Federal Budget 2026-27: What Small Business Owners Need to Know
The 2026-27 Federal Budget introduces pivotal changes to asset write-offs, negative gearing, and trust taxation. This guide breaks down how these legislative proposals impact your business structure, investment strategy, and bottom line starting from July 2026.
Quick Summary: What This Budget Means for Your Business
Instant asset write-off permanently set at $20,000 for small businesses from 1 July 2026
Income tax rate drops from 16% to 15% on earnings between $18,201 and $45,000 from 1 July 2026
$1,000 instant work expense deduction for employees (no receipts required) from 1 July 2026
Negative gearing changes apply to established residential properties acquired after 7:30pm AEST on 12 May 2026. Those properties can still be negatively geared until 30 June 2027, but from 1 July 2027 losses can only offset residential property income, not wages or business income
50% CGT discount replaced by CPI indexation and a 30% minimum tax rate from 1 July 2027
Pre-CGT assets (acquired before 20 September 1985) lose their full CGT exemption from 1 July 2027
Electric car FBT exemption scaled back from 1 April 2027
FBT exemption for work-related items under salary packaging arrangements is being removed from 1 July 2026
Loss carry back available for companies under $1 billion global turnover from 1 July 2026
Family trust distributions face a minimum 30% tax from 1 July 2028
PAYG instalment opt-in to monthly reporting from 1 July 2027
R&D tax incentive reformed with minimum spend threshold rising to $50,000 from 1 July 2028
ATO receives $86.3 million to detect and prevent tax fraud from 1 July 2026
All measures are proposals only and not yet law
Here is what every key measure means for your business, in plain English and without the jargon.
The $20,000 Instant Asset Write-Off
Small businesses can finally move away from year-to-year uncertainty. The Government has announced that the $20,000 instant asset write-off will become a permanent fixture for businesses with an aggregated turnover under $10 million.
Effective Date: 1 July 2026 (though the $20,000 threshold currently applies for the 2025-26 year).
Per-Asset Limit: The threshold applies to each individual asset, allowing for multiple purchases.
Franchise Impact: Ideal for franchisees upgrading equipment or franchisors investing in head office infrastructure.
Major Shifts in Property and Capital Gains Tax
The landscape for property investors and business owners holding assets is shifting significantly to address housing affordability.
Negative Gearing Restrictions: For established residential properties acquired after 7:30pm AEST on 12 May 2026, losses can only offset residential rental income or capital gains—not wages—starting 1 July 2027.
CGT Overhaul: From 1 July 2027, the 50% Capital Gains Tax (CGT) discount is replaced by CPI indexation and a 30% minimum tax rate.
Pre-CGT Assets: Assets held before September 1985 will lose their full exemption status on gains accruing after 1 July 2027.
New Rules for Family Trusts and Companies
If you operate through a discretionary trust or a company structure, pay close attention to these compliance updates:
Trust Distributions: From 1 July 2028, a minimum 30% tax applies to distributions from discretionary trusts. This is a major change for those using trusts for tax flexibility.
Loss Carry Back: Companies with turnover under $1 billion can offset future tax losses against tax paid in the previous two years starting 1 July 2026.
Monthly PAYG: From 1 July 2027, businesses can opt-in to monthly Pay As You Go (PAYG) instalments to better manage cash flow.
Employee Benefits and FBT Adjustments
Tax Cuts: The 16% tax rate drops to 15% (for income $18,201–$45,000) on 1 July 2026.
Standard Deduction: Employees gain a $1,000 "no-receipts" work expense deduction.
FBT Alert: To fund the deduction, the Fringe Benefits Tax (FBT) exemption for salary-packaged work items (laptops, tools) is being removed.
Electric Vehicles: The EV FBT exemption begins scaling back from 1 April 2027.
Whether you are expanding a franchise network or managing a solo venture, these measures represent a significant shift in the Australian tax landscape.
Connect with our Linkins team today for expert support in navigating these Budget changes and ensuring your business structure remains tax-effective.
Frequently Asked Questions
1. Is the $20,000 instant asset write‑off now permanent?
The Government has announced that the $20,000 threshold will become permanent from 1 July 2026 for small businesses with aggregated turnover under $10 million. This removes the annual uncertainty.
Note: this measure is not yet law and still requires legislation.
2. I hold assets acquired before 1985. Am I affected by the CGT changes?
Assets acquired before 20 September 1985 have always been exempt from CGT. From 1 July 2027, this exemption will no longer apply to gains that accrue after that date. If you hold any pre‑CGT assets—property, business assets or shares—you will need to obtain a valuation as at 1 July 2027.
3. How will the negative gearing changes affect my investment property?
If you owned, or had exchanged contracts on, a residential investment property before 7:30pm AEST on 12 May 2026, nothing changes.
For established properties acquired after that date, a transition period applies: traditional negative gearing remains available until 30 June 2027.
From 1 July 2027, losses can only offset residential rental income or residential property capital gains—not wages or business income. New builds remain fully exempt.
4. How do the CGT changes affect me if I sell my business or a property?
From 1 July 2027, the 50% CGT discount will be replaced with CPI indexation and a minimum 30% tax on gains. Only gains accruing after that date are affected. If you are considering selling a business, property or other major asset, the timing relative to 1 July 2027 is important - speak with us now.
5. Can I write off multiple assets under $20,000?
Yes. The threshold applies per asset. You can immediately write off multiple assets costing less than $20,000 each in the same income year, even if the combined total exceeds $20,000.
6. How does the $1,000 work‑expense deduction change affect salary packaging across my business?
The current FBT exemption for certain work‑related items provided under salary packaging will be removed. For businesses offering salary packaging arrangements, this may have wide implications.
7. My business provides electric cars to staff or area managers. What should I do?
Existing lease arrangements are unaffected. For new arrangements involving electric vehicles costing more than $75,000, the full FBT exemption ends on 31 March 2027. Discuss timing considerations with us for more information.
8. My business is structured as a family trust holding property and business assets. What should I do?
The negative gearing changes, CGT changes and the new minimum 30% trust tax from 1 July 2028 all interact for trust‑held assets. This makes reviewing your trust structure a priority. Limited rollover relief will be available from 1 July 2027.
9. How does loss carry back apply to businesses?
Loss carry back will apply to companies with aggregated global turnover under $1 billion from 1 July 2026. If your business is a company and falls under this threshold, it may be eligible. It does not apply to sole traders, partnerships or trusts.
10. Are all of these changes guaranteed to happen?
No. All budget announcements are proposals only and must pass through Parliament before taking effect. Linkins accountant will keep clients updated as measures progress.
--
Disclaimer:
The information and content provided in this publication are purely for informative purposes. It is not meant to serve as advice, and you should not act specifically on the basis of this information.
