The 2026-27 Federal Budget was handed down on 12 May 2026 and contained the most significant set of small-business-affecting announcements in years. The headline measures include making the $20,000 instant asset write-off permanent, reintroducing two-year loss carry-back as a permanent feature, and creating new flexibility around how businesses pay PAYG instalments.
This is a snapshot of what was announced, what stage each measure is at, and what each announcement might mean for an Australian small business in plain English. None of these announcements are tax advice. Most still need to pass Parliament before they become law. Where individual circumstances matter, the only sensible step is a conversation with a registered tax agent.
Published: May 2026
This piece covers the Budget announcements that directly affect Australian small businesses. The wider Budget snapshot covering personal tax cuts, property tax changes, and trust reforms is covered separately.
The business-affecting announcements break into three groups:
Each section explains what was announced, when it would take effect (if legislated), and what it might mean for an Australian small business.
Before stepping through the measures, it is worth noting that almost everything below is an announcement, not law. Budget announcements regularly get delayed, modified, or scrapped entirely between announcement and legislation. The Labor government proposed a similar trust tax measure in 2019 that never became law. Some of the measures in this Budget are unlikely to face material opposition (the IAWO permanent change, the abolition of nuisance tariffs). Others may attract significant debate (R&D reform, the broader tax reform package).
The dates below are the announced commencement dates, all subject to legislation passing.
The Government announced that the $20,000 instant asset write-off (IAWO) will be made permanent from 1 July 2026 for small businesses with aggregated turnover under $10 million. Under the previous settings, the IAWO threshold was scheduled to revert to $1,000 on 1 July 2026 unless extended.
For the past several years, the IAWO has been extended one financial year at a time, with each extension announced close to or after the deadline. Small businesses have had to plan equipment purchases without certainty about whether the threshold would carry forward.
If legislated, the permanent extension means:
According to the Budget papers, the measure is estimated to improve small business cash flow by around $890 million over five years and save around $32 million per year in compliance costs.
The change is structural rather than dramatic. The $20,000 threshold itself is not new. What changes is the certainty. For more detail on how the IAWO interacts with cash flow planning, see our cost of bookkeeping in Australia guide and the employee cost calculator where capital expenditure decisions often arise alongside hiring decisions.
The Government announced that two-year loss carry-back will be permanently reintroduced for companies with aggregated turnover up to $1 billion, from 1 July 2026. Companies that incur a tax loss in the current income year would be able to carry that loss back against tax paid in the previous two income years and receive a refund of the tax already paid (limited by the company's franking account balance).
The measure is similar to the temporary loss carry-back introduced during COVID-19, which applied to companies with turnover up to $5 billion. The permanent version is narrower (up to $1 billion) but ongoing.
For most small businesses, this measure is most relevant when business conditions change. The Budget papers note the measure is expected to benefit up to 85,000 companies each year, mostly small businesses.
If legislated:
This is most useful for businesses that have had a profitable run followed by a downturn, for example a services business that loses a major client, a construction business in a project gap, or a hospitality business hit by an external shock. The carry-back converts a tax loss into a cash refund rather than a deduction against future income.
Whether to apply loss carry-back or carry the loss forward is a decision that depends on the company's forecast future profit, franking position, and timing. This is a tax agent decision, not a bookkeeping decision.
The Government announced that from 1 July 2028, eligible small startups in their first two years of operation would be able to receive a refund for tax losses, capped at the amount of fringe benefits tax and PAYG withholding from employee wages.
According to the Budget papers, the measure is expected to benefit up to 25,000 startups each year.
For startups that are pre-revenue or running at a loss in their first two years (common in software, biotech, and other capital-intensive sectors), the measure would convert a portion of accumulated losses into cash refunds during the early years.
The cap at FBT and PAYG withholding is significant. It means the measure most benefits startups that employ staff (and therefore generate PAYG withholding obligations). A founder-only startup with no employees would have a small cap or none at all. A startup with 5-10 early staff would have a meaningful cap.
This is a 2028-29 measure, so the start date is more than two years out. It is also subject to detailed design through Treasury consultation. For most small businesses, the relevance is to ensure clean records and payroll setup from day one, so that the FBT and PAYG history is available if the measure becomes law and is needed.
The Government announced two related measures:
The standard PAYG instalment cycle is quarterly, with the ATO calculating each quarterly instalment based on the previous year's tax. For businesses with seasonal or project-based revenue, this can mean instalments that significantly under- or over-estimate the current year's tax, creating cash flow misalignment.
If legislated:
For businesses on Xero, MYOB, or another connected accounting platform, the dynamic instalment approach is likely to be the more meaningful change long-term, because it would automate a calculation that currently requires either accepting the ATO's default or manually varying instalments each quarter.
For our existing audience on Xero bookkeeping and BAS due dates, this measure is worth tracking as legislation progresses through 2026-27.
The Government announced reforms to the Research and Development Tax Incentive (RDTI) to take effect from 1 July 2028, in response to recommendations from the Ambitious Australia Report. Key features of the announcement:
For small businesses currently claiming R&D Tax Incentive (mostly tech, biotech, manufacturing, and engineering firms), the announcement is broadly favourable but materially restructures who benefits.
If legislated:
The full design is being consulted on. Most R&D Tax Incentive claimants work through an R&D specialist consultant who prepares the claim, and these specialists will publish detailed analysis once the design is clearer. The Budget announcement is a direction, not a final framework.
The Government announced expansion of the Early-Stage Venture Capital Limited Partnership (ESVCLP) and Venture Capital Limited Partnership (VCLP) programs from 1 July 2027:
The ESVCLP and VCLP regimes are how Australian venture capital structures themselves for tax purposes. The caps have not been adjusted in over 20 years, and the announcement brings them closer to current company valuations.
If legislated:
For most small businesses, this announcement is not directly relevant. For high-growth startups in software, biotech, climate tech, and similar sectors that are or might raise institutional capital, it expands the pool of capital that can access concessional tax treatment.
The Government announced the abolition of 497 nuisance tariffs from 1 July 2026, building on a previous round of around 500 tariffs already abolished. The combined effect is the removal of close to 1,000 tariffs over two years, streamlining $23 billion of trade and reducing compliance costs by an estimated $157 million per year.
For Australian small businesses that import inputs, equipment, or finished goods, the tariff abolition reduces compliance burden and may reduce landed cost on specific goods.
If legislated:
For businesses with frequent imports, this is a small but real ongoing operational saving. For occasional importers, the saving is mostly in not having to engage a customs broker for low-value entries.
The list of abolished tariffs will be published when the legislation is introduced.
The Government announced that mandatory Australian Standards will be made free. Previously, accessing a single Australian Standard could cost up to $1,600.
For businesses in regulated industries (construction, manufacturing, food, electrical, aged care, childcare, healthcare, and many others), compliance with Australian Standards is often a legal requirement. The cost of accessing the actual text of the relevant Standards has been a long-running compliance friction, particularly for small businesses that may need to reference multiple Standards across different aspects of their operation.
If legislated:
The detail of which Standards are covered, and from when, will be in the legislation.
The Government announced a commitment to reduce red tape by $10 billion per year, framed as a productivity-focused commitment alongside the Budget tax reforms. The Budget papers reference specific measures including:
Red tape reduction commitments are common in Budgets and the practical impact depends on implementation. The "tell us once" commitment, if delivered, could be material for small businesses that currently provide the same information to multiple government agencies (ATO, ASIC, state revenue offices, Centrelink, Services Australia, etc.).
The faster project approvals measure is most relevant for businesses involved in development, construction, or infrastructure projects, where approval timelines can extend months or years.
The Digital ID expansion is likely to reduce friction for routine government interactions (BAS lodgement, ABN updates, ASIC filings) over time.
These are commitments rather than concrete legislative changes. The execution is in subsequent administrative decisions and agency-level implementation.
The Budget reaffirms the Voluntary Small Business Wage Compliance Code introduced alongside the wage theft criminalisation that took effect on 1 January 2025. While the Code is not new in the 2026-27 Budget, the Budget papers reinforce its role as a safe harbour for small business employers who follow it in good faith.
The Code provides a safe harbour from criminal prosecution under the wage theft provisions for small business employers who take reasonable steps to comply with workplace pay obligations. The Code requires the employer to:
Following the Code in good faith does not absolve civil liability for underpayments, but it does protect against the criminal offence that took effect from 1 January 2025.
For small business employers, the Code is a practical compliance framework. Our hiring first employee compliance guide covers what is required to align with the Code from the first hire onwards.
The Budget contains several announcements that touch businesses indirectly:
Continued Future Made in Australia support. Funding for critical minerals processing, domestic smelting and manufacturing, and the Critical Minerals Strategic Reserve. Most relevant to businesses in mining services, advanced manufacturing, and related supply chains.
Fuel security investment. $10 billion committed to lift Australian fuel reserves to around 50 days of cover, and a temporary 32 cents per litre cut to fuel excise plus a three-month reduction in the heavy vehicle road user charge. Relevant for transport, logistics, and any business with significant fuel cost exposure.
AI adoption support. Various references to government support for AI adoption in small businesses, the National AI Plan, the launch of AI.gov.au, and up to $70 million for AI research through the Accelerator CRC program. Most of this is at the policy and infrastructure level rather than direct small business funding.
ACCC enforcement resourcing. Increased resourcing for the ACCC, with maximum penalties doubled to $100 million for serious breaches of competition law and consumer law. Relevant for businesses across all sectors, particularly those in retail, services, and B2C industries where consumer law compliance is a material risk.
A few things worth noting that did not appear in the Budget:
These absences matter because some of them were rumoured in pre-Budget commentary and would have had significant operational implications if announced.
The most useful question for most small business owners is: which of these announcements actually applies to my business, and what should I be talking to my accountant or tax agent about?
Some practical observations:
For everything else, the Budget announcements need to be legislated, designed in detail, and start dates need to be reached before they have any operational effect. The most likely scenario is that most measures pass in some form, but with adjustments. Some may be delayed. A small number may not proceed at all.
When does the permanent $20,000 instant asset write-off start?
The announced start date is 1 July 2026, subject to legislation passing. The $20,000 threshold itself is already in place for the 2025-26 financial year under separate legislation. The 2026-27 Budget announcement makes the threshold a permanent feature from 1 July 2026 rather than reverting to $1,000.
Is the two-year loss carry-back the same as the COVID-era measure?
The 2026-27 Budget loss carry-back is similar in concept to the temporary COVID-era loss carry-back but applies to companies with aggregated turnover up to $1 billion (compared to $5 billion for the temporary measure). It is also intended to be permanent rather than time-limited. Whether it actually becomes permanent depends on legislation passing.
When can I start paying PAYG instalments monthly?
The announcement is that the opt-in monthly PAYG instalment option would be available from 1 July 2027, subject to legislation passing. Until that date, the standard quarterly cycle continues to apply.
What does the Budget mean for my R&D Tax Incentive claim?
The R&D reforms announced are scheduled to take effect from 1 July 2028, subject to legislation. For 2026-27 and 2027-28 claims, the existing R&D Tax Incentive rules continue to apply. The proposed changes may affect future claims significantly, particularly the removal of eligibility for activities that only "support" core R&D.
Are the new tariff abolitions automatic, or do I have to apply for the saving?
The announced tariff abolitions take effect when the legislation passes and the relevant tariff codes are removed from the Customs Tariff Act. Customs brokers and freight forwarders apply the updated tariff schedule automatically once the change takes effect.
Did the Budget change the company tax rate?
No. The company tax rate for base rate entities (turnover under $50 million, with no more than 80% passive income) remains 25%. The standard company tax rate for other companies remains 30%.
Did the Budget change the small business turnover threshold?
No. The $10 million aggregated turnover threshold for small business tax concessions (including the IAWO) remains unchanged. Some specific concessions have different thresholds (the small business CGT concessions use $2 million, base rate entity status uses $50 million), and these are also unchanged.
Should I make business decisions based on Budget announcements?
Budget announcements are not law. Most need to pass Parliament before they take effect, and the final form of each measure can change between announcement and legislation. Major business decisions (equipment purchases, restructures, hiring decisions, capital raises) should be made based on current law and your specific circumstances, in consultation with your tax agent or accountant. The announcements give a useful indication of where policy is heading, but they are not a guarantee.
Where can I find the full Budget papers?
The full Budget papers are published at budget.gov.au. Budget Paper No. 2 contains the detailed measures. Budget Paper No. 1 contains the economic and fiscal outlook. Treasury fact sheets and ministerial press releases provide additional detail on specific measures.
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Disclaimer: This article summarises announcements made in the 2026-27 Federal Budget, handed down on 12 May 2026. Almost all measures described are announcements requiring legislation to take effect. Start dates, design details, and final form may change between announcement and enactment. Scale Suite is a registered BAS Agent, not a licensed tax advisor or financial advisor. This content is general information only and does not constitute professional tax, financial, or legal advice. For advice on how any specific measure might apply to your circumstances, consult a registered tax agent or qualified accountant.
Scale Suite is a Sydney-based provider of outsourced finance and HR services for Australian SMEs. We deliver bookkeeping, financial reporting, payroll processing, fractional CFO support, recruitment, employee onboarding, people and culture support, and fractional HR oversight, all as a fully embedded team that works inside your business.
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