Federal Budget 2026: What Small Business Owners Need to Know
The 2026 Federal Budget is packed with proposed changes for small business. Most won't land for a year or more, but it's worth knowing what's coming.
Every Budget brings a wave of headlines, and the 2026 Federal Budget is no exception. From asset write-offs to capital gains tax and trust structures, there's a lot on the table for small business owners. But here's the most important thing to understand upfront: many of these measures are not yet law, and several don't start until 1 July 2027 or 1 July 2028.
That means the right move right now isn't to overhaul your structure or rush a decision. It's to understand what's proposed, keep your records clean, and stay close to your bookkeeper or advisor as the detail firms up.
Instant Asset Write-Off: Made Permanent
$20,000 Instant Asset Write-Off
After years of temporary extensions, the Government has proposed permanently setting the Instant Asset Write-Off at $20,000 for eligible small businesses with turnover under $10 million.
Eligible depreciating assets under $20,000 can continue to be deducted immediately, while higher-value assets remain under simplified depreciation pool arrangements. If this lands as proposed, it gives small business owners far more certainty for asset planning and purchasing going forward.
Working Australians Tax Offset and the $1,000 Deduction
$250 Working Australians Tax Offset
A proposed $250 offset for Australian tax residents earning income from work, including sole traders.
$1,000 Instant Work-Related Deduction
Individuals with work-related expenses under $1,000 could claim a standard deduction without needing to itemise. Anyone with expenses above $1,000 would still claim deductions the usual way.
Loss Carry-Back for Companies
Carrying back tax losses
Eligible companies with turnover under $1 billion may be able to carry back tax losses for up to two years against previously paid tax. This applies only to revenue losses and is limited by the company's franking account balance.
Capital Gains Tax: A Bigger Shift, But Not Yet
CGT discount restructure
This is one of the larger proposed changes in the Budget. The current 50% CGT discount for assets held longer than 12 months would be replaced with cost base indexation and a 30% minimum tax on net capital gains.
The proposal affects individuals, trusts and partnerships. Transitional arrangements are included, with the current 50% discount proposed to continue applying to gains arising before 1 July 2027.
Negative Gearing Changes
Limited to new builds
Negative gearing for residential property would be limited to eligible new builds. Established residential properties acquired after 7:30pm AEST on 12 May 2026 may face different treatment, with losses quarantined against residential property income rather than offset against wages or other income.
Properties acquired before this date are proposed to remain under existing rules until disposed of.
Discretionary Trusts
Minimum 30% tax on trust income
A proposed minimum 30% tax on discretionary trust income, with exclusions for certain trust types and categories of income. Restructuring rollover relief is also proposed for businesses wanting to move from discretionary trust structures into alternative entity structures, over a three-year period from 1 July 2027.
What Else Is in the Budget?
Beyond the headline measures, there are several other items worth knowing about:
- Dynamic PAYG Instalments — The ATO's pilot program is proposed to expand from 1 July 2027, eventually allowing eligible businesses to opt into monthly PAYG instalments calculated through their accounting software.
- Payroll and STP reporting — Measures linked to employer withholding for child support and expanded STP data sharing mean accurate, timely payroll reporting remains as important as ever.
- Medicare levy thresholds — Increased low-income thresholds may affect PAYGW calculations and employee tax outcomes.
- Digital ID and business systems — Continued investment in myID, RAM, and business registers, focused on improving security and reliability when accessing government systems.
- Reducing regulatory burden — "Tell Us Once" reporting initiatives, proposed payroll tax harmonisation across states and territories, and a Productivity Commission inquiry into regulatory barriers.
- Electric vehicle FBT changes — Transitional changes for higher-value EVs from 1 April 2027, moving toward a permanent 25% FBT discount from 1 April 2029.
- Support for business owners — Extended funding for the Small Business Debt Helpline and the NewAccess for Small Business Owners mental health coaching program.
What Should Small Business Owners Actually Do Right Now?
With so much still subject to legislation, the smartest move is to focus on the fundamentals rather than react to headlines.
Keep your financial records accurate and current. Maintain clear asset records. Keep payroll reporting up to date. Review your Digital ID and government access arrangements. And hold off on major structural decisions until the legislation is actually passed.
Clean data and good reporting processes are always the priority — Budget or no Budget.
Talk to Your Bookkeeper or Advisor
Many of these measures cover complex areas of tax and structuring, and the details are still subject to legislation and further clarification. If any of these proposals could affect your business — particularly around trusts, capital gains, or asset purchasing decisions — it's worth having a conversation with your bookkeeper, BAS agent or advisor before taking any action.
We'll continue monitoring updates as more detail becomes available, and we'll keep you informed as these measures progress through Parliament.
Got Questions About the Budget?
Let's talk through what these proposed changes could mean for your business.
Talk to the Diverse Team