What’s Changing and Why It Matters
The Treasury Laws Amendment (Tax Reform No. 2) Bill 2026 includes two major reforms for businesses starting 1 July 2026:
- 2-year loss carry-back: Companies with annual global income under A$1 billion can carry trading losses back up to two income years, matching against previous profits to generate a refundable tax offset. (ministers.treasury.gov.au)
- Permanent $20,000 instant asset write-off: Businesses with turnover under A$10 million can instantly deduct assets costing less than A$20,000. Assets costing more go into a simplified depreciation pool with 15% in first year, then 30% thereafter. Lock-out rules suspended until 30 June 2027. (ministers.treasury.gov.au)
These reforms aim to improve investment incentives, cash flow stability, and reduce compliance costs for small and medium firms. (ministers.treasury.gov.au)
Where and How These Help the Most
- For SMEs (especially in construction, manufacturing, professional, scientific services and wholesale trade), wave of high upfront investment or volatile earnings can now get more tax benefit sooner. (ministers.treasury.gov.au)
- Loss carry-back allows smoothing of profits: if a company was profitable two years ago but is now loss-making, it can claim refund to reinvest immediately.
- Instant write-off cuts red tape: multiple smaller assets can be expensed individually rather than going through depreciation schedules. Saves time and simplification.
Steps to Take Now
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Audit your balance-sheet and assets
- Identify assets you might buy or install after 1 July 2026 that cost under $20,000. If possible, delay purchases until in the new year to benefit from write-off if you expect profit but high expenses.
- Conversely, if you’ve already purchased recently, see whether they qualify under current rules.
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Project your profit/loss trends
- Estimate earnings for previous two years; assess whether you’ll benefit from loss carry-back.
- Work with your accountant to cash-flow tax refunds from losses vs timing of asset write-offs.
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Ensure proper record-keeping
- Maintain clear documentation for your asset costs and turnover.
- For assets $20,000 and over, keep depreciation pool records.
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Monitor the legislative process—this bill is before Parliament, and while many core measures seem solid, some definitions and exemptions (especially around loss carry-back eligibility) may be refined. (ministers.treasury.gov.au)
Example Scenario
ABC Engineering Pty Ltd has A$8 million turnover. In FY 2024-25, they made A$1 million profit. In FY 2025-26 they expect a loss of A$500,000. Under new rules, ABC can carry back this loss to offset tax paid in 2024-25, receiving a refund in 2026-27. Simultaneously, if they purchase A$15,000 in equipment in FY 2026-27, that asset can be written off instantly, improving cash reserves.
Pitfalls and Watch-Outs
- Ensure your business will meet the turnover threshold (< A$1 billion). Exceeding that disqualifies loss carry-back.
- Understand franking credits and limitations—they limit how much refund you can get.
- Asset write-off cap is per asset, not total spend. Multiple small assets help; big ones go into depreciation pool.
- Stay up to date: government consultations may tweak eligibility (e.g. what qualifies as ‘active business asset’, affects access to CGT concessions).
Bottom Line
For Australian small and medium businesses, these reforms offer real opportunities: better cash flow, lower tax burdens, and greater certainty when investing. With a bit of planning before 1 July 2026, businesses can position themselves to get the maximum benefit.