Federal Budget 2026: The Key Tax and Business Changes Small Business Owners and Investors Should Be Watching
The 2026 Federal Budget delivered a mix of business support measures alongside some major proposed tax reforms that are likely to spark ongoing debate over the coming years.
For small business owners, there were some welcome announcements around investment incentives and cash flow support.
For investors and families using trust structures, there are also proposed changes that could significantly reshape future tax planning decisions if ultimately legislated.
Here’s a practical overview of the major announcements and what they could mean in real terms.
A Permanent $20,000 Instant Asset Write-Off
One of the most positive outcomes for small business was the proposal to permanently extend the $20,000 instant asset write-off from 1 July 2026.
For eligible businesses with turnover under $10 million, this would allow immediate deductions for eligible assets under $20,000 instead of depreciating them over several years.
For many businesses, this creates:
More certainty around equipment purchases
Simpler tax administration
Better cash flow management
Less reliance on yearly Budget announcements
While this is helpful, it’s still important to remember that a tax deduction does not mean the Government is paying for the full asset.
The real benefit comes when the purchase genuinely improves productivity, efficiency or supports business growth.
Company Tax Loss Refunds Expanded
The Government has also proposed changes allowing companies to carry back losses for up to two years to recover previously paid company tax.
This may assist businesses that:
Experience temporary downturns
Invest heavily into expansion
Upgrade equipment or systems
Face difficult economic conditions
For some businesses, this could improve cash flow during periods where profitability temporarily drops.
Proposed Trust Tax Changes
One of the most widely discussed announcements was the proposed 30% minimum tax on discretionary trusts from 1 July 2028.
Discretionary trusts are commonly used by:
Family businesses
Investors
Professional practices
Asset protection structures
The Government’s position is that the changes are designed to improve fairness in the tax system and reduce income splitting advantages.
However, many business owners will likely view these proposals as much broader than simply “tax minimisation”.
For many families, trusts have long been used for:
Protecting assets
Succession planning
Managing business risk
Passing wealth between generations
The Government has proposed rollover relief for those wanting to restructure into companies or fixed trusts, although many business owners may still choose to wait before making major structural decisions.
The following income categories and trust types are proposed to remain excluded:
Primary production income
Fixed trusts
Testamentary trusts
Charitable trusts
What this means practically
At this stage, there is no immediate need for panic or rushed restructuring. However, many business owners and investors may benefit from reviewing whether their current structures still suit their long-term plans.
Negative Gearing Changes
The Budget also announced proposed changes to negative gearing for residential investment properties.
Under the proposal:
Negative gearing would generally only remain available for new residential builds from 1 July 2027
Existing investment properties owned before the announcement date are proposed to be protected under grandfathering provisions
The Government’s goal appears to be shifting investment toward increasing housing supply rather than established homes.
Commercial properties are proposed to remain unaffected.
What this means practically
For existing investors, the proposed grandfathering rules may provide reassurance. However, future investment decisions may increasingly focus on newer developments rather than established residential properties.
Capital Gains Tax (CGT) Changes
The Budget also proposes major changes to capital gains tax from 1 July 2027.
Currently, many investors rely on the 50% CGT discount available for assets held longer than 12 months.
Under the proposed changes, the Government wants to move away from the current blanket discount system and instead use a CPI indexation method, meaning only gains above inflation would be taxed.
While this may sound relatively simple in theory, the practical application is likely to become far more complex.
For investors with strongly performing assets, taxable gains could potentially be higher than under the current rules.
The proposals may also increase future compliance requirements, particularly around:
Asset valuations
Record keeping
Apportioning gains across different periods
Future CGT calculations
For example, if an investment property was already owned prior to the Budget announcement on 12 May 2026 and then sold after the new rules commence, the capital gain may effectively need to be split into two separate periods.
Under the proposal:
The current 50% CGT discount would continue to apply to the increase in value up to 30 June 2027
The increase in value from 1 July 2027 until the eventual sale date would instead be calculated under the new CPI indexation method
This means property owners may need to obtain valuations around the transition date or rely on future ATO-approved valuation methods and apportionment calculations.
Interestingly, the proposed transitional rules would also apply to pre-CGT assets acquired before 20 September 1985.
Under the proposal:
Any gains accrued on pre-CGT assets before 1 July 2027 would continue to remain exempt from CGT
However, any increase in value from 1 July 2027 onward may become subject to the new CGT rules when the asset is eventually sold
For many long-term investors and families holding older assets, this may come as a surprise, particularly where assets have historically remained completely outside the CGT system.
For some investors, particularly those with multiple properties, shares or long-held family assets, these proposed rules could create significantly more administration and complexity in future years.
Points to note:
The family home exemption is proposed to remain unchanged
Existing small business CGT concessions are also proposed to remain available
What this means practically
Investors and business owners should keep good records, stay informed as the legislation develops, and avoid making rushed decisions based purely on headlines. The final legislation, if passed, may still change considerably from the initial Budget announcement.
Other Measures Included in the Budget
Other announcements included:
Support for AI and digital adoption
Additional innovation and start-up incentives
Small business mental health funding
Fuel relief measures for transport businesses
Reduced compliance and red tape initiatives
Final Thoughts
At this stage, these are still proposed measures only and many will require legislation to pass Parliament before becoming law.
Some proposals may change significantly during consultation and negotiation.
For now, the most important thing for business owners and investors is not to react emotionally to headlines, but instead focus on:
Staying informed
Understanding how the proposals may affect their own situation
Making long-term decisions based on commercial goals, not short-term fear
This Budget has clearly started a broader conversation around the future direction of Australia’s tax system, and it will likely remain a major topic for businesses and investors over the next few years.