiming to reduce energy bills and emissions simultaneously.
On the regulatory side, the government is reviewing emissions standards for vehicles and industries, potentially tightening restrictions to encourage faster adoption of electric vehicles and cleaner manufacturing processes. The transport sector accounts for about 19% of Australia’s emissions, so changes here could have a sizeable impact.
These moves come as Australia faces international pressure to deliver on its Paris Agreement commitments, and as domestic climate events — like bushfires and floods — increase public awareness of environmental risks.
Other Key Policy Areas to Watch in 2026
Besides fuel tax credits, property taxes, and environmental funding, several other policy areas are on the government’s radar this year.
Health funding continues to be a priority, with increased budgets aimed at both public hospitals and mental health services. The government plans to allocate an additional $3 billion over the next two years to expand community health programs and reduce waiting times for elective surgeries.
Infrastructure investment is also expected to grow, with a focus on regional development. Projects like road upgrades, rail expansions, and broadband improvements aim to support economic growth outside major cities. The government has earmarked $15 billion for infrastructure projects in regional Australia between 2024 and 2027, with further announcements likely in 2026.
Education reforms are underway as well, particularly targeting vocational training and support for apprenticeships. The government is investing $1.5 billion to boost skills development and address labour shortages in key industries, including construction, healthcare, and technology.
Finally, the government is reviewing immigration policies to balance economic needs with social integration. While the overall migration intake will probably remain steady, there may be changes to visa categories and pathways aimed at attracting skilled workers to high-demand sectors.
The Australian government’s policy changes scheduled for 2026 highlight a push to rethink how public money is spent — especially on fuel subsidies, housing tax benefits, and environmental funding. These decisions will have wide-reaching effects on industries, taxpayers, and communities, shaping Australia’s economic and environmental future.
This article was created with AI assistance.
