Entity Setup
Setting Up a Business Entity Post-Budget: Opportunities & Considerations
With reforms targeting businesses and small-business tax incentives, the Budget creates new windows for structuring your entity in a more efficient way.
By NomadicTax Research Team • 5-8 min read • May 20, 2026
## Key Budget-Driven Changes Hitting Businesses
Australia’s 2026-27 Budget introduced several changes that businesses—especially small and growing companies—should know in relation to structure, deductions, and cash-flow:
- **Instant Asset Write-off of $20,000** permanently extended from **1 July 2026** for eligible small businesses to boost investment and cash flow. ([budget.gov.au](https://budget.gov.au/content/factsheets/download/factsheet-backing-small-business.pdf?utm_source=openai))
- **Loss-refundability** expanded. Companies with turnover up to $1 billion will be able to use current year tax losses **to claim a refund for tax paid in the prior year**—helping to smooth cash flow, especially for growing concerns. ([budget.gov.au](https://budget.gov.au/content/factsheets/download/factsheet-backing-small-business.pdf?utm_source=openai))
- **Changes to R&D incentives** from **1 July 2028**: Increased refundable offsets for young firms, higher expenditure caps, stricter eligibility thresholds, and a focus on “core R&D”. ([budget.gov.au](https://budget.gov.au/content/04-tax-reform.htm?utm_source=openai))
## Choosing Your Entity Structure with New Incentives
- **Sole Trader vs Company**: If you’re under the $1 billion turnover threshold, structuring as a company offers advantage because business losses can generate refunds and the instant write-off applies. However, liability and compliance burdens still need assessment.
- **Trusts**: With the introduction of a minimum 30% tax on discretionary trusts (from 2028-29), trusts lose some flexibility in distributing income to low-rate beneficiaries. Be sure to evaluate distributions vs individual income structures now.
- **R&D Entities**: If you’re an early-stage or fast-growing firm, the R&D changes provide benefits especially if you invest heavily and plan to scale. But core R&D must meet stricter expenditure and intensity thresholds; plan projects accordingly.
## Practical Steps for New and Existing Businesses
- **Asset purchasing**: If you’re considering upgrades or equipment purchases, aim to stay under $20,000 to use write-off immediately. Bulk purchases may need splitting or reassessing component value.
- **Tax loss management**: Businesses with fluctuating profits should model loss refundability vs carry-forward losses. If eligible, a refund in the prior year could improve liquidity.
- **Entity review timeline**: With significant trust, CGT and negative gearing reforms coming, business owners should conduct entity structuring reviews before reforms take effect (from 1 July 2027 or 2028). Seek valuations where needed.
## Example Scenario
_Let’s say Alex runs a small tech firm with $20 million turnover and wants to buy new computers & machinery costing $50,000 in June 2026._
- He could pay $20,000 in that year under instant asset write-off and depreciate the rest under normal depreciation rules.
- If the business makes a loss in 2026-27 but had profits in 2025-26, it may be able to get a refund on taxes paid in 2025-26 (if eligible, under new loss-refundability rules). Planning is critical.
- If Alex uses a trust structure, the forthcoming minimum 30% tax should be considered, especially if income is distributed to family members at low rates.
## Final Thoughts
The Budget opens up new structuring possibilities with incentives but also carries substantial regulatory reform.
- Make entity decisions early—well before 1 July 2027 or 1 July 2028 depending on measure.
- Sketch out cash-flow models that incorporate loss refunds and write-offs.
- Monitor legislative drafts and ATO rulings to stay compliant with new R&D requirements and trust tax provisions.