The Federal Budget announcements include a comprehensive business tax relief package designed to support companies and encourage investment and innovation.
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 was set to revert to $1,000 on 30 June 2026 but 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.
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.
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 applies to revenue losses only and remains limited by a company’s franking account balance.
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. Further, for EVs costing less than $75,000, there will be no changes until 1 April 2029.
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.
From 1 July 2027, small and medium businesses can opt into monthly PAYG instalment reporting and payments. This system will use ATO-approved calculations embedded in accounting software to better reflect real-time business activity.
