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Most of the conversation around this Budget has focused on the changes to negative gearing, capital gains and trusts, understandably, given the scale of those reforms. But buried in the same budget package is a genuinely positive set of measures for small business owners. This post covers what's in it for you if you run or own a small business.
Measure 1: The $20,000 Instant Asset Write-Off is finally permanent
If you've been in business for any length of time, you'll know the annual ritual of waiting to find out whether the $20,000 instant asset write-off would be extended for another year. It's been temporary and renewed one year at a time since 2023, and before that, it was a similar story going back years further.
That uncertainty is now over. From 1 July 2026, the $20,000 instant asset write-off (IAWO) is permanent.
What this means practically: if your business has an aggregated annual turnover under $10 million, you can immediately deduct the full cost of any eligible asset under $20,000 in the year you purchase it, rather than depreciating it gradually over several years. Each asset is assessed individually, so you can purchase multiple assets under $20,000 and write off each one in full.
Assets at $20,000 or above continue to go into the small business simplified depreciation pool, where they're depreciated over time at set rates.
Why does permanence matter? Because for years, business owners have been making investment decisions in the dark, not knowing whether the threshold would still be $20,000 next financial year. That uncertainty either delayed purchases or pushed them into rushed year-end buying. Now you can plan equipment upgrades, tooling, technology, and other capital purchases on your own timeline with confidence. The ATO estimates this will save small businesses around $32 million per year in compliance costs alone.
This applies whether your business is structured as a sole trader, partnership, trust or company, the write-off is available across all structures for eligible businesses under the turnover threshold.
Measure 2: Company Loss Carry Back returns, and this time it's permanent
If your business operates through a company structure and you have a bad year, you've historically had only one option with that tax loss: carry it forward and hope you have enough profit in future years to absorb it. That could take years, and it provided no immediate cash flow relief when you needed it most.
From income years commencing on or after 1 July 2026, company loss carry back is being reintroduced, and this time as a permanent measure.
Here's how it works: if your company records a tax loss in a given year, you can carry that loss back up to two years and offset it against tax you've already paid in those earlier years. The ATO then refunds the tax, effectively treating the loss as if it had been offset at the time.
There are two important limits to be aware of. First, the carry back is limited to revenue losses, capital losses don't qualify. Second, the refund cannot exceed your company's franking account balance. This is to prevent a situation where the refund creates a mismatch with the franking credits that have already been distributed to shareholders.
The measure applies to companies with aggregated annual global turnover under $1 billion, so effectively all small and medium businesses. (we are using that term loosely here)
To put a dollar figure on what this can mean in practice: when loss carry back was temporarily available during COVID, Treasury analysis found it delivered an average cash flow boost of around $50,000 per business. The sectors that benefited most were construction, professional services, and manufacturing, three sectors with significant small business representation.
This is particularly valuable for a business that has been consistently profitable for several years and then hits a tough period, a major contract falls through, a key employee departs, an industry goes through disruption. Rather than absorbing the full cash flow pain of a loss year, the company can reclaim tax already paid and use that cash to stabilise and recover.
It's also worth noting the interaction with the permanent IAWO: a small company that invests heavily in new assets in a given year and triggers a tax loss as a result of those write-offs can now carry that loss back and receive a refund rather than simply accumulating a carry-forward loss. The two measures work well together.
Measure 3: Start-Up Loss Refundability (from 1 July 2028)
For clients who are in the early stages of building a new business through a company structure, there's an additional measure coming from 1 July 2028, though it's more targeted.
Small start-up companies with annual turnover under $10 million that generate a tax loss in their first two years of operation will be able to convert that loss into a refundable tax offset. The offset is capped at the amount of FBT and PAYG withholding tax paid on employee wages in the loss year.
In practice this means a start-up that is employing people and paying wages, and therefore paying withholding tax on those wages, can reclaim that withholding as a refund if the company is making a loss. It's a meaningful cash flow support for young businesses in the critical early years when revenue is building but costs are high.
This doesn't apply to every start-up; if you're a solo operator with no employees, the cap would be zero. But for start-ups with staff, it's a genuine early-stage cash flow mechanism. Companies that don't elect refundability can continue to carry the loss forward as normal.
Measure 4: Smarter PAYG Instalment Calculations (from 1 July 2027)
This one is less headline-grabbing but practically annoying enough that it's worth covering.
Currently, most small businesses have their PAYG instalments calculated by the ATO using a formula based on their most recently lodged tax return, which could be 12 to 18 months out of date. In 2023–24, only 12% of small businesses had PAYG instalments that closely matched their actual tax outcome for that year. The rest were either overpaying, tying up cash they needed in the business, or underpaying and facing a large catch-up bill at lodgement time.
From 1 July 2027, small and medium businesses will be able to opt in to a dynamic PAYG instalment system that calculates instalments in real time using an ATO-approved formula embedded directly in their accounting software. Instalments can be varied without the risk of interest charges, so if your business has a slow quarter, your instalment adjusts accordingly.
This won't change your total tax obligation, but it should substantially improve the accuracy of what you pay throughout the year, reducing the cash flow volatility of large unexpected tax bills and freeing up working capital when business is slower.
Putting it all together: what it means for your business
The four measures above don't attract the same headlines as the trust and CGT changes, but for small business owners they represent meaningful, practical improvements to the tax system. Taken together:
If you run a business with turnover under $10 million, you now have permanent certainty around the $20,000 asset write-off. You can plan investment decisions on your terms.
If your business is structured as a company, a bad year is no longer purely a carry-forward problem, you can reclaim tax paid in the prior two years. The average benefit during COVID was around $50,000, and many businesses will find it similar.
If you're starting a new business and employing people, the start-up loss refundability from 2028 provides early-stage cash flow support that wasn't previously available.
And from 2027, your PAYG instalments should better reflect your actual business conditions rather than last year's numbers.
None of these measures require action right now — but the IAWO permanence in particular is worth having a conversation about if you've been holding off on asset purchases waiting to see what the rules would be. That uncertainty is gone.
One important reminder for trust-structured businesses
If your business currently operates through a discretionary trust, please read our earlier post in this series on the new 30% minimum trust tax starting 1 July 2028. The measures above apply equally to trust-structured businesses where eligible, but the minimum trust tax changes create a separate and significant set of considerations for your overall structure. The rollover relief window opening in July 2027 means there is time to plan, but that planning needs to start well before then.
This post is general information based on the 2026–27 Federal Budget papers released 12 May 2026. It does not constitute personal financial or tax advice. Please speak with us to understand how these measures apply to your specific business structure and circumstances.
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