The 2026-27 Budget contains several measures aimed at supporting business investment and innovation. The three most significant for our clients are the permanent extension of the $20,000 instant asset write-off, the reintroduction of loss carry-back for companies, and a substantial reform of the R&D Tax Incentive.

Permanent $20,000 instant asset write-off

From 1 July 2026, the $20,000 instant asset write-off for small businesses with aggregated annual turnover of less than $10 million will be made permanent, ending the cycle of annual extensions that has characterised this measure since 2023.

Under the measure, businesses using the simplified depreciation regime can immediately deduct the full cost of eligible assets costing less than $20,000 in the year they are first used or installed. Assets costing $20,000 or more can continue to be placed into the small business depreciation pool and depreciated at 15% in the first year and 30% thereafter.

The provisions that prevent small businesses from re-entering the simplified depreciation regime for five years after opting out remain suspended until 30 June 2027.

Loss carry-back reinstated for companies

From 1 July 2026, companies with aggregated annual global turnover of less than $1 billion will be able to carry back current-year tax losses and offset them against taxes paid in the prior two income years, generating a refundable tax offset.

This measure was previously available as a temporary COVID-era measure (2019-20 to 2022-23) for companies with turnover below $5 billion. The new permanent measure has a tighter eligibility threshold ($1 billion) and applies only to revenue losses - not capital losses. The refundable offset is also capped at the company's franking account balance, preventing it from exceeding the actual tax paid in prior years.

This is a significant cash flow benefit for companies experiencing cyclical losses or one-off difficult years.

Refundable loss offset for small start-ups

From 1 July 2028, start-up companies with aggregated annual turnover of less than $10 million that generate a tax loss in their first two years of operation will be able to convert that loss into a refundable tax offset.

The offset is capped at the value of fringe benefits tax and PAYG withholding on wages paid to Australian employees in the loss year. This measure recognises that start-ups investing in staff typically do not have the tax history needed to use standard loss carry-back provisions, and provides a direct cash refund to support continued investment in Australian employees.

Dynamic PAYG instalment calculations

From 1 July 2027, small and medium businesses will be able to opt in to monthly PAYG instalment reporting and payment, using ATO-approved calculations embedded in accounting software to dynamically calculate their liability based on real-time business activity.

Businesses that use ATO-approved calculators and make instalment variations that turn out to be incorrect will have interest charges waived. Taxpayers with a history of non-compliance will be required to use monthly reporting.

Fuel excise reduction – already in effect

The Government has already reduced fuel excise by 60.9% (equating to a 32 cents per litre reduction for petrol and diesel) for a three-month period from 1 April 2026. The road user charge for heavy vehicles has been reduced to zero for the same period. This measure is already in effect and reflected at the bowser.

R&D Tax Incentive reform

From 1 July 2028, the R&D Tax Incentive will be significantly reformed. Key changes include:

• Higher core R&D offset: The offset for experimental core R&D expenditure increases by 4.5 percentage points - effectively increasing the incentive by around 25% to 50%.
• Lower intensity threshold: The intensity threshold for qualifying for higher offset rates is reduced from 2% to 1.5%, making more companies eligible.
• Supporting R&D expenditure removed: Only core R&D expenditure (experimental activities) will qualify. Supporting activities, such as production, distribution, and marketing that supported R&D, will no longer be eligible.
• Expanded refundable access for growing firms: The turnover threshold for the highest refundable offset rate increases from $20 million to $50 million. Firms above 10 years of age at the higher threshold receive a non-refundable equivalent.
• Higher expenditure cap: The maximum eligible R&D expenditure increases from $150 million to $200 million.
• Minimum threshold raised: The minimum eligible expenditure rises from $20,000 to $50,000. R&D activities valued below $50,000 must be conducted with a registered Research Service Provider or Cooperative Research Centre.

Please contact us if you have any questions - email us or phone our team on 02 9899 3044.