The budget includes several proposed changes that may affect small and medium businesses. The major measure that will impact on many businesses is the minimum trust distribution tax which you can read more about in our blog by clicking here. Some other measures particularly impact on companies, start-ups and employers providing electric vehicles.

Loss carry-back makes a comeback

From 1 July 2026, the loss carry-back rules are proposed to return for businesses.

Where a company makes a tax loss, it may be able to carry that loss back and offset it against tax paid up to two years earlier. This can provide a cash flow benefit by allowing eligible companies to obtain a tax refund.

However, the company must have a sufficient franking account balance. Businesses should monitor franking accounts closely if they intend to rely on these rules.

New start-up offset

From 1 July 2028, small start-up companies with turnover under $10 million may be eligible for a refundable offset where they make a loss in their first two years.

The offset will apply to FBT and PAYG withholding paid. This could help early-stage businesses manage cash flow during the initial loss-making period.

Further detail will be needed to confirm eligibility requirements, but start-ups should be aware of this potential support measure when forecasting cash flow.

$20,000 instant asset write-off made permanent

The $20,000 immediate asset write-off is proposed to become permanent.

This is a practical measure for small businesses, as it allows eligible asset purchases under the threshold to be written off immediately rather than depreciated over time.

Businesses should still ensure that asset purchases are commercially justified. A tax deduction reduces taxable income, but it does not make an unnecessary purchase worthwhile.

Electric vehicle FBT changes

The budget also includes changes to the FBT treatment of electric cars.

Electric cars provided before 1 April 2029 costing $75,000 or less will remain exempt, provided the arrangement does not change.

Electric cars provided between 1 April 2027 and 1 April 2029 costing between $75,000 and the fuel-efficient luxury car tax threshold will receive a 25% FBT discount.

Electric cars provided from 1 April 2029 up to the fuel-efficient luxury car tax threshold will also receive a 25% discount.

Importantly, electric cars will maintain the rate in place when the arrangement was entered into. This makes timing and documentation important when setting up salary packaging or business vehicle arrangements.