With a Budget full of major tax announcements, this article outlines the other announcements that affect businesses that were contained in the Budget which did not make the headlines.

Instant asset write-off made permanent

Since 2015, the instant asset write-off has been extended and the threshold changed almost every year. After a decade of constant extensions and revisions, the government announced in the Budget that it will make the instant asset write-off permanent.

Companies with an aggregated turnover of less than $10 million that purchase a depreciating asset with a value of less than $20,000 will now have a stable long-term investment setting in which to make business decisions.

Dynamic, monthly pay-as-you-go-instalments (PAYGI)

From 1 July 2027, small and medium businesses will be able to opt into using accounting software with embedded ATO-approved calculations to work out and vary their instalments and to report and pay PAYGI monthly. This is intended to support businesses by reflecting real time business activity. Taxpayers with a demonstrated history of non-compliance will be required to report and pay PAYGI monthly.

Loss carry back rules reintroduced

Loss carry back rules were first introduced along with the mineral resources rent tax (MRRT), then withdrawn when the MRRT was abandoned. They were once again introduced to assist businesses to recover from COVID. In this Budget, the government has permanently reintroduced the loss carry back provisions.

Broadly, the loss carry back provisions support businesses that have previously been successful get through a difficult period, by giving cash back to them that they have paid as taxes in prior years, in the form of a refundable tax offset. The difficult period could arise due to economic conditions or because the business is investing in the growth of its business. It is expected that the government will be able to reinvigorate the prior legislative provisions and ATO administrative systems relatively quickly and easily, hence a 1 July 2026 start date.

So how does it operate? Basically, companies with an aggregated global turnover of less than $1B can choose to carry back a revenue loss to a prior income year. The loss reduces the taxable income of the prior year, effectively offsetting tax paid up to two years ago. The amount of the tax offset is limited by the amount of the franking credits in the company’s franking account balance – that is, a company cannot claim a tax offset for tax it has paid but distributed in the form of franking credits attached to a dividend. The rules are complicated and the ATO makes the calculations.

Further information can be found here on the ATO’s website.

Loss refundability for startups

From 1 July 2028, startup companies with an aggregated turnover of less than $10M that generate a loss in their first two years of operation will be able to utilise the loss to generate a refundable tax offset. The refundable tax offset will be limited to the value of fringe benefits tax (FBT) and pay-as-you-go withholding (PAYGW) made in relation to Australian employees. From discussions with Treasury, it is understood that the loss will be applied against FBT and PAYGW paid in the same year.

Tariffs

A further 497 tariffs will be abolished.

Research and development (R&D)

The Government has changed R&D settings to simplify and better target support. Key initiatives that apply from 1 July 2028 include:

• A 4.5% increase in core R&D offset rates
• Reduce the intensity threshold to 1.5%
• Removing eligibility of supporting R&D expenditure
• Increasing the turnover threshold for the refundable tax offset to $50M (up from $20M) 
• Only eligible firms less than 10 years old are entitled to a refundable offset. Existing eligible firms remain eligible for the highest tax offset rate, but the offset is not refundable
• Maximum R&D expenditure increased to $200M
• Increasing the minimum R&D threshold to $50K

Venture capital and start ups

Tax incentives for venture capital will be expanded from 1 July 2027. Key changes include:

• Venture capital limited partnership cap on asset size of investee business increased to $480M
• Early stage venture capital limited partnership (ESVCLP) cap on asset size of investee business increased to $80M
• ESVCLP cap on investee business at which investment returns are fully tax exempt increased to $420M
• ESVCLP maximum fund size increased to $270M

International measures

Government will amend the global and domestic minimum tax legislation to implement the side-by-side package agreed by the OECD to ensure consistency internationally, effective from 1 January 2026.

A time limited targeted capital gains tax (CGT) concession for foreign investors in renewable energy infrastructure will be provided. Whilst the Budget papers do not provide further details, draft legislation has been released for consultation, proposing a 4-year 50% discount on capital gains from such projects. CA ANZ has made a submission that the 4 year period may not align with the long project development cycles typical in the sector.