What the 2026 Federal Budget Means for Small Business Owners

The 2026 Federal Budget handed down last night includes a number of tax measures relevant to small business owners. Some take effect from 1 July 2026, while others are proposed to come into force over the next two to three years.

Important: This is an early analysis only. These are announced measures, not yet legislation. The detail of each measure will determine how it applies in practice, and until that legislation is passed, we are not in a position to provide specific advice on how any of this will impact your situation. We will keep you updated as more information becomes available.

Changes Proposed from 1 July 2026

Permanent $20,000 Instant Asset Write-off

For small businesses with turnover under $10 million, the instant asset write-off is proposed to become a permanent measure from 1 July 2026. Eligible assets costing under $20,000 can be immediately deducted in the year of purchase, rather than depreciated over time. The government estimates this measure is worth around $890 million over five years in compliance cost savings and improved cash flow timing for small businesses.

Loss Carry-Back for Companies

From 2026-27, companies that make a tax loss will be able to carry that loss back against tax paid in either of the previous two income years and receive a cash refund. Previously, losses could only be carried forward to offset future profits. Treasury estimates around 85,000 companies will be eligible, the majority of which are small businesses.

The $1,000 Work-Related Deduction

Workers will be able to claim up to $1,000 in work-related deductions without keeping receipts. While this is aimed at employees, if you run a business and have staff, it's good context to understand. Your employees will have a simpler tax experience.

Changes Proposed for Later Years

Discretionary Trusts and the 30% Minimum Tax (from 1 July 2028)

Around 350,000 small businesses operate through a discretionary trust. Currently, trustees can allocate income to beneficiaries each year, with those beneficiaries paying tax at their own marginal rate. From 1 July 2028, the trustee would be required to pay a 30% minimum tax on the trust's total taxable income, regardless of how that income is distributed. Beneficiaries would still declare their share in their own returns and receive a non-refundable credit for the tax already paid by the trustee.

Excluded from this measure are fixed trusts, superannuation funds, special disability trusts, deceased estates, charitable trusts, and primary production income. Around 40% of small businesses using discretionary trusts are not expected to be affected.

A restructuring window has been proposed from 1 July 2027 to 30 June 2030, allowing businesses to move from a discretionary trust into a company or fixed trust without income tax or capital gains tax consequences. The finer mechanics of how the minimum tax will be collected and administered are still subject to consultation and have not yet been legislated.

Capital Gains Tax (from 1 July 2027)

The capital gains tax discount will shift from 50% to cost-base indexation plus a 30% minimum tax on real capital gains. In plain terms: if you've owned an investment property or asset for a long time, some of the gain you pay tax on will be adjusted for inflation (which is good). But there's a floor of 30% tax, which tightens things compared to the current 50% discount.

If your business is largely operational (a trades business, a professional practice, a cafe), this is less direct. If you're a property investor or have significant investment holdings outside the business, this is worth a closer conversation.

Negative Gearing (from 1 July 2027)

From 1 July 2027, negative gearing on established residential properties purchased after 7:30 pm on 12 May 2026 will be limited. Rental losses from those properties will only be able to be offset against residential property income (including rental income from other properties and capital gains on the sale of a rental property) rather than against other income, such as wages or business income. Any losses that exceed residential property income in a given year will be quarantined and carried forward to be offset against residential property income in future years.

Properties already held as at 7:30 pm on 12 May 2026 are not affected. New builds purchased after that date will retain full negative gearing treatment. The measure does not directly affect the day-to-day operations of most small businesses, but may be relevant for business owners who also hold residential investment properties.

What This Means for You

Each of these measures will look different depending on how your business is structured, your turnover, and your personal circumstances. Until legislation is passed and the details confirmed, we are not yet in a position to provide specific advice on how any of these changes will apply to you.

We are monitoring all developments closely and will provide further updates as the details become clearer. If you have questions about how any of these announced measures might be relevant to your situation, we are happy to have that conversation.