The 2026-27 Federal Budget was handed down in May 2026, and it carries real consequences for how you invest, pay your team and plan your tax over the next few years. Some measures are now law. Others are announced or still in draft, which means the detail can shift before they take effect.
This guide walks through what was announced and what it means for a small or medium business. Throughout, treat every figure, threshold and date as something to confirm against the ATO before you act, because tax settings move and the way they apply depends on your circumstances.
The Instant Asset Write-Off Is Set to Become Permanent
The headline measure for small business is the instant asset write-off. The Government announced it will permanently set the threshold at $20,000 from 1 July 2026, ending the run of year-by-year extensions that made planning so difficult.
If your business has an aggregated turnover under $10M, you can immediately deduct the full cost of eligible depreciating assets costing less than $20,000, rather than writing them off over several years. The threshold applies on a per-asset basis, so you can write off multiple qualifying assets in the same year.
The $20,000 threshold already applies for the current income year. It was legislated in late 2025, so you can claim eligible assets first used or installed ready for use by 30 June 2026. What is not yet law is the proposal to make $20,000 the permanent threshold from 1 July 2026, which was announced in the Budget and still needs to pass. A permanent setting matters more than the dollar figure, because you could make equipment and fit-out decisions with confidence rather than racing a 30 June deadline. Either way, confirm the current rules and eligibility on the ATO website before you commit to a purchase.
Personal Tax Cuts From 1 July 2026
Separate from the Budget announcements, tax cuts that are already law take effect from 1 July 2026. The 16 per cent marginal rate drops to 15 per cent, with a further reduction to 14 per cent legislated from 1 July 2027.
For most SME owners this lands in two places. If you draw a salary or wage from your business, your take-home pay improves. If you operate as a sole trader, the cut flows through to the tax on your business income because you are taxed at individual rates.
The benefit is modest per person but it compounds across a household and a financial year. Verify the current rates and thresholds against the ATO, as offsets such as SAPTO are also being adjusted alongside the cuts.
New Deductions and Offsets for Workers and Sole Traders
The Budget introduced a $1,000 instant tax deduction, proposed to apply from the 2026-27 income year. The measure would let workers reduce their taxable work income by up to $1,000 without keeping receipts, cutting both tax and the compliance burden of tracking small work-related expenses.
A $250 Working Australians Tax Offset was also announced, proposed to start from 2027-28 as an ongoing annual offset. Both measures matter to sole traders, who lodge as individuals and stand to benefit directly.
These two items are announced rather than fully legislated, and the instant deduction was released as an exposure draft. The final design can change, so confirm the rules before relying on either when you plan.
Cash Flow Measures: Loss Carry Back and PAYG
Two announced measures target cash flow. A tax loss carry back was flagged for companies with turnover up to $1B, allowing eligible companies to use current tax losses to claim a refund of tax paid in the previous two income years, proposed from 2026-27.
The Government also signalled more flexible PAYG instalments, with monthly instalments proposed from 1 July 2027 alongside expanded dynamic instalment pilots. For a business with uneven income, paying tax closer to when you actually earn can ease pressure.
Both measures were announced in the Budget and the detail is still being settled. Treat the turnover thresholds and start dates as provisional until the legislation is confirmed.
Skills, Innovation and Support
On skills, the Budget signalled apprenticeship reforms from 1 January 2027, redirecting employer incentives toward small and medium businesses. If you take on apprentices or trainees, watch the detail as it develops.
For innovation, the R&D Tax Incentive is set for reform, with the turnover threshold for the higher refundable offset proposed to rise to $50M from 1 July 2028. That widens access for fast-growing firms, though the timeline is several years out.
The Budget also funded support services, including dispute resolution help through the Fair Work Commission and wellbeing programs such as NewAccess for Small Business Owners and the Small Business Debt Helpline. On energy and any specific bill relief for small business, confirm what applies to you directly through business.gov.au and your state programs, as the detail can vary and change.
Payday Super and Division 296
Two superannuation changes deserve attention because both take effect from 1 July 2026 and both are law.
Payday super requires employers to pay super guarantee at the same time as salary and wages, rather than quarterly. Contributions will generally need to reach the employee’s fund within seven business days of payday, with longer windows in limited cases such as new starters. Review your payroll and cash flow now, because the timing change is significant and the super guarantee charge applies when contributions are late.
Division 296 adds an extra 15 per cent tax on the share of earnings tied to a total super balance between $3M and $10M, taking the effective rate on that slice to about 30 per cent. For the share above $10M the effective rate rises to about 40 per cent. Both thresholds are indexed, and the tax applies to realised earnings. This affects relatively few people, but it can catch SME owners who hold business premises or large balances in an SMSF. Confirm how the rules apply to your situation with a registered tax agent.
How Foothold Advisory Can Help
The Budget rewards businesses that plan ahead rather than react at 30 June. A clear read on what is law, what is proposed and how each measure touches your structure is the difference between capturing the benefit and missing it.
A tax and structure review with Foothold Advisory maps these changes against how your business actually operates, from the assets you are weighing up to your payroll timing and your super arrangements. Book a consultation and we will help you confirm what applies, with the figures verified against the ATO.
General information only. This article provides general information about Australian tax and business concepts and is current as at its publication date. It does not take into account your objectives, financial situation or needs. It is not tax, financial or legal advice. Foothold Advisory is not a registered tax agent. Tax laws and figures change and apply differently depending on your circumstances. Before acting, obtain advice from a registered tax agent and verify all figures against the ATO.