The 2026-27 Federal Budget is the biggest tax shake-up in more than 25 years. For small business owners, it’s a mix of practical features for investment and cash flow, plus some big changes that will take time to work through. You’ll likely need expert help to navigate what’s ahead.

Here’s what you need to know, what to watch, and what to do next.

What the Budget delivers for small business

Permanent $20,000 instant asset write-off

After years of temporary extensions and last-minute renewals, the $20,000 instant asset write-off is now a permanent fixture for businesses with an aggregated turnover of up to $10 million. From 1 July 2026, eligible small businesses will be able to immediately deduct the full cost of assets costing less than $20,000 each, in the financial year they are first used or installed ready for use.

This is a real step forward. No more waiting for last-minute announcements – you can plan equipment purchases, invest in tech, or upgrade tools any time. The government says this will save small businesses about 366,000 hours of paperwork each year by scrapping depreciation schedules for low-cost assets.

But the $20,000 cap is still well below what many small businesses spend. For instance, a common asset such as a commercial vehicle or specialised machinery can often cost closer to $90,000. While the permanence of the write-off provides certainty, there remains a significant gap for businesses seeking to make larger investments.

Assets costing $20,000 or more can still be placed into the small business simplified depreciation pool and written down over time.

Permanent loss carry-back

From 1 July 2026, companies with an aggregated annual turnover of up to $1 billion can carry back a tax loss and offset it against tax paid in the previous two income years. This is a permanent measure, expected to benefit around 85,000 companies.

If your business has a tough year, you can free up cash instead of just carrying losses forward. If you’re in a good spot, this is a safety net that could make it easier to take a risk on new investments or expansion. If things don’t work out right away, you can claim back some of the cost against past profits.

This only applies to revenue losses and depends on your company’s franking account balance. Check with your accountant to see if you’re eligible.

Support for startups

From 1 July 2028, small startup companies (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 value of fringe benefits tax and withholding tax paid on employee wages.

If you’re running a new business that’s not profitable yet but you’re hiring staff, this could give you a cash flow boost when you need it most.

Fuel relief

The government has temporarily more than halved the fuel excise, bringing savings of around 32 cents per litre, and backed it up with a $10.7 billion long-term fuel security package. The excise cut applies for three months, while the wider package includes increased fuel reserves and investment in domestic refining capacity.

If fuel is a big cost for your business, whether you’re in transport, trades, logistics or another sector, this means real savings now and more certainty for the future.

Red tape reduction

The budget also promises to cut red tape, with reforms expected to save businesses billions each year. Here’s what’s changing for small business:

  • Free access to Australian Standards: Businesses have historically had to pay for access to mandatory standards covering areas like construction, health and safety, and product safety. This could save some businesses up to $1,600 a year.
  • More flexible tax instalments: From 1 July 2027, small businesses will be able to opt into monthly PAYG instalment calculations via accounting software, allowing tax payments to better mirror real-time business activity.
  • Better skills recognition: For tradies, and the removal of 497 nuisance tariffs that add compliance costs to imports.

Tax offsets for sole traders and workers

Two smaller measures round out the support package:

  • A new permanent $250 Working Australians Tax Offset (WATO) for over 13 million workers, including around 1.5 million sole traders, effective from 1 July 2027.
  • A $1,000 instant tax deduction for work-related expenses, with no requirement to keep receipts, also from the 2027-28 financial year.

These changes aren’t game-changers on their own, but if you’re a sole trader with tight margins, every little bit helps.

What small business owners need to prepare for

Capital gains tax overhaul

From 1 July 2027, the current 50% capital gains tax (CGT) discount for individuals, trusts and partnerships will be replaced with a cost base indexation model. Under the new system, only the real capital gain above inflation will be taxed, but a minimum 30% tax rate on net capital gains will apply.

In practical terms, this means:

  • Assets purchased and sold before 1 July 2027 continue to benefit from the existing 50% discount.
  • Assets purchased and sold after 1 July 2027 fall entirely under the new system.
  • Assets purchased before 1 July 2027 but sold after that date will have gains split: the 50% discount applies to gains accrued up to 30 June 2027, and the new indexation model applies from 1 July 2027 onwards.

Small business CGT concessions under Division 152 remain unchanged, which is an important protection. However, the changes affect a wide range of assets beyond property, including shares, managed funds, business assets and private company interests.

In summary, the new rules favour business owners when inflation is high and growth is slow, as the indexation reduces taxable gains. However, if inflation is low and asset prices grow quickly, the revised system could lead to higher taxes than the previous 50% discount.

Business owners should seek professional advice to choose the best strategy.

New minimum tax on discretionary trusts

From 1 July 2028, trustees of discretionary trusts will face a 30% minimum tax on the trust’s taxable income. Many small business owners use discretionary trusts for asset protection and tax planning, so this change could have a real impact on how businesses are structured and how income is distributed.

Important details:

  • The tax falls on trustees, not beneficiaries. Non-corporate beneficiaries will receive a non-refundable tax credit for the tax paid.
  • Primary production income is carved out, as are income from deceased estates, vulnerable minors, and existing testamentary trusts.
  • Rollover relief is available for three years from 1 July 2027 for businesses that want to restructure into a company or fixed trust.
  • Company beneficiaries (including “bucket companies”) do not receive a credit, meaning distributions could effectively be taxed twice.

If you use a trust for your business, this is a big change. Have an early chat with your accountant or adviser.

Negative gearing changes

From 1 July 2027, negative gearing for residential property will be limited to new builds. Losses on established rental properties will only be deductible against rental income or capital gains from residential property, not against other personal or business income. Excess losses can be carried forward.

Properties acquired before 12 May 2026 are grandfathered and exempt from the new rules until they are sold.

If you’re a business owner investing in property, note that new CGT indexation, negative gearing restrictions, and trust tax rules intersect, affecting tax outcomes. Losses from rental properties and asset sales may be treated differently, especially within trusts. Given these reforms’ collective impact on after-tax results, it’s vital to assess their effects on your tax position and consult professionals early.

Payday superannuation

From 1 July 2026, you’ll need to pay super every payday instead of quarterly. This is a big change for payroll, especially if you’re still using manual or semi-automated systems. Now’s the time to get ready.

If you haven’t checked your payroll software and processes yet, do it now. The ATO will be watching compliance from day one using Single Touch Payroll data.

What wasn’t addressed

The budget brings some practical support, but there’s no real tax relief for small and medium businesses. With costs, wages and compliance all rising, many business owners were hoping for a clearer plan to ease the tax load. The small business tax rate stays at 25%. Bigger reforms like GST changes are still off the table.

The $20,000 write-off cap is still too low for bigger investments. Cutting red tape is good news, but payday super adds more admin just as other changes are meant to reduce it.

What to do next

This budget covers a lot, but most changes won’t kick in until 2027 or 2028. That gives you time to plan if you start now. These are some practical steps to consider:

  • Review your plans for buying equipment or assets. With the write-off now permanent, there’s no more EOFY rush. Plan purchases any time of year.
  • Chat to your accountant about how the trust and CGT changes could affect you. If you own assets through a discretionary trust or invest in property, the 2027 and 2028 changes matter.
  • Check your payroll system. Payday super starts 1 July 2026, so make sure your software and processes are ready.
  • Model your cash flow. If you’re eligible for loss carry-back, work out what it could mean for your business. If you’re a startup, keep the 2028 refund option in mind.
  • Keep an eye on the details. Many of these changes are just announcements for now. They still need to pass Parliament and could change along the way.