2026-27 Federal Budget

What the Budget means if you run a small business

The Budget delivered several useful measures for small business — a permanent $20,000 instant asset write-off, the return of loss carry-back, and more flexible PAYG instalments. Five months on, they are at very different stages. The write-off and loss carry-back are law — the Treasury Laws Amendment (Tax Reform No. 2) Act 2026 received Royal Assent on 26 August 2026. The EV FBT wind-down and the R&D Tax Incentive overhaul are now exposure draft legislation, not yet introduced to Parliament. The PAYG changes are still announcements. Every measure below is marked with its legislative status so you can tell the difference.

Current as at 9 October 2026. Tax law is changing rapidly following the 2026–27 Budget. Measures marked Before Parliament, Consultation or Announced are not law and may change or not proceed.

Law — 26 Aug 2026

$20,000

Instant asset write-off, permanent, per asset, for businesses under $10M turnover. Applies to assets first used or installed ready for use from 1 July 2026.

Law — 26 Aug 2026

2 years

Loss carry-back for companies under $1bn global turnover, against tax paid up to 2 years earlier, from 1 July 2026. Same Act as the write-off.

Exposure draft

EV FBT

Wind-down from 1 April 2027 for cars over $75,000 and 1 April 2029 for the rest. Draft law released September 2026; not yet a Bill. Draft grandfathering is narrower than many expected.

The headline changes

Five measures most small businesses can use

Positive changes that affect day-to-day tax planning and cash flow. They are not all at the same stage, and the difference matters when you are deciding whether to commit money. Each card shows exactly where the measure stands.

Law Passed and assented. Plan around it.

Before Parliament Introduced, not yet passed.

Consultation Treasury paper or exposure draft only.

Announced Budget announcement. No draft, no paper.

Cash flow win Assets first used from 1 July 2026

Law

$20,000 instant asset write-off made permanent

Now law under the Treasury Laws Amendment (Tax Reform No. 2) Act 2026, which received Royal Assent on 26 August 2026. It applies to eligible assets costing less than $20,000 first used or installed ready for use from 1 July 2026, for businesses with aggregated turnover under $10 million — permanently, with no annual extension needed.

FY2026 is also settled. The $20,000 threshold for the year ended 30 June 2026 was already law under separate 2025 legislation
Threshold applies to each asset, not the total purchases for the year
Assets $20,000 or more go into the simplified depreciation pool (15% first year, 30% thereafter)
The 5-year lockout rule for opting out of simplified depreciation remains suspended until 30 June 2027
Practical position for FY2027 purchases: you can plan around the $20,000 threshold. The usual rules still apply — the asset must be used or installed ready for use for a taxable purpose, and only the business-use portion is deductible

Resilience tool From 1 July 2026

Law

Loss carry-back returns — permanently

In the same Act as the instant asset write-off, law from Royal Assent on 26 August 2026, for losses in income years starting on or after 1 July 2026. First claimable in 2026–27 returns. Companies, corporate limited partnerships and public trading trusts with aggregated annual global turnover under $1 billion can carry a revenue loss back against tax paid in the prior two income years and receive a refundable offset.

Up to 85,000 companies expected to benefit each year
Applies to revenue losses only — not capital losses
Capped at the entity’s year-end franking account balance (you can’t refund more than has been paid in)
Lodgement conditions apply — returns for the current and previous five years must be lodged and assessed
An integrity rule blocks the offset where voting control changes in order to claim it
Useful for a business hit by a one-off bad year after paying tax in earlier good years

For start-ups From 1 July 2028

Announced

Loss refundability for small start-ups

Start-up companies in their first two years of operation with turnover under $10 million will be able to convert tax losses into a refundable tax offset.

Offset is capped at the value of FBT and withholding tax on wages paid to Australian employees in the loss year
Designed to support genuinely new businesses with employees, not pre-revenue investment vehicles
Useful for new businesses with payroll but limited revenue while they grow
Doesn’t start until 2028-29 — longer planning horizon
Budget announcement only. No bill, no exposure draft. Do not build a funding plan around it

Cash flow flexibility From 1 July 2027

Announced

Optional monthly PAYG instalments

Small and medium businesses will be able to opt in to monthly PAYG instalments (rather than quarterly), and the ATO will expand its dynamic PAYG calculations using business software data.

Helpful for businesses with lumpy quarterly cash flow who’d rather pay smaller amounts more often
Dynamic instalments use real-time data from your accounting software to calculate liability more accurately
Reduces the size of year-end true-up surprises
Worth considering if quarterly instalments routinely cause cash flow stress
Budget announcement only — no legislation has been introduced

Now law From 1 July 2027

Law

Small business 50% CGT reduction — turnover test lifted from $2M to $10M

Added by Senate amendment and now law under the Treasury Laws Amendment (Tax Reform No. 1) Act 2026 (Royal Assent 26 June 2026), effective 1 July 2027. Businesses with aggregated turnover between $2 million and $10 million will be able to access the 50% active asset reduction on the sale of an active business asset for the first time.

Read this carefully — only one of the four concessions moves. The 15-Year Exemption, the Retirement Exemption and the Small Business Rollover all keep the existing $2 million aggregated turnover / $6 million net asset value tests
A business with $7 million turnover gains the 50% reduction but still does not automatically get the other three concessions
Matters most for owners contemplating a sale from 2027-28 onwards — and it interacts with the CGT indexation changes starting the same day
If a sale is on the horizon, the ordering of these concessions against the new indexation rules is worth modelling rather than assuming

A planning window that’s closing

The EV FBT discount is being wound back

Consultation

The Government announced on 5 May 2026 that the FBT exemption for eligible electric vehicles will move to a permanent 25% discount over three stages. Treasury released exposure draft legislation in September 2026; consultation closed 28 September 2026. The draft follows the announced stages and dates. It is not yet a Bill and could still change — and the grandfathering rules in the draft are the part to read carefully.

EV FBT discount transition

Three stages, three different rules — arrangement timing matters

Now — 1 April 2027

100% exemption

Full FBT discount on eligible EVs

Eligible electric cars (up to the luxury car tax fuel-efficient threshold) get a full FBT exemption. This stage is the existing law and is unaffected by the announcement.

1 April 2027 — 1 April 2029

100% / 25%

Split treatment by EV value

EVs up to $75,000: continue with 100% FBT discount until 1 April 2029. EVs above $75,000 (up to LCT threshold): drop to a 25% FBT discount from this date.

From 1 April 2029

25% permanent

Implemented via 15% statutory rate

All eligible electric cars (up to the LCT threshold) get a permanent 25% FBT discount, implemented through a 15% statutory rate. Whether a Stage 2 arrangement continues on Stage 2 terms past this date has not been confirmed.

Grandfathering: narrower in the draft than the announcement suggested

The Government said existing leases will not be affected. The exposure draft gives effect to that through a test of whether an existing commitment continues — and on the draft as written, transitional treatment may end on events such as a change of employer, a transfer within the same corporate group or between government departments, or adding accessories that increase lease payments. Where a new commitment (for example a lease refinance) moves a car from exemption to the 25% discount part-way through an FBT year, the discount is averaged for that year.

Professional bodies have argued this is too harsh, so it may change before a Bill is introduced. On the draft timetable the cutoff for EVs over $75,000 is 1 April 2027 and for EVs up to $75,000 it is 1 April 2029. If you are weighing an EV novation, or changing jobs or varying a lease on an existing EV, speak to us first.

If you claim R&D Tax Incentive

R&D Tax Incentive: more generous, but narrower

Consultation

From income years starting on or after 1 July 2028, the R&D Tax Incentive is proposed to be reformed. The headline offset rates go up meaningfully, but supporting activities are removed from eligibility — so the same business may get a higher rate on a smaller eligible base. Treasury released exposure draft legislation (Treasury Laws Amendment (Tax Reform No. 5) Bill 2026) on 11 September 2026; consultation closed 28 September 2026. It is not yet a Bill and may change.

More generous

Where the changes help

Core R&D offset rate increased — for SMEs under $50M turnover, the offset becomes the corporate tax rate plus 23% (i.e. up to 48%), versus the current 18.5% premium
Refundable offset threshold raised — from $20M to $50M turnover, expanding access for growing businesses
Maximum spend cap increased — from $150M to $200M per year
Intensity threshold lowered — from 2% to 1.5%, qualifying more businesses for higher offset rates

More restrictive

Where the changes tighten

Supporting R&D activities removed from eligibility — only core R&D expenditure qualifies. Significant scope narrowing for many claimants
Refundability tied to age — refundable offset only in the first 10 years of carrying on an enterprise or from first R&D registration (15 years for R&D relating to therapeutic goods). Older SMEs get a non-refundable equivalent
Minimum spend threshold raised — from $20,000 to $50,000, with smaller projects required to use a Research Service Provider
Net effect for an established small business may be similar or worse than today, depending on how much of their spend was on supporting activities

If you currently claim R&DTI, get a fresh assessment

The reform is part of the government’s response to the Ambitious Australia Strategic Examination of R&D. The intent is to redirect support away from claims that wouldn’t have happened anyway (often supporting activities) and towards genuine experimental R&D. For businesses with eligible core R&D, the higher rate is genuinely generous. For businesses where most claimed spend was supporting activities, the net effect could be worse.

There is now draft legislation to test your current claim pattern against. Worth reviewing what share of your claim relates to supporting activities, but model the exposure rather than restructuring your R&D programme around a draft that may still change.

Other items worth knowing

Smaller measures that may still affect you

Several measures sit alongside the headline changes — some directly relevant to specific industries, others administrative items worth flagging.

Draft law: September 2026

Consultation

Venture capital incentives expanded

VCLP investee asset size cap increased from $250M to $480M; ESVCLP cap from $50M to $80M. Maximum ESVCLP fund size lifted to $270M. Eligible venture capital investor program closed to new applications.

From 1 July 2025

Law

Medicare levy thresholds up 2.9%

Routine annual increase. Singles threshold rises to $28,011. Family threshold $47,238. Over 1 million Australians on lower incomes will continue to be exempt or pay a reduced rate.

1 April – 30 June 2026 (concluded)

Law — period now ended

Fuel excise temporarily halved

For three months from 1 April 2026, fuel excise drops from 52.6c to 20.6c per litre. Heavy vehicle road user charge reduced to zero. ATO also offering temporary tax relief (payment plans, interest remission) for businesses hit by fuel supply issues.

From 2026-27

Announced

Business register reforms (Tranche 2)

Director IDs to be linked to the Companies Register. Director information to be synchronised with the ACNC Charities Register. ABN authentication uplift. Administrative tightening rather than substantive change.

Now & ongoing

Funding measure

Small Business Debt Helpline extended

Funding extended for the Small Business Debt Helpline (financial counselling) and the NewAccess for Small Business Owners mental health coaching program. Free resources for business owners under financial pressure.

Watch this space

Funding measure

ATO compliance focus expanding

$86.3M over 4 years for ATO to strengthen the tax system against fraud, including expanded monitoring of tax agent activity. The ATO can now pause or waive debts of victims of agent fraud, and recover from the agent directly.

Worked example

Loss carry-back in practice

A small business hit by a single bad year that had been profitable previously, showing how the loss carry-back regime turns the year-3 loss into a refund of prior-year tax. The measure became law on 26 August 2026.

Greenway Trading Pty Ltd — small business client

Profitable 2026-27 and 2027-28, then a $150,000 loss in 2028-29

Greenway is a small business operating as a Pty Ltd company. Two strong years followed by a loss-making year due to a major customer leaving. Franking account has accumulated from tax paid on the earlier profits.

2026-27 taxable income $300,000

2026-27 company tax (25%) $75,000

2027-28 taxable income $280,000

2027-28 company tax (25%) $70,000

2028-29 tax loss ($150,000)

Loss carry-back refund (25% × $150,000) $37,500

Greenway gets a $37,500 refund of previously-paid company tax, applied against the franking account balance. Without loss carry-back, the $150,000 loss would have been carried forward against future profits — useful, but with no immediate cash flow benefit in the year the loss actually hit. The refund arrives when the business needs it most.

What you should do

Practical steps for the next 12 to 18 months

Most of these measures don’t need immediate action, but a few are worth thinking through in this year’s planning and equipment purchase decisions.

Plan equipment purchases around the $20,000 threshold

The $20,000 threshold is now permanent law for assets first used or installed from 1 July 2026. The threshold is per asset and the line is sharp: $19,990 = immediate deduction; $20,010 = pool depreciation. Check the GST-exclusive cost (if you are GST-registered) before you buy.

If you’re considering an EV novation — check the dates, then check with us

On the draft timetable the cutoff is 1 April 2027 for EVs over $75,000 and 1 April 2029 below that. The draft grandfathering can be lost on a change of employer or a lease variation. Don’t sign a novation purely to beat a date that hasn’t been legislated, and talk to us before changing jobs or varying an existing EV lease.

If your company has had a bad year — check loss carry-back

If you incur a revenue loss in 2026-27 or later and paid company tax in the prior two years, you can claim a refundable offset, first in your 2026-27 return. Capped at your year-end franking account balance, revenue losses only, and conditional on the last six years of returns being lodged and assessed.

If you claim R&DTI — model it, don’t restructure yet

The removal of supporting activities is the bigger story than the rate increase. Draft legislation was released in September 2026 for a 1 July 2028 start. Now is a sensible time to work out how much of your current claim is supporting activities — but don’t restructure until the Bill is final.

Consider monthly PAYG if cash flow is lumpy

Quarterly instalments don’t suit every business. The proposed opt-in to monthly instalments is flagged for 1 July 2027 but has not been legislated. Worth keeping on the radar if BAS deadlines routinely cause cash flow stress.

If a business sale is on the horizon — the small business CGT position has changed

From 1 July 2027 the 50% active asset reduction opens up to businesses with turnover up to $10 million. The 15-Year Exemption, Retirement Exemption and Small Business Rollover keep the old $2M turnover / $6M net asset tests. This is law, and it lands the same day as the CGT indexation changes — sale timing across 30 June 2027 is worth modelling properly.

The trust minimum tax is separate — and it is still draft law only

If you run your business through a discretionary trust, the proposed 30% minimum trust tax from 1 July 2028 is a bigger consideration than anything on this page. Treasury released exposure draft legislation on 3 September 2026; no bill has been introduced. The draft confirms that distributions to corporate beneficiaries get no offset for the trustee’s tax, and adds a new option to elect out by fixing beneficiaries and their shares. It is time to model your options — not yet to restructure. There’s a separate page covering the trust position in detail.

Other Budget changes that might apply to you

Small business owners usually fit more than one of these

Most business owners also have personal investments, run their business through a trust, or have an SMSF. The full picture matters more than any single measure.

If this applies

I run a business through a trust

A proposed 30% minimum tax on discretionary trusts from 1 July 2028. Exposure draft released 3 September 2026 — no bill.

Read about trust changes If this applies

I have a Self-Managed Super Fund

Division 296 has commenced. The residential property borrowing ban took effect 10 August 2026.

Read about SMSF changes If this applies

I own (or am buying) an investment property

Now law. Losses quarantined from 1 July 2027 — but property held at 12 May 2026 is grandfathered.

Read about property changes If this applies

I hold shares or other investments

Now law from 1 July 2027. The 50% discount is replaced with CPI indexation and a 30% minimum tax.

Read about CGT changes If this applies

I’m a PAYG employee

All law: the rate cut on the $18,201–$45,000 bracket, the $1,000 instant deduction and the $250 offset.

Read about employee changes If this applies

I’m retired or close to it

The private health rebate cut for over-65s is a bill before Parliament, not law. CGT changes and Division 296 are law.

Read about retirement changes

Structure, cashflow, compliance and tax — pulling in the same direction.

The Budget’s small business measures help, but they only work properly when integrated with your broader plan. We can model the impact for your specific business — structure, equipment decisions, succession, the lot — rather than treating each measure in isolation.

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