Compliance
2-Year Loss Carry-Back & the Instant Asset Write-Off: What Small Businesses Need to Do Now
Big tax relief for small-med firms comes in 2026-27: permanent $20,000 asset write-offs and 2-year loss carry-backs are changing cash flow and investment dynamics significantly.
By NomadicTax Research Team • 5-8 min read • June 27, 2026
## 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](https://ministers.treasury.gov.au/ministers/jim-chalmers-2022/speeches/second-reading-speech-treasury-laws-amendment-tax-reform-no-2?utm_source=openai))
- **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](https://ministers.treasury.gov.au/ministers/jim-chalmers-2022/speeches/second-reading-speech-treasury-laws-amendment-tax-reform-no-2?utm_source=openai))
These reforms aim to improve **investment incentives**, **cash flow stability**, and reduce **compliance costs** for small and medium firms. ([ministers.treasury.gov.au](https://ministers.treasury.gov.au/ministers/jim-chalmers-2022/speeches/second-reading-speech-treasury-laws-amendment-tax-reform-no-2?utm_source=openai))
## 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](https://ministers.treasury.gov.au/ministers/jim-chalmers-2022/speeches/second-reading-speech-treasury-laws-amendment-tax-reform-no-2?utm_source=openai))
- 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
1. **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.
2. **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.
3. **Ensure proper record-keeping**
- Maintain clear documentation for your asset costs and turnover.
- For assets $20,000 and over, keep depreciation pool records.
4. **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](https://ministers.treasury.gov.au/ministers/jim-chalmers-2022/media-releases/tax-reform-implementation-small-business-and-startups?utm_source=openai))
## 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.