The 2026 Federal Budget includes several proposed measures that may affect small businesses over the coming years, particularly around asset purchases, payroll reporting, PAYG instalments and business systems.
Some of the larger tax changes announced in the Budget are still not law, and several do not commence until 1st July 2027 or 1st July 2028. Further legislation and ATO guidance are still expected before the full details are known.
While some of the proposed changes are significant, many are still years away. For most small businesses, the immediate focus should remain on maintaining accurate records, keeping payroll and reporting up to date, and understanding where future changes may affect business operations.
Instant Asset Write-Off
The Government has proposed permanently setting the Instant Asset Write-Off at $20,000 from 1st July 2026 for eligible small businesses with a turnover under $10 million.
Eligible depreciating assets costing less than $20,000 may continue to be deducted immediately, while higher-value assets continue under the simplified depreciation pool arrangements.
After years of temporary extensions, the measure is intended to provide greater certainty for small business asset planning and purchasing.
Working Australians Tax Offset And $1,000 Deduction
The Budget includes:
- A proposed $250 Working Australians Tax Offset.
- A proposed $1,000 instant tax deduction for work-related expenses.
The $250 offset applies to Australian tax residents earning income from work, including sole traders.
The $1,000 deduction would allow eligible individuals with work-related expenses under $1,000 to claim a standard deduction without itemising expenses.
Individuals with work-related expenses above $1,000 would still be able to claim deductions in the usual way.
Loss Carry-Back For Companies
From 1st July 2026, eligible companies with a turnover under $1 billion may be able to carry back tax losses for up to two years against previously paid tax.
The measure applies only to revenue losses and is limited by the company’s franking account balance.
CGT Changes
One of the larger proposed changes in the Budget is the restructuring of Capital Gains Tax from 1st July 2027. The current 50% CGT discount for assets held longer than 12 months is proposed to be replaced by:
- Cost base indexation.
- A 30% minimum tax on net capital gains.
The proposals affect individuals, trusts and partnerships. The Budget papers also outline transitional arrangements, including the continued application of the current 50% discount for gains arising before 1st July 2027.
Negative Gearing Changes
The Government has proposed limiting negative gearing for residential property to eligible new builds from 1st July 2027. Established residential properties acquired after 7:30pm AEST on 12th May 2026 may be subject to different treatment, with losses quarantined against residential property income rather than offset against wages or other income. Properties acquired before this date are proposed to remain under the existing rules until disposed of.
Discretionary Trusts
The Budget also proposes a minimum 30% tax on discretionary trust income from 1st July 2028. The proposal includes exclusions for certain trust types and some categories of income.
The Government has also proposed restructuring rollover relief for businesses wishing to move from discretionary trust structures into alternative entity structures over a three-year period from 1st July 2027.
Dynamic PAYG Instalments
The ATO’s Dynamic PAYG Instalments pilot is proposed to expand from 1st July 2027.
Eligible businesses may eventually be able to opt in to monthly PAYG instalments calculated through their accounting software.
This may change how some businesses manage tax instalments and cash flow in the future, however further ATO guidance and software development is still required.
Payroll And STP Reporting
The Budget also includes measures linked to:
- Employer withholding for child support.
- Expanded use of STP data sharing.
For employers, accurate and timely payroll reporting through STP remains important.
The Budget also increases Medicare levy low-income thresholds, which may affect PAYGW calculations and employee tax outcomes.
Digital ID And Business Systems
The Budget includes continued investment in:
- myID.
- RAM.
- Business registers.
- Digital ID infrastructure.
The focus is on improving security and reliability when businesses access government systems.
Reducing Regulatory Burden
The Government has also announced measures aimed at reducing regulatory burden for businesses, including:
- “Tell Us Once” reporting initiatives.
- Proposed payroll tax harmonisation work across states and territories.
- A Productivity Commission inquiry into regulatory barriers affecting business.
If implemented, these measures may help reduce duplicated reporting and improve consistency for businesses operating across multiple jurisdictions.
Electric Vehicle FBT Changes
Transitional changes to electric vehicle FBT concessions were also announced, particularly for higher-value electric vehicles from 1st April 2027 onward. The Government is proposing a transition toward a permanent 25% FBT discount arrangement from 1st April 2029.
Support For Small Business Owners
The Government has extended funding for:
- The Small Business Debt Helpline.
- The NewAccess for Small Business Owners mental health coaching program.
These services are designed to support business owners experiencing financial or personal pressure.
Practical Focus For Small Businesses
While many of the larger Budget measures are still some years away, businesses should focus on:
- Keeping financial records accurate and current.
- Maintaining clear asset records.
- Keeping payroll reporting up to date.
- Reviewing Digital ID and government access arrangements.
- Waiting for legislation before making major structural decisions.
Accurate recordkeeping, clean business data and good reporting processes remain the priority as further details become available.
The proposed Budget measures cover a broad range of business and taxation areas; many details are still subject to legislation and further clarification.
Businesses should continue monitoring updates over the coming months and discuss any significant operational or structural decisions with their professional advisors before taking action.
Speak with your Bookkeeper, BAS Agent or advisor if you have questions about how the proposed Budget measures may affect your business operations or reporting processes.
References: Budget 2026: What Bookkeepers Need To Know and Budget.gov.au | Budget 2026–27
