The 2026-27 Federal Budget has made the $20,000 instant asset write-off a permanent feature of the small business tax system from 1 July 2026. Businesses with aggregated turnover under $10 million can continue to immediately deduct the full cost of eligible assets costing less than $20,000 each, with no scheduled sunset clause. The measure had been on annual extensions since 2015 and was the single most-asked-about line item for SME advisers each year. It is now off the table as a year-end uncertainty.
Alongside the write-off, the budget reintroduced loss carry-back for eligible companies and retargeted the R&D Tax Incentive from 2028 to weight more heavily toward core experimental R&D. This article walks through each measure and what it changes for SME planning.
The $20,000 instant asset write-off: what changes, what stays
The eligibility rules are essentially the same as the previous year:
- Eligible entities: businesses with aggregated turnover under $10 million.
- Threshold: $20,000 per asset, GST-exclusive (for GST-registered businesses).
- Timing: the asset must be first used or installed ready for use in the income year.
- Asset use: predominantly business use (over 50 per cent business).
- Multiple assets: the $20,000 threshold applies per asset, so a business can write off multiple sub-$20,000 assets in the same year.
- Effective date: 1 July 2026 (i.e. for the 2026-27 income year onwards).
The single substantive change is the removal of the sunset clause. Previous extensions ran for one year at a time, with the threshold reverting to $1,000 on 30 June each year unless extended. Treasury Treasury and Treasury industry estimates suggest the extension-uncertainty alone was worth about $200 million of deferred asset purchases each year as businesses delayed purchase decisions waiting for the next budget. The permanent status removes this drag.
What this means for EOFY 2025-26 planning (right now)
For the current EOFY (year ending 30 June 2026), the $20,000 threshold is in force under the existing one-year extension. The permanent measure from 1 July 2026 means the deduction is also available in 2026-27 and beyond. There is no longer a "rush before the threshold reverts to $1,000" pressure on asset purchases between now and June 30. Businesses can plan asset acquisitions on a multi-year basis using their actual operational and cashflow needs rather than tax-deadline considerations.
That said, EOFY-period asset purchases still make sense for the same reasons they always have: the year-one deduction reduces tax in the year of purchase rather than spreading the cost across the asset's effective life. For an SME with a strong taxable income in 2025-26 and lower expected income in 2026-27, bringing forward an asset purchase still captures the deduction at the higher marginal rate.
Loss carry-back: returns for eligible companies
The reintroduction of loss carry-back allows eligible companies to offset current-year tax losses against income from prior years and receive a refundable tax offset. This is particularly useful for SMEs that had profitable years in 2023-24 or 2024-25 and have now run a loss year in 2025-26 or 2026-27 (due to rising interest costs, weak consumer demand, or a one-off event such as a flood or fire affecting trading).
The mechanism: a company with a 2026-27 tax loss can carry the loss back against company income from up to two prior years (2024-25 and 2025-26) and receive a cash refund of the tax paid on that income, up to the amount of franking credits available. Previous iterations of loss carry-back during the pandemic period generated about $9 billion of cashflow back to SMEs over the lifetime of the measure; the new permanent version is expected to be smaller in aggregate but to operate the same way.
Loss carry-back is restricted to companies; sole traders, partnerships, and trusts use the existing loss-carry-forward rules (losses carried into future years against future income, no refund). The detail of the eligibility rules and refund cap will be in the budget papers; we will update this article when the bill is tabled.
R&D Tax Incentive: retargeted from 2028
The R&D Tax Incentive is being retargeted from the 2028 income year. The change has two parts: higher offsets for "core experimental R&D activities" (the actual experimental work, where genuine uncertainty exists), and the removal of eligibility for "supporting activities" (background work that contributes to but does not itself constitute experimental R&D).
In practice, this is a sharpening of the policy rather than a contraction. Businesses doing genuine experimental R&D (developing new products, processes, software algorithms with technical uncertainty) will see a higher rate of support. Businesses claiming under the R&D banner for activities such as routine market research, business-process improvement, or production scale-up will likely lose eligibility for those components. The Inspector-General of Taxation has flagged for years that the "supporting activities" definition has been a source of compliance ambiguity; the retargeting removes it.
For an SME currently claiming under R&D Tax Incentive, the practical step is to ask your accountant or R&D specialist to review your 2024-25 and 2025-26 claims and identify which components fall under "core experimental" (likely retained) versus "supporting" (likely removed from 2028). The 2026-27 and 2027-28 income years operate under the existing rules. AusIndustry will issue updated guidance well ahead of the 2028 start.
What the budget did not change for SMEs
- Company tax rate: unchanged. Small businesses (under $50 million turnover) continue at 25 per cent; large companies at 30 per cent.
- GST: unchanged at 10 per cent. No threshold changes.
- Payroll tax: state-level; unaffected by the federal budget.
- Single Touch Payroll: continues. No new reporting obligations.
- Superannuation guarantee: continues on its existing legislated schedule (currently 12 per cent from 1 July 2025).
- Payday super: legislated to commence 1 July 2026 as scheduled. Confirmed in the budget.
What an SME should do this week
- Review your remaining EOFY 2025-26 asset-purchase pipeline. The threshold and rules for this year are unchanged. Bring forward any sub-$20,000 asset that you would have bought in early 2026-27 anyway. The deduction is now confirmed for next year too, but the in-year tax saving is still worth capturing if your 2025-26 income justifies it.
- If you anticipate a 2025-26 or 2026-27 tax loss and you operate as a company, talk to your accountant about loss carry-back. Refundable tax offsets are immediate cashflow.
- If you currently claim R&D Tax Incentive, ask for a 2024-25 and 2025-26 claim review to identify which components survive the 2028 retargeting and which do not.
- Review your equipment-finance facilities. Permanent threshold removes the EOFY rush; some lenders historically priced higher in May/June for that reason. The rate landscape may be slightly more competitive across the rest of the year now that demand is smoother.
Our team refers SME equipment finance and business loan applications to ALG, our credit-licensed broker partner. For sub-$20,000 asset purchases, the chattel mortgage versus cash decision is sensitive to your specific cashflow and tax position; we can model both before you commit.