Backing small businesses to grow,
compete and build resilience
2026–27 AUsTRALIAN TAX REFORM
Small Businesses
As part of the 2026–27 Federal Budget, the Australian Government has delivered a suite of tax relief and support measures targeting small businesses, medium enterprises and start-ups. The reforms cover asset depreciation, loss utilisation, R&D incentives, PAYG administration and cost-of-doing-business relief, designed to support cash flow and business growth. Below is a structured summary of all key business-related measures.
1. Permanent A$20,000 Instant Asset Write-Off
Effective from: 1 July 2026
Who it applies to?
Small businesses with an aggregated annual turnover of less than A$10 million.
Core rules
● Eligible assets valued at A$20,000 or less can be fully deducted in the income year they are first used or installed ready for use.
● Assets valued above A$20,000 will continue to be allocated to the small business depreciation pool and depreciated under existing pool rules.
● The rule that prevents small businesses from re-entering the simplified depreciation regime for five years after opting out will remain suspended until 30 June 2027, giving businesses flexibility to switch between depreciation methods.
2. Reintroduced Loss Carry Back for Companies
Effective from: Income years commencing on or after 1 July 2026
Who it applies to?
Companies with an aggregated annual global turnover of less than A$1 billion.
Core rules
● Eligible companies can carry back a tax loss and offset it against tax paid in up to two prior income years, generating a refundable tax offset.
● The measure applies to revenue losses only; capital losses are not eligible for carry back.
● The total claimable amount is capped at the company’s franking account balance, ensuring refunds align with previously paid company tax.
3. Loss Refundability for Small Start-Up Companies
Effective from: Income years commencing on or after 1 July 2028
Who it applies to?
Start-up companies with aggregated annual turnover below A$10 million, that generate a tax loss in their first two years of operation.
Core rules
● Qualifying start-ups can convert tax losses from their first two years into a refundable tax offset, delivering direct cash flow support to early-stage businesses.
● The refundable offset is limited to the total value of:
– Fringe benefits tax (FBT) paid, and
– Pay-as-you-go (PAYG) withholding tax on wages paid to Australian employees
in the relevant loss year.
4. Dynamic PAYG Instalment Calculations
Effective from: 1 July 2027
Who it applies to?
Small and medium businesses.
Core rules
● Businesses will be able to opt in to monthly PAYG instalment reporting and payments, instead of the standard quarterly cycle, to better align tax payments with real-time revenue.
● Eligible businesses can use an ATO-approved calculation embedded in accounting software to automatically calculate and vary their instalment amounts, reducing manual administration and improving accuracy.
● Taxpayers with a demonstrated history of non-compliance will be required to report and pay PAYG instalments monthly as a compliance measure.
5. Temporary Reduction in Fuel Excise & Heavy Vehicle Road User Charge
Effective from: 1 April 2026, for a period of 3 months
Who it applies to?
All businesses and consumers using eligible fuel products, and heavy vehicle operators.
Core rules
● Excise and excise-equivalent customs duty rates for most fuel products are reduced by 60.9%, equating to a 32 cent per litre reduction for petrol and diesel.
● The heavy vehicle road user charge is reduced from 32.4 cents per litre to zero for the 3-month period, lowering operating costs for transport and logistics businesses.
6. Reforms to the Research & Development (R&D) Tax Incentive
Effective from: 1 July 2028
Who it applies to?
Businesses undertaking eligible R&D activities in Australia.
Key reforms
● Increased core R&D offset: The offset rate for core R&D expenditure will rise by 4.5 percentage points, increasing the total offset by approximately 25% to 50%.
● Lower intensity threshold: The R&D expenditure intensity threshold will be reduced from 2% to 1.5%, making the incentive accessible to more businesses.
● Removed supporting R&D eligibility: Supporting R&D expenditure will no longer be eligible for the incentive, focusing support on core research activities.
● Higher turnover threshold for premium offset: The turnover threshold for the highest refundable offset rate will increase from A$20 million to A$50 million, allowing growing firms to retain access to more generous support for longer.
● Refundability age limit: For firms below the A$50 million turnover threshold, older firms will retain eligibility for the higher offset rate, but only firms under 10 years of age will be eligible for the refundable component.
● Higher maximum expenditure cap: The maximum R&D expenditure eligible for the incentive will increase from A$150 million to A$200 million per year.
● Higher minimum claim threshold: The minimum expenditure threshold will rise from A$20,000 to A$50,000. Claims below this amount will only be eligible if the research activities are delivered by a registered Research Service Provider or Cooperative Research Centre.
7. Extended Support for Small Business Debt & Mental Health Services
Timeline: Funded for 3 years from 2025–26, extended to 30 June 2027
Funding: A$8.2 million over 3 years
Key details
● The Small Business Debt Helpline financial counselling program will be extended, providing free, confidential support for small business owners facing financial difficulty.
● The NewAccess for Small Business Owners mental health coaching program will also continue, delivering free, low-intensity mental health support tailored to small business operators.
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