Budget 2026–27: Fuel security and farm tax wins, but ag grants slashed

Treasurer Jim Chalmers handed down the 2026–27 Federal Budget on Tuesday night, 12 May, against a backdrop of global economic turbulence driven by conflict in the Middle East, an oil price shock, and ongoing supply chain pressures.

Framed under the theme of "Resilience and Reform," the Budget's six pillars — fuel security, cost of living, productivity, tax reform, care and opportunity, and national security — each carry implications for Australian farmers and regional communities.

"Farmers have been doing it tough, and so has the broader economy," said NFF President, Hamish McIntyre.

"The conflict in the Middle East has driven fuel and fertiliser costs through the roof and placed pressure on the production of the food and fibre Australians rely on every day."

Here are the key Budget measures for the agriculture sector.

The headline measure for farmers is the $14.8 billion Strengthening Australia's Fuel Resilience Package, which includes the establishment of a $3.2 billion government-controlled Australian Fuel Security Reserve.

The package is designed to shield essential industries — including agriculture — from the kind of supply shocks that have driven up production costs since the escalation of the Middle East conflict.

Key components include a $7.5 billion Fuel and Fertiliser Security Facility, through which Export Finance Australia has already secured over 450 million litres of additional diesel and around 100 million litres of additional jet fuel.

Together with an expansion of the Minimum Stockholding Obligation, Australia aims to increase its diesel and jet fuel reserves to 50 days.

Of particular note for farmers, the Budget confirmed that biosecurity border processes will be streamlined to help get fertiliser to farms faster. The Government has also facilitated 250,000 tonnes of agricultural urea for Australian farmers.

"We've had the opportunity to be at the centre of some of the most important discussions of this generation, around fuel and fertiliser supply and capability," McIntyre said.

Alongside this, the Budget includes a temporary reduction in fuel excise and heavy vehicle road user charges to provide immediate cost-of-living and cost-of-doing-business relief.

Several tax measures in this Budget represent direct wins for farm businesses.

Discretionary trust tax exemption: The Government is introducing a minimum tax of 30 per cent on discretionary trusts from 1 July 2028, with rollover relief available for three years from 1 July 2027 to allow businesses time to restructure.

Critically, primary production income will be exempt. With around 40,000 trusts used across Australian agriculture — many of them the backbone of family farm succession planning — the NFF had lobbied hard for this carve-out.

"Family farms are generational businesses built over decades and often represent a family's life savings and retirement plan. We are pleased the Government has listened," McIntyre said.

Instant Asset Write-Off made permanent: The $20,000 instant asset write-off for small businesses will be made a permanent feature of the tax system from 1 July 2026.

Small businesses with turnover up to $10 million will be able to immediately deduct eligible assets costing less than $20,000. While this threshold won't cover major capital items like tractors or harvesters, it does provide certainty for smaller equipment purchases.

No changes to small business CGT concessions: While the Budget introduced broader changes to capital gains tax rules and discretionary trusts, the government confirmed existing small business CGT concessions under Division 152 will remain unchanged, providing some certainty for farming businesses planning succession or asset transfers.

Loss carry-back provisions: From 2026–27, eligible companies that make a loss will be able to use that loss to receive a refund against tax paid in the prior two income years.

The government estimates the measure will benefit up to 85,000 companies — mostly small businesses — potentially providing useful cash flow support for farming operations exposed to seasonal and cyclical income swings.

The Budget's most contested measure for agriculture is a reprioritisation within the Agriculture, Fisheries and Forestry portfolio, slashing $191.6 million over five years from 2025–26 (and $30.5 million per year ongoing), with savings redirected to other priorities within the portfolio.

The cuts break down into three distinct components:

The $191.6 million in portfolio savings above are not simply cut as a significant portion is redirected internally to fund the "Securing the Future of Agricultural Trade" measure, which provides $77.1 million over four years from 2026–27 (and $17.5 million per year ongoing) to sustain DAFF's agricultural export and trade functions.

The $77.1 million includes:

The national regulator responsible for approving agricultural chemicals and veterinary medicines, Australian Pesticides and Veterinary Medicines Authority (APVMA) receives $8.7 million in supplementary funding.

Industry groups like NFF have welcomed the funding, saying it should help improve assessment capabilities and ease pressure on approval bottlenecks that can delay farmers’ access to newer crop protection products and livestock treatments.

The measure comes as growers face increasing pest resistance, tighter chemical regulations and rising demand for newer biological and precision agriculture products.

Not everything in the biosecurity space is a cut with the government announcing funding support for CSIRO’s Australian Centre for Disease Preparedness (ACDP) in Geelong.

The high-containment facility is responsible for researching and responding to major animal disease threats, including avian influenza and other exotic livestock diseases that could severely impact Australian agriculture.

The investment forms part of a broader $387.4 million funding package for CSIRO over four years, with the government saying the facility plays a critical role in protecting agricultural exports and strengthening national biosecurity capabilities.

The government is also betting on cheaper imports to ease pressure on Australian businesses, announcing another 497 “nuisance tariffs” will be scrapped from July 1, 2026.

While the changes may sound minor on paper, they could flow through to machinery operators and farmers via lower costs and reduced red tape on imported products such as agricultural tyres, tools, machinery components and industrial equipment.

The latest round of cuts brings the total number of abolished tariffs to almost 1000 over two years, with the government claiming the reforms will save businesses about $157 million annually in compliance costs.

The Budget also includes $7.6 million over four years to expand the Australian Trusted Trader (ATT) program, with the government aiming to reduce border red tape and speed up trade for accredited importers and exporters.

The expansion includes the rollout of a new Approved Exporter Scheme, which would allow eligible businesses to self-certify certain export documentation under free trade agreements, reducing reliance on traditional Certificates of Origin processes.

The Budget has also drawn criticism after failing to renew funding for the Regional Tech Hub, a federally-backed service operated by the National Farmers’ Federation that helps rural Australians improve phone and internet connectivity.

The free service assists regional users with issues relating to mobile coverage, NBN, Starlink and telecommunications troubleshooting, and has become increasingly important as farms adopt more connected technologies. In 2025, the service helped 75 regional people each day.

Industry advocates warn uncertainty around the program could impact regional communities and farming businesses that rely on connectivity for precision agriculture, machine telematics, remote diagnostics and cloud-based farm management systems.

“Without continued support for this service, regional Australians may lose a trusted service that has helped thousands navigate major technology changes and stay connected,” McIntyre said.

The Inland Rail Project has also had funding pulled back, with the federal government shelving plans to extend the freight rail line beyond Parkes in NSW to Brisbane.

Originally pitched as a major freight corridor connecting Melbourne and Brisbane, Inland Rail was expected to improve efficiency for agricultural transport and reduce pressure on regional roads.

The government said escalating costs — now estimated to exceed $45 billion — forced a rethink of the project.

“The Inland Rail was designed to strengthen supply chains, ease pressure on our highways and reduce the cost of moving produce from farm gate to consumers,” McIntyre said.

“There could not be a worse time to pull back investment in supply chains and regional connectivity.”

The NFF’s overall verdict on the Budget was cautious. While McIntyre acknowledged the government had listened to industry concerns around tax and trade measures, he said the cuts to grants, regional connectivity and infrastructure funding risk undermining the sector’s long-term productivity and resilience.

“This Budget contains some hard-won wins for agriculture, and we welcome them,” he said. “But if Australia is serious about building a stronger, more productive economy, this must be the starting point, not the finish line.”

The comments come as Australian agriculture is forecast to surpass the NFF’s long-standing $100 billion farm gate production target four years ahead of schedule. The latest ABARES forecasts show agricultural production is expected to reach a record $101.4 billion in 2025–26, rising to $107.4 billion when fisheries and forestry are included.

For the NFF, the milestone highlights the need for continued investment in the infrastructure and programs supporting regional Australia, rather than cuts to connectivity, freight and resilience initiatives at a time when farmers are still facing global uncertainty, labour shortages and rising costs.