In brief
This year’s budget contained a number of measures presented as simplifying the tax system, particularly for small businesses, with a focus on reducing compliance costs and improving business cash flow.
Key takeaways
The Federal budget contains a number of tax measures which will be relevant to small businesses, including the permanent extension of the AUD 20,000 instant asset write-off. The Government will also introduce loss refundability for start-ups and give small businesses the ability to vary their Pay As You Go (PAYG) instalments, providing them with greater cash flow flexibility.
In more detail
Permanent AUD 20,000 instant asset write-off
As announced by the Minister last week, an instant asset write-off of AUD 20,000 will be made permanent for small businesses with turnover of up to AUD 10 million. The initiative provides the incentive of an immediate tax deduction during the year in which an asset is purchased, rather than needing to depreciate the asset over several years. The threshold for the instant asset write-off was originally set to drop to AUD 1,000 on 1 July 2026.
Loss refundability for small start-ups
Small start-up companies with aggregated annual turnover of less than AUD 10 million will become eligible for loss refundability for tax years commencing on or after 1 July 2028. Under the reforms, eligible start-ups will be able to access a refundable tax offset using losses incurred during the first two years of their operation.
PAYG reforms
The Government is set to expand access to dynamic PAYG instalments, which will give small and medium businesses the option to vary their instalments to fluctuate more closely with actual business activity. Businesses can elect to make monthly PAYG instalments and use an Australian Taxation Office (ATO)-approved calculation to vary those instalments from 1 July 2027.
A copy of the Federal Budget papers can be found here.
Michael Zhang, Associate, has contributed to this legal update.