Budget 2026 Small Business Measures: $20k IAWO, Loss Carry-Back and Start-Up Refunds

The 2026-27 Federal Budget gives accountants advising small business clients a more stable planning environment, particularly for Pty Ltd companies and sole traders with aggregated turnover under $10 million. While the property and CGT reforms will attract the headlines, the small business package is operationally important: a permanent $20,000 instant asset write-off from 1 July 2026, a new company loss carry-back from 2026-27, and start-up loss refundability from 2028-29.

For practices, the key shift is that several measures move from temporary or uncertain settings into longer-term planning tools. That changes how you advise on asset purchases, company structures, cash-flow forecasting, incorporation timing and business exit planning.

Key Budget 2026 small business measures at a glance

• Permanent $20,000 instant asset write-off: from 1 July 2026 for small businesses with aggregated turnover under $10 million.
• Per-asset threshold: multiple assets costing less than $20,000 each can qualify.
• New loss carry-back: from the 2026-27 income year, eligible companies can apply a current year loss against tax paid in the prior two income years.
• Start-up loss refundability: from 2028-29, small start-ups in their first two years can receive a refund for tax losses up to the value of FBT and withholding tax paid on employee wages.
• Small business CGT concessions: unchanged, preserving a key tax shield on future business sales.
• SBE base rate entity tax rate: unchanged at 25% for eligible companies.
• Stage 3+ personal tax cut: from 1 July 2026, the 16% personal tax bracket drops to 15%, relevant for sole traders and owners extracting income personally.

Permanent $20,000 instant asset write-off: from EOFY scramble to long-term planning

The $20,000 instant asset write-off has been made permanent from 1 July 2026 for small businesses with aggregated turnover under $10 million. This is more significant than another annual extension. The Budget papers estimate the permanent setting will save small businesses approximately $32 million per year in compliance costs, largely because owners and advisers no longer need to constantly monitor whether the concession will lapse, extend or change.

For accountants, this should change the tone of capital expenditure conversations. Instead of prompting clients to rush purchases before 30 June based on uncertainty, you can build asset acquisition plans around business need, cash flow and tax timing.

What to remind clients

• The threshold is per asset, not aggregate. A client can buy several eligible assets under $20,000 each and potentially deduct each immediately.
• Eligibility is based on aggregated turnover under $10 million. Include connected entities and affiliates when testing the threshold.
• Timing still matters. The asset must be acquired and used, or installed ready for use, in the relevant income year.
• GST treatment matters. For GST-registered clients, the cost is generally considered GST-exclusive; for non-registered clients, it is generally GST-inclusive.

Practitioner action item: rebuild depreciation schedules

For asset-heavy clients such as tradies, hospitality venues, medical clinics, retail stores, warehouses and mobile service businesses, rebuild the depreciation schedule around the permanent $20,000 threshold. This is especially important where clients regularly acquire tools, kitchen equipment, POS systems, laptops, shelving, trailers, fit-out components or small machinery.

The practical advisory opportunity is to separate purchases into three categories:

• Under $20,000 per asset: assess for immediate deduction under the permanent instant asset write-off.
• At or above $20,000: model depreciation under the applicable small business pool or general depreciation rules.
• Bundled invoices: review whether the invoice represents one asset or multiple separately identifiable assets, and retain documentation.

New loss carry-back for companies from 2026-27

The Budget introduces a new loss carry-back for eligible companies from the 2026-27 income year. A company that makes a tax loss can apply that loss against tax paid in the prior two income years, generating a cash refund mechanism. Treasury estimates the measure could benefit up to 85,000 companies.

This is a major cash-flow development for Pty Ltd clients. It is particularly relevant for businesses exposed to project timing, seasonal volatility, expansion costs, failed product launches, major repairs, debtor defaults or downturns after previously profitable years.

Worked example: Pty Ltd client with prior-year tax paid

Assume a small Pty Ltd company is an eligible base rate entity and has aggregated turnover under $10 million.

• Tax paid in 2024-25: $80,000
• Tax paid in 2025-26: $0
• Tax loss in 2026-27: $50,000
• Corporate tax rate: 25%

At a 25% company tax rate, the $50,000 tax loss has a potential tax value of $12,500. Because the company paid $80,000 in tax in 2024-25, and the measure allows losses to be carried back against tax paid in the prior two income years, the company may be able to claim a cash refund of up to $12,500 for 2026-27, subject to the final legislation and integrity rules.

Without loss carry-back, the company would generally carry the $50,000 loss forward and wait to use it against future taxable income. The Budget measure potentially brings forward the cash benefit, which can be critical for working capital.

Practitioner action item: review prior two years of tax paid

For every Pty Ltd client that may report a 2026-27 loss, create a loss carry-back review file. At minimum, it should include:

• taxable income and tax paid for 2024-25 and 2025-26;
• expected 2026-27 taxable income or loss;
• base rate entity status and corporate tax rate;
• franking account and dividend history, where relevant;
• loss integrity risks, including changes in ownership or business activity; and
• cash-flow timing for refund claims after 30 June 2027.

For quarterly BAS clients, it may also be worth updating tax instalment assumptions earlier rather than waiting until year-end accounts are finalised.

Start-up loss refundability from 2028-29

From 2028-29, small start-ups in their first two years will be able to receive a refund for tax losses up to the value of FBT and withholding tax paid on employee wages. The measure is expected to benefit up to 25,000 young companies per year.

This is not the same as ordinary loss carry-forward treatment. The policy intent appears to be to support early-stage employers that are investing in staff before becoming profitable. For accountants, the measure makes payroll tax architecture, PAYG withholding records and FBT compliance more important in the first two years of a company’s life.

Decision framework: should a sole trader incorporate earlier?

The Budget changes the incorporation analysis for sole trader clients. The answer is not automatic, but the company structure now has additional tax cash-flow features that sole traders cannot access.

• If the client is profitable and simple: remaining a sole trader may still be appropriate, especially with the 15% personal tax bracket from 1 July 2026 and lower administration costs.
• If the client expects early losses after hiring staff: incorporation may become more attractive from 2028-29 because start-up loss refundability is company-focused and linked to FBT and withholding tax paid on wages.
• If the client has volatile profit cycles: a Pty Ltd structure may be more attractive from 2026-27 due to the company loss carry-back.
• If asset protection, succession or external investment matters: tax should be considered alongside legal risk, commercial credibility and future equity plans.

The practical message is that accountants should revisit incorporation modelling for sole traders who are hiring, expanding or taking on commercial risk. The company structure now has a stronger cash-flow case in selected scenarios.

Small business CGT concessions are unchanged — and now relatively more valuable

The Budget’s broader CGT reforms start from 1 July 2027. The 50% general CGT discount will be replaced by cost base indexation plus a 30% minimum tax floor for individuals, partnerships and trusts. Against that backdrop, the fact that the small business CGT concessions are unchanged is significant.

For accountants advising business owners approaching sale, retirement or intergenerational transfer, the small business CGT concessions become relatively more valuable because the general 50% discount will no longer be available in the same way for individuals and trusts after 1 July 2027.

Practitioner action item: revisit sale-and-retirement plans

Review clients who may sell a business, business real property, goodwill or shares in a business company between 2026 and 2030. Focus on:

• whether the $6 million maximum net asset value test or $2 million aggregated turnover test may be satisfied;
• active asset status and ownership period;
• 15-year exemption eligibility;
• retirement exemption planning and contribution timing;
• small business rollover strategy; and
• whether restructuring before a sale improves or harms access to concessions.

The unchanged small business CGT concessions may become the central tax planning tool for business exits once the new CGT regime commences on 1 July 2027.

Three pitfalls accountants should actively manage

1. Base rate entity rules can disqualify investment-heavy companies

The 25% SBE base rate entity tax rate is unchanged, but eligibility is not just about turnover. Companies with too much base rate entity passive income can be pushed out of the 25% rate. This matters when modelling loss carry-back refunds, because the assumed tax rate affects the refund value and prior-year tax profile.

2. Sole traders cannot access the new company loss carry-back

The loss carry-back measure applies to eligible companies. Sole traders may still be eligible for other small business concessions, and they benefit from the 15% personal tax bracket from 1 July 2026, but they do not get the company refund mechanism. This should be clearly explained when comparing sole trader and Pty Ltd structures.

3. The $20,000 instant asset write-off threshold is per asset, not total annual spend

Clients often confuse the $20,000 threshold as a total cap for the year. It is a per-asset threshold. A café could potentially acquire multiple eligible items under $20,000 each, while a single $24,000 item would not qualify for immediate write-off under that threshold.

How accounting firms should operationalise the changes

The best response is to update internal checklists before 1 July 2026 rather than waiting for 2027 tax planning season. Recommended firm-level actions include:

• add a $20,000 instant asset write-off review to quarterly management meetings for SBE clients;
• flag all Pty Ltd clients with prior-year tax paid and possible 2026-27 losses;
• create an incorporation review template for sole traders hiring employees or forecasting losses;
• update tax planning letters to distinguish sole trader and company access to loss measures;
• run a CGT concessions review for owners aged 50+ or clients discussing sale, succession or retirement;
• train junior staff to test aggregated turnover, base rate entity status and per-asset write-off treatment; and
• monitor ATO guidance and legislation as the measures move from Budget announcement to enacted law.

Tools like Fedix can help practices manage the compliance workload behind these advisory conversations, particularly where clients arrive with incomplete records. For example, MyLedger can convert bank statements into reconciled financial data and generate working papers, helping accountants identify asset purchases, prior-year tax positions and BAS/GST issues more efficiently.

Bottom line for accountants

The Budget 2026 small business measures reward proactive advice. The permanent $20,000 instant asset write-off gives accountants a durable framework for asset planning. The new loss carry-back gives Pty Ltd clients a potential 2026-27 cash refund opportunity. Start-up loss refundability from 2028-29 strengthens the case for earlier incorporation in selected employee-heavy start-ups. Meanwhile, unchanged small business CGT concessions should be revisited because they become more valuable in relative terms once the new CGT regime starts on 1 July 2027.

For firms advising small businesses under $10 million aggregated turnover, the immediate task is clear: update tax planning models, segment clients by structure, and start conversations before the measures affect cash flow, asset purchasing and exit decisions.

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Disclaimer: This article is for general informational purposes only and does not constitute professional financial or tax advice. Always consult a qualified accountant or tax professional for advice specific to your situation. Fedix.ai provides tools to assist accounting professionals but does not replace professional judgement.