The Federal Budget Breakdown 2026/27 for Business

The $20,000 instant asset write-off for small businesses with annual turnover under $10 million is now permanently legislated from 1 July 2026. 

The write-off allows eligible small businesses to immediately deduct the full cost of any eligible asset costing less than $20,000 in the year it is first used or installed — rather than depreciating it over a number of years.

The $20,000 limit applies on a per-asset basis, meaning multiple assets can be written off in the same year provided each individual asset is under the threshold.

If you have been holding off on equipment or other asset purchases pending clarity on whether this concession would continue, that uncertainty has now been resolved.

From 1 July 2026, companies with aggregated annual global turnover of less than $1 billion will be able to carry back a tax loss and offset it against tax paid in either of the two previous financial years.

If your company paid tax in 2024-25 or 2025-26 and subsequently incurs a loss in 2026-27 or later, you can apply that loss against the earlier tax paid and receive a cash refund.

The carry-back applies to revenue losses only — not capital losses — and is limited by your company's franking account balance.

This measure is particularly valuable for companies that were profitable in recent years but are now experiencing a downturn.

Businesses that claim the Research and Developments to the R & D Tax Incentive will need to be aware of significant changes taking effect from 1 July 2028.

The reforms are broadly positive for businesses engaged in genuine core R & D activity, though some aspects tighten the scope of what is eligible.

The Key Changes

The offset rates for core R & D expenditure will increase by 4.5 percentage points. The intensity threshold will be reduced from 2% to 1.5%, meaning more businesses will qualify.

The turnover threshold for accessing the refundable tax offset increases from $20 million to $50 million, allowing a greater number of growing businesses to access cash refunds.

The maximum R & D expenditure threshold also increases from $150 million to $200 million.

What Is Tightening

Supporting R & D expenditure — which has historically allowed businesses to claim a broader range of costs associated with their R & D activities — will no longer be eligible from 2028.

Only core R & D expenditure will qualify. The minimum expenditure threshold also increases from $20,000 to $50,000. Research activities below this amount will only be eligible if undertaken with a registered Research Service Provider or Cooperative Research Centre.

From 1 July 2028, small start-up companies with 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 — meaning the ATO will pay out the offset as a cash refund even where no tax has previously been paid.

The offset is capped at the value of FBT and withholding tax on wages paid to Australian employees in the loss year.

From 1 July 2027, the venture capital tax incentive programs will be expanded.

The cap for standard venture capital limited partnerships increases from $250 million to $480 million; for early stage funds, from $50 million to $80 million.

These changes apply to both new and existing funds.

Note: the separate Eligible Venture Capital Investor program has been closed to new applications from Budget night, 12 May 2026.

The full FBT exemption will remain in place until 31 March 2027.

From 1 April 2027, the full exemption will only apply to EVs priced at $75,000 or less.

EVs above $75,000 but below the Luxury Car Tax threshold will attract a reduced 25% FBT discount only.

From 1 April 2029, the 25% discount applies to all EVs below the Luxury Car Tax threshold regardless of price 

The Budget states that all eligible electric cars will retain the FBT discount rate that was in place when the arrangement began.

However, the word 'eligible' is critical. Reading the Budget papers as a whole, it appears that 'eligible' refers to eligibility under the new rules — meaning only EVs priced at $75,000 or less retain the full 100% exemption beyond 1 April 2027.

If your current EV is priced above $75,000, you will likely lose the full exemption at 1 April 2027 regardless of when you entered the arrangement.

This is a materially different outcome from what many people may be expecting.

The Budget papers do not define what 'commenced' means for grandfathering purposes.

When plug-in hybrid vehicles were removed from the exemption, grandfathering required not just that a lease existed, but that there was a financially binding ongoing commitment.

Optional lease extensions did not qualify. It is possible a similar test will apply here.

No assumption should be made that an existing arrangement is automatically protected until the legislation is released.