2026 Federal Budget
The main focuses of the 2026 federal budget are: responding to the global oil shock, taking pressure off Australians, making the economy more productive, delivering tax reform for workers and businesses, and making sensible savings.
Treasurer Jim Chalmers’ 2026-2027 federal budget was just announced, and it was framed as a plan for “resilience and reform” at a time of genuine global uncertainty. This time budget deficit is estimated to be down to $31.5 billion.
Here are the key takeaways:
Contents
Tax deductions and offsets
The $1,000 Instant Tax Deduction allows individuals — including sole traders — to claim up to $1,000 in work-related expenses without needing to keep receipts. Note, though, that charitable donations, association memberships, and union fees are excluded from this deduction.
There’s also a new $250 Working Australians Tax Offset (WATO), which is available to sole traders, not just employees. The WATO is set to offer a permanent annual tax offset of up to $250 for income earned from 1 July 2027.
Instant Asset Write-Off goes permanent
After years of uncertainty and repeated short-term extensions, the $20,000 Instant Asset Write-Off (IAWO) has been made permanent for businesses with an annual turnover of up to $10 million.
This allows eligible businesses to immediately deduct the cost of new or second-hand assets (up to $20,000 per asset) rather than depreciating them over time. The certainty of a permanent scheme means you can plan capital expenditure without waiting each year to see whether the scheme will be renewed.
Loss carry back and start-up support
From tax years commencing on or after 1 July 2026, companies with an aggregated annual global turnover of up to $1 billion will be able to carry back a tax loss and offset it against tax paid in the previous two years (revenue losses only).
For early-stage businesses, there’s also a new loss refundability measure for small start-ups. For tax years starting on or after 1 July 2028, businesses with a turnover of less than $10 million that generate a tax loss in their first two years will be able to use that loss to generate a refundable tax offset.
CGT changes
This is where it gets more complex. From 1 July 2027, the current 50% Capital Gains Tax (CGT) discount will be replaced by a cost base indexation model, with a 30% minimum tax on net capital gains. These changes apply to all CGT assets (including property and shares) held by individuals, trusts, and partnerships, including pre-1985 assets.
The good news: the existing CGT concessions specifically for SMEs will be maintained. And gains arising before 1 July 2027 will still be subject to the current 50% discount rules.
Investors in new houses will have the choice of either the 50% discount or the new indexation model with the minimum tax.
Negative gearing: new builds only from 2027
From 1 July 2027, negative gearing will be limited to eligible new builds. Losses from established properties will only be deductible against rental income or capital gains from residential property and not against other income. However, excess losses can be carried forward to future years.
For SME owners who hold investment properties as part of their wealth strategy, this is a meaningful change. If you currently use rental losses to offset your business or personal income, that arrangement will no longer work for established properties after July 2027.
Discretionary trusts: the new 30% minimum tax
Many SMEs operate through discretionary trust structures, and this Budget introduces a significant change: a minimum 30% tax on taxable income distributed through discretionary trusts. Beneficiaries (other than companies) will receive non-refundable credits for the tax paid by the trustee.
Importantly, the Government is offering a three-year rollover relief window from 1 July 2027 for SMEs that want to restructure into a different entity type, such as a company or a fixed trust. ASIC will be resourced to help expedite these changes.
The minimum tax will not apply to fixed trusts, widely held trusts, complying superannuation funds, special disability trusts, deceased estates, or charitable trusts. Some income types — including primary production income and certain income relating to vulnerable minors — will also be excluded.
If your business currently operates through a discretionary trust, this is a priority conversation to have with your accountant. The restructuring window is generous, but three years goes quickly.
Fuel prices: immediate relief for business costs
Fuel was identified as the number one cost pressure facing SMEs in the latest MYOB Business Monitor, cited by 51% of respondents, with average fuel costs rising by around 18% over the past 12 months.
The global oil shock is particularly a live issue for any business with transport, logistics, or fuel-heavy operations.
Today, the Government has responded with a three-month lowering of the fuel excise from 1 April 2026, delivering a 32 cents-per-litre reduction in petrol and diesel prices.
Beyond the short-term excise cut, the $14.8 billion Strengthening Australia’s Fuel Resilience package includes a $7.5 billion Fuel and Fertiliser Security Facility and a $3.2 billion Australian Fuel Security Reserve.
There are also $1 billion in interest-free loans available to manufacturing and logistics businesses impacted by the fuel crisis. If your business has been hit hard by fuel costs, it’s worth exploring whether you’re eligible.
Other factors affecting SMEs
- Free access to mandatory standards, saving some businesses up to $1,600 per year
- A National Construction Code Modernisation Project to reduce state-by-state variations
- Round 3 of the Digital Solutions Program from 1 July 2026, with a new focus on AI and emerging technologies
- Expansion of PAYG pilot, with SMEs able to opt into monthly payments using ATO-approved calculations embedded in accounting software from 1 July 2027.
- Extension to funding of $8.2 million over three years to continue the Small Business Debt Helpline and the NewAccess for Small Business Owners mental health coaching program through to 30 June 2027.
- Restructuring of electric vehicle FBT discount, with reductions coming into place in 2029. If you’ve been considering adding EVs to a novated leasing arrangement or company fleet, the window for the full 100% discount on vehicles under $75,000 is open until April 2029. Plan your fleet decisions accordingly.
WL Advisory is a Chartered Accounting firm. We specialise in accounting, tax, and advisory services for individuals and small businesses. Please visit our website to book an obligation-free appointment. (2026 Federal Budget)