The Australian Government’s 2026/27 Federal Budget introduced some major tax and business changes - especially for small businesses, startups, sole traders, and property investors.
In this blog, we cover the key Budget measures that may impact your small business. Full details can be found on the Government website: https://budget.gov.au/index.htm.
Please note that some of these measures are not yet law at the time of writing. Please check the latest updates before applying them or seek professional advice where appropriate.
For updates relating to property investors, including proposed changes to capital gains tax (CGT) and negative gearing, see our separate blog: “2026/27 Budget Impact for Property Investors”.
Starting a business almost always means losing money before you make money. The problem is that a tax loss is only useful if you have past or future profits to offset it against. For brand new businesses, that future profit can feel very far away. Loss refundability is a new measure designed to help new startups survive their early years.
From 2028/29, startup businesses in their first two years of operation will be able to receive a cash refund for their tax losses, up to the value of:
New companies with an aggregated annual turnover of less than $10 million
Example: A new startup company makes a $20,000 tax loss in its first year and has paid $10,000 in PAYG withholding tax on employee wages. Assuming a 25% company tax rate, the tax loss could generate a $5,000 ($20,000x25%) cash refund under the proposed loss refundability rules. Instead of waiting for future profits to use the loss, the startup may receive cash support earlier to help fund operating costs.
Businesses have good years and bad years. If your company made a loss this year, loss carry back lets you apply that loss against profits you made in previous years and claim back some of the tax you already paid.
Loss carry back was first introduced during COVID and reintroduced from the 2026/27 financial year. Eligible companies that make a loss in the current income year can apply that loss against tax paid in the prior two years and receive a cash refund.
Companies (Pty Ltd) with a aggregated turnover up to $1 billion (previously $5 billion) - so practically all small and medium businesses.
Example: Dining Co runs a small restaurant. It made a $50,000 profit in 2025/26 and now reports a $15,000 tax loss in 2026/2027. With loss carry back, it can apply this loss against last year's profit and receive a $3,750 tax refund (being $15,000x25% company tax rate). That cash comes back into the business when it is needed most.
When you buy equipment or tools for your business, the government normally only lets you claim a small portion as a tax deduction each year (called depreciation). The instant asset write-off lets eligible small businesses deduct the full cost of an asset in the year they buy it, rather than spreading it out over many years.
The $20,000 instant asset write-off has been extended several times over the years and was always temporary. The 2026/27 Budget makes it permanent from 1 July 2026.
Example: Say you are a café owner and you buy a new coffee machine for $18,000. Under the instant write-off, you claim the full $18,000 in year one, meaning a lower taxable profit and less tax to pay immediately.
PAYG instalments are regular tax payments businesses make throughout the year towards their expected income tax bill, helping avoid a large tax payment at year end.
From 1 July 2027, businesses will be able to choose monthly PAYG instalments, and the ATO plans to use live financial data from business software to more accurately calculate PAYG instalments based on actual business performance.
The Research and Development (R&D) Tax Incentive is a federal program that gives businesses a tax offset for eligible R&D spending: think product development, technical experimentation or new software. It is one of Australia's most powerful tools for innovative businesses.
From 1 July 2028, the government is reshaping the program to reward real experimental R&D more generously, whilst tightening up claims that do not meet the bar.
R&D can be a complex area: eligibility, claims and deadlines all have specific rules. We recommend seeking professional advice before proceeding.
If you run your business as a sole trader, you pay personal income tax on your business profits. That means all the personal tax incentives apply to you too:
From 1 July 2027, a new permanent $250 annual tax offset will apply to income earned from work and this explicitly includes sole trader business income. While the official tax-free threshold remains $18,200, this WATO means some low-income earners may effectively pay little or no income tax on income up to around $24,985.
It is automatic, no separate claim needed, and applies when you lodge your tax return.
From 2026/27, you can claim an $1,000 work-related deduction without keeping receipts. This is available to sole traders and employees.
Fringe Benefits Tax (FBT) is a tax employers may pay when providing benefits to employees outside of salary, such as company cars for their personal enjoyment.
The Government plans to gradually reduce the current full FBT exemption for electric cars and replace it with a permanent 25% FBT discount. From 1 April 2027, this change will apply to eligible electric cars over $75,000, and from 1 April 2029 it will apply to all eligible electric cars. Electric cars worth $75,000 or less can still receive the current full exemption if the arrangement starts before 1 April 2029.
From 1 July 2028, the Government plans to introduce a minimum 30% tax rate for most discretionary (family) trusts, although some exceptions will apply.
This means trust income may sometimes be taxed twice. Once in the trust structure and again when distributed, which could increase the overall tax payable.
To help businesses and families adjust, the Government will provide a 3-year rollover relief period from 1 July 2027 for those who choose to restructure their affairs. More information can be found via this link.
From 1 July 2027, the Government plans to expand venture capital tax incentives to better reflect how modern businesses are valued. The changes to the Early-Stage Venture Capital Limited Partnership (ESVCLP) and Venture Capital Limited Partnership (VCLP) programs aim to encourage more investment into Australian startups and high-growth businesses. This could help innovative companies access more funding, industry expertise, and growth opportunities. More information can be found via this link.
The key focus of the 2026/27 Budget is supporting genuine business growth while tightening tax concessions in areas that may be open to misuse.
The Government is helping small businesses, start-ups, innovation, and cash flow, while taking a firmer approach on tax planning structures and overly generous tax benefits.
As tax compliance becomes more digital and scrutinised, businesses may benefit from tools like ANNA. We help small businesses streamline business admin with features such as smart receipt capture, auto-categorisation, Pots, easy document management - helping business owners stay organised and save time.
ANNA +Taxes is available for newly registered companies – first 1,000 customers get 6 months free. We auto-categorise your transactions and take care of your lodgements.
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