A month after Budget 2026, the immediate headlines have mostly faded (the proposed donations cap being the exception) and attention is now turning to the practical implications of the announced measures, areas where important detail is still to emerge, and where further consultation may influence the final outcome.

The Budget did not contain any major structural tax reforms. There were no new taxes and few surprises. Instead, the Government focused on a series of targeted changes affecting Fringe Benefit Tax (FBT), charities and not-for-profit organisations, Foreign Investment Fund (FIF) rules, financial arrangements, the Research and Development Tax Incentive (RDTI), non-resident contractors' tax (NRCT) and company loans to shareholders.

Only four Budget measures were enacted through the Taxation (Budget Measures) Act 2026, with many of the remaining reforms still subject to legislative development prior to their inclusion in the Annual Rates Tax Bill expected out in September. There will be opportunity for additional public consultation during the bill process.

So, one month on, what should practitioners be paying attention to?

Q: Are the FBT reforms as simple as they sound?

The proposed motor vehicle FBT reforms are likely to be one of the most significant compliance-focused measures in the package.

Expected to apply from 1 April 2027, the reforms replace detailed day-count calculations with a category-based approach. The proposed "set and forget" model should reduce record-keeping obligations and make compliance easier for many employers. However, important details remain unresolved.

Questions remain around the detailed operation of some vehicle categories and how the new rules will apply in specific factual situations. Inland Revenue has released information sheets outlining the proposed reforms, but further detail is expected when draft legislation is released later this year.

It is also worth noting that while the vehicle reforms have progressed, broader FBT simplification measures previously considered have not proceeded, reflecting the fiscal challenges associated with wider reform.

Q: Why might the new not-for-profit threshold create unexpected outcomes?

One of the more positive Budget announcements was the increase in the statutory deduction threshold for not-for-profit organisations from $1,000 to $10,000. The changes are proposed to apply from the 2027–28 income year. However, the measure comes with an important caveat.

Rather than operating as an automatic deduction for all not-for-profits, the threshold will function as a cliff-edge test. A not-for-profit earning taxable income of $10,000 remains exempt. But if taxable income reaches, say, $10,001, and no expenses are otherwise deductible (the statutory deduction cannot be claimed), the entire amount becomes taxable.

For some organisations, this could create unexpected outcomes and may influence decisions around income-generating activities, timing and budgeting.

The increase in the threshold is welcome, but practitioners advising not-for-profit organisations should ensure clients understand how the new rules operate.

The Budget also confirmed that membership subscriptions and levies received by taxable not-for-profit organisations will remain non-taxable. Additionally, proposals were outlined to reduce filing obligations for organisations with taxable income of $10,000 or less.

Q: What do the donation tax credit changes mean for donors and charities?

One of the more notable measures in Budget 2026 is the introduction of a cap for individuals on donations eligible for a donation tax credit.

For donations made on or after 1 April 2027, the maximum entitlement of donations eligible for a donation tax credit will be the lower of $100,000 or the donor's taxable income.  Therefore, the maximum amount of annual donation tax credit will be $33,333.33.

The Government has cited two concerns for enacting the cap on donation tax credits.  One is the fiscal sustainability of an open-ended donation tax credit regime.  The other is an integrity concern involving the use of the donation tax credit rules in an avoidance arrangement entered into by certain donor-controlled charities.

The cap is accompanied by several measures intended to simplify how donation tax credits are administered.

From 1 April 2028, eligible donors will be able to receive donation tax credit refunds throughout the year rather than waiting until after year-end. Donors will also be able to direct Inland Revenue to transfer donation tax credit entitlements directly to the charity that received the donation. As you would expect the transfer of the entitlement will not give rise to a further tax credit.

Q: Are the FIF changes one of the most practically significant measures?

For many practitioners, the answer may be yes.

The increase in the FIF de minimis threshold from $50,000 to $100,000 is proposed to apply from 1 April 2026.

The threshold has remained unchanged for many years despite significant growth in offshore investing and the increasing accessibility of international investment platforms.

The increase should reduce compliance costs for many smaller investors and remove FIF obligations for some taxpayers altogether. For some clients, it may eliminate the need to undertake FIF calculations that were previously required.  However, these clients will also need to remember to return foreign dividends when received.

The expansion of the revenue account method and additional relief for taxpayers subject to concurrent taxation in multiple jurisdictions are also positive developments.

Q: Will financial arrangements rules simplification finally reduce compliance costs?

The proposed financial arrangements rules changes have received less attention than the FBT and FIF reforms, but they may ultimately prove just as significant.

The Government has proposed changes that would remove certain low-risk foreign currency arrangements from the financial arrangement rules and reduce the need to calculate unrealised foreign exchange gains and losses. 

Examples include certain foreign bank accounts, mortgages and credit card arrangements.

Without knowing final decisions and details of the changes, it is too early to make a call on whether compliance costs will be reduced.

Q: Which measures are still likely to change?

Many proposals remain at an early stage of the legislative process.

Only four Budget measures were enacted through the Taxation (Budget Measures) Act 2026:

• the donation tax credit cap
• the exemption from non-resident contractors' tax for the dry leasing of aircraft and aircraft parts
• the rule that will bring to tax an amount of a loan from a company to a shareholder that remains unpaid six months after a company is deregistered (with application to a company deregistered on or after 4 December 2025), and
• changes to Working for Families.

Most of the remaining reforms are expected to progress through the September Annual Rates Tax Bill and remain subject to consultation through the legislative process.

Q: What should practitioners be doing now?

Although many measures are not yet enacted, practitioners may wish to begin identifying clients who could be affected by the proposed changes.

Particular areas to monitor include:

• clients who may benefit from the higher FIF threshold
• employers affected by the proposed FBT motor vehicle categorisation rules
• charities and not-for-profit organisations impacted by the new deduction threshold and donation tax credit changes
• taxpayers with foreign currency exposures who may benefit from financial arrangement simplification, and
• consultation opportunities as draft legislation is introduced later this year.

The next key milestone is likely to be the September Annual Rates Tax Bill, which is expected to contain many of the remaining Budget measures.