The 2026–27 Federal Budget delivers a range of measures aimed at supporting Australian businesses, encouraging investment, and fostering innovation. While several initiatives provide immediate relief for small businesses, others introduce significant changes that may influence business structures and tax planning strategies in the years ahead.
Permanent Extension of the Instant Asset Write-Off
One of the most welcome announcements for small businesses is the permanent extension of the $20,000 Instant Asset Write-Off.
Businesses with aggregated annual turnover of less than $10 million will continue to be able to immediately deduct eligible assets costing less than $20,000. This provides much-needed certainty for businesses planning equipment purchases, technology upgrades and expansion projects, as the threshold had previously been scheduled to revert to just $1,000 from 1 July 2026.
Eligible assets costing $20,000 or more will continue to be added to the simplified depreciation pool, with deductions available at 15% in the first year and 30% in subsequent years.
The Government has also extended the suspension of the five-year lockout rule, allowing businesses greater flexibility to move in and out of the simplified depreciation regime until 30 June 2027.
Changes for Discretionary Trusts
Businesses operating through discretionary trust structures should take note of significant reforms commencing from 1 July 2028.
Under the proposed rules, discretionary trusts will be subject to a minimum tax rate of 30% on taxable income. Beneficiaries will receive non-refundable credits for tax paid by the trustee; however, lower-income beneficiaries may not be able to fully utilise these credits, potentially increasing the overall tax burden on family groups and business structures that rely on income distribution strategies.
To assist affected taxpayers, the Government has announced expanded rollover relief from 1 July 2027 for a three-year period, allowing eligible trusts to restructure into companies or fixed trusts without immediate tax consequences.
Return of Tax Loss Carry-Back Provisions
From 1 July 2026, companies with aggregated global turnover below $1 billion will once again be able to carry back eligible tax losses and offset them against income tax paid in the previous two financial years.
This measure provides valuable cash flow support for businesses experiencing temporary downturns and allows companies to access refunds of previously paid tax. The rules apply to revenue losses and remain subject to existing franking account limitations.
Electric Vehicle FBT Concessions to Continue
The Budget confirms the Government’s intention to gradually transition the Fringe Benefits Tax (FBT) exemption for eligible electric vehicles.
The changes will be phased in over the coming years, ultimately resulting in a permanent 25% FBT discount from 1 April 2029. Importantly, there will be no changes during the current FBT year, and electric vehicles valued below $75,000 will continue to receive existing concessions until April 2029.
Businesses considering fleet upgrades therefore still have time to take advantage of the current arrangements.
Enhanced Research and Development Incentives
The Research and Development (R&D) Tax Incentive will undergo substantial reform from 1 July 2028, providing greater support for businesses investing in innovation.
Key changes include:
- An increase of 4.5 percentage points to core R&D tax offset rates.
- A reduction in the R&D intensity threshold from 2% to 1.5%.
- An increase in the turnover threshold for the highest offset rate from $20 million to $50 million.
- An increase in the maximum eligible expenditure threshold from $150 million to $200 million.
However, businesses should also be aware of several restrictions, including the removal of eligibility for supporting R&D expenditure and an increase in the minimum expenditure threshold from $20,000 to $50,000.
These changes are expected to benefit businesses undertaking substantial research activities while narrowing eligibility for smaller claims.
Monthly PAYG Instalments for Small and Medium Businesses
From 1 July 2027, eligible small and medium-sized businesses will be able to opt into monthly PAYG instalment reporting and payments.
The new system will utilise ATO-approved calculations integrated directly into accounting software, allowing tax obligations to better reflect real-time business performance. For many businesses, this may improve cash flow forecasting and reduce the likelihood of unexpected tax liabilities at year-end.
Planning Ahead
While the permanent Instant Asset Write-Off and loss carry-back provisions offer immediate benefits, several of the Budget’s longer-term reforms may significantly impact business structures, investment decisions and tax planning strategies.
Business owners should review their current arrangements and consider how proposed trust taxation changes, R&D reforms and future PAYG reporting requirements may affect their operations over the coming years. Contact Dymond Foulds & Vaughan today to get a plan that works for your business!