The Federal Budget handed down on 12 May 2026 was lighter on small-business fanfare than the cycle before — but the changes inside it are the kind that quietly shape decisions for the next 24 months. Below is the practical version: what changed, when it takes effect, and what to actually do about it.
1. The A$20,000 instant asset write-off is now permanent
The Government confirmed the A$20,000 instant asset write-off as a permanent feature from 1 July 2026 — no sunset clause, no annual renewal needed. Small businesses with aggregated turnover under A$10M can immediately deduct eligible assets costing less than A$20,000 (ex GST).
What to do: stop treating EOFY as the only window for asset purchases. The threshold is now part of the long-term planning landscape. Run the eligibility checkwhenever a purchase decision lands on your desk.
2. Loss carry-back is returning from 2026–27
Eligible companies that make a loss in 2026–27 will be able to apply that loss against tax paid in the prior two income years to claim a refund. Around 85,000 companies — mostly small businesses — are expected to benefit. This is the loss carry-back measure that ran during COVID, reintroduced as a structural feature.
What to do: if you are forecasting a 2026–27 loss, model it against your 2024–25 and 2025–26 tax positions before year-end. A refund is more useful than a carried-forward loss sitting on the balance sheet.
3. Loss refundability for start-ups (from 2028–29)
Small start-ups in their first two years of operation will be able to claim a refund on tax losses up to the value of fringe benefits tax and PAYG withholding paid on employee wages. This applies from the 2028–29 income year and is expected to benefit up to 25,000 young companies per year.
What to do: early-stage founders should factor this into their first 24 months of cash flow planning — it is meaningful runway support that was not on the table previously.
4. New A$1,000 instant work-related deduction (from 2026–27)
From the 2026–27 income year, individuals can claim a flat A$1,000 instant deduction for work-related expenses without keeping receipts. Substantiation requirements drop for amounts up to the cap. Treasury estimates this benefits 6.2 million workers with an average tax saving of A$205.
What to do: for your staff, this is a payroll-conversation note rather than a process change. For sole traders and contractors, you still benefit from substantiated higher deductions — the cap is a floor for people who would otherwise claim nothing.
5. Monthly PAYG instalments from 1 July 2027
Small and medium businesses will be able to opt in to monthly PAYG instalments — up from the current quarterly cycle — and use an ATO-approved calculation embedded in their accounting software to size and vary each instalment. Currently quarterly is the default with limited flexibility.
What to do: if cash flow is lumpy across the year, monthly PAYG smooths the tax outflow. Worth modelling once the opt-in is open. We'll be running through it with affected clients during 2026–27.
6. Division 296 super tax begins 1 July 2026
Separately from the budget, the legislated Division 296 super tax commences 1 July 2026. Total super balances over A$3M attract an additional 15% tax on the proportion of earnings (including unrealised gains) above the threshold. Balances over A$10M attract a further 10% on the excess above A$10M.
What to do: if your SMSF balance is above or approaching A$3M, get a strategy conversation with your SMSF adviser this financial year. The mechanics of unrealised-gain taxation change how some asset classes (illiquid property, early-stage equity) make sense inside super.
7. Medicare levy low-income thresholds lifted 2.9%
The Medicare levy low-income thresholds were raised by 2.9% retroactive to 1 July 2025. The single individual lower threshold is now A$28,011 (was A$27,222); the corresponding upper threshold is A$35,014. Around one million low-income earners pay less levy as a result.
What to do: the change flows through 2025–26 tax returns automatically — no action required. We've already updated our structure-comparison calculator with the new thresholds.
8. Venture capital tax incentives expanded (from 1 July 2027)
The Early-Stage Venture Capital Limited Partnership (ESVCLP) and Venture Capital Limited Partnership (VCLP) programs will have their thresholds and eligibility expanded to reflect modern company valuations. Aimed at unlocking earlier-stage capital for high-growth businesses.
What to do: if you are eyeing institutional capital in the next 18 months, the expanded settings change which structures and investors are available to you. Worth a conversation with your corporate adviser before 2027–28.
What we're telling clients
Most of these changes are good news, particularly the permanent IAWO and the return of loss carry-back. The two to actively plan around are Division 296 (anyone with a super balance over A$3M) and monthly PAYG (anyone with seasonal cash flow). The rest you can integrate at next quarterly review.
If you want a 30-minute conversation about how these changes hit your specific position, the discovery call is the right place to start.
Scope note: this is a general budget commentary, not personal financial or tax advice. Specific implementation depends on your structure, industry, and individual circumstances. We model the tax impact and refer execution of any structural change to your solicitor or chartered tax adviser. Confirm changes with the ATO or a registered BAS Agent before relying on them for a specific decision.
This information is general in nature and does not constitute personal financial or tax advice. Please contact us to discuss your individual circumstances. Tax laws are subject to change; information on this page reflects legislation in effect as of June 2026.