Business tax relief package announced for immediate support

The 2026–2027 Federal Budget announcements include a comprehensive business tax relief package designed to support companies through economic uncertainty while encouraging investment and innovation.

Permanent instant asset write-off secured

Small businesses can breathe easier with the permanent extension of the $20,000 instant asset write-off for businesses with turnover up to $10 million. This measure, which was set to revert to just $1,000 on 30 June 2026, now provides ongoing certainty for equipment purchases and business expansion plans.

Assets valued at $20,000 or more can continue to be placed into the small business simplified depreciation pool, with deductions of 15% in the first year and 30% thereafter. The provisions preventing businesses from re-entering the simplified depreciation regime for five years after opting out remain suspended until 30 June 2027.

Trust distributions face new minimum tax

From 1 July 2028, discretionary trusts will face a minimum 30% tax rate on taxable income. Beneficiaries will receive non-refundable credits for tax paid by trustees, but this could result in higher effective tax rates for lower-income beneficiaries who would normally pay less than 30%.
The government will provide expanded rollover relief for three years from 1 July 2027 to help restructure discretionary trusts into companies or fixed trusts.

Loss carry-back returns

From 1 July 2026, companies with aggregated annual global turnover below $1 billion will again be able to carry back tax losses and offset them against tax paid up to two years earlier. This reinstated measure applies to revenue losses only and remains limited by a company’s franking account balance.

Start-up support expanded

New loss refundability provisions will support emerging businesses from 1 July 2028. Start-up companies with aggregated annual turnover below $10 million that generate tax losses in their first two years can utilise these losses to generate refundable tax offsets.

The offset is limited to the value of fringe benefits tax and withholding tax on wages paid to Australian employees in the loss year. 

Venture capital incentives enhanced

Asset size caps for venture capital tax incentives will increase significantly from 1 July 2027. The venture capital limited partnership cap on investee business asset size rises from $250 million to $480 million, while early stage venture capital limited partnership caps increase from $50 million to $80 million.

Maximum fund sizes for early stage venture capital limited partnerships will expand from $200 million to $270 million. These increases, the first in over 20 years, aim to facilitate greater venture capital investment in Australian businesses.

FBT exemption for electric vehicles

The Budget confirmed the proposed changes to the FBT exemption for electric vehicles (EVs). The changes will be phased in over the next three years until a permanent 25% discount is operating from 1 April 2029 for all eligible EVs. There will be no changes in the current FBT year (ie the one ending 31 March 2027). Further, for EVs costing less than $75,000, there will be no changes until 1 April 2029.

In summary, the proposed changes are as follows:

• 2027–2028 and 2028–2029 (ie the next two FBT years): The full discount for EVs costing $75,000 or less will continue. EVs costing more than $75,000 but less than the luxury car tax threshold  will receive a 25% discount on their payable FBT.

• 2029–2030 onwards: All EVs costing amounts below the luxury car tax threshold will receive a 25% discount on payable FBT (ie rather than the full discount).

Research and development overhaul

The Research and Development Tax Incentive faces major reforms from 1 July 2028. Core research and development offset rates will increase by 4.5 percentage points, while the intensity threshold drops from 2% to 1.5%.

The turnover threshold for the highest offset rate increases from $20 million to $50 million, and the maximum expenditure threshold rises from $150 million to $200 million. However, supporting research and development expenditure will lose eligibility, and the minimum expenditure threshold increases from $20,000 to $50,000.

Streamlined tax payments

From 1 July 2027, small and medium businesses can opt into monthly pay-as-you-go instalment reporting and payments. This system will use ATO-approved calculations embedded in accounting software to better reflect real-time business activity.