Treasurer Jim Chalmers handed down the 2026–27 Federal Budget on 12 May 2026. This budget offers several meaningful measures for founders, small business owners, and investors, including the return of loss carry-backs, a permanent instant asset write-off, and expanded venture capital incentives. However, it also introduces significant changes affecting early-stage R&D claimants, investors planning exits, and business owners using discretionary trusts.
For Startups
Loss Carry-Back Returns
- From 1 July 2026, companies with aggregated annual turnover under $1 billion can carry back tax losses to offset tax paid up to two years earlier.
- Applies only to revenue losses and capped by the company’s franking account balance.
- Provides potential cash flow relief for early-stage companies that have previously paid tax.
Loss Refundability for New Startups
- Applies to companies incorporated from 1 July 2028 onward.
- Startups with turnover under $10 million generating tax losses in their first two years can receive a refundable tax offset.
- Offset capped at the FBT and wage withholding tax paid in the loss year.
- Not relevant for existing businesses but important for future startups.
R&D Tax Incentive — Mixed Impacts
- Effective from 1 July 2028.
- Refundable offset turnover threshold increases from $20M to $50M, benefiting growing companies.
- Offset rates for core R&D activities increase by approximately 25–50%.
- Minimum expenditure threshold rises from $20,000 to $50,000, potentially excluding companies with R&D spend between $20k–$49k.
- Early-stage founders with R&D spend in the $20k–$49k range should review and document activities carefully before FY29.
CGT Reform and Startup Investment Consultation
- Government acknowledges concerns about CGT changes affecting startup equity incentives (ESS and VC-backed exits).
- Formal consultation announced to address these issues.
For SMEs
$20,000 Instant Asset Write-Off — Now Permanent
- The instant asset write-off for small businesses is permanently set at $20,000.
- Encourages investment in equipment, fit-outs, and technology without delay.
Loss Carry-Back
- Same as for startups: businesses with turnover under $1 billion can carry back losses from 1 July 2026.
- Provides cash flow relief for SMEs experiencing a down year.
$1,000 Instant Work-Related Deduction
- From the 2026–27 income year, individuals can claim up to $1,000 in work-related deductions without receipts.
- Reduces administrative burden for employees and founders.
For Investors
CGT Reform — Key Details
- Inflation-indexed model may yield comparable outcomes for long-held assets depending on growth vs inflation.
- High-growth and startup equity investments likely to face higher tax under the new model.
CGT on Business Sales
- Four small business CGT concessions remain intact: 15-year exemption, 50% active asset reduction, retirement exemption, and rollover provisions.
- The general 50% CGT discount will no longer apply as a first layer of relief from 1 July 2027.
- Important to model exit scenarios with advisors if planning sales within 2–3 years.
Discretionary Trust Minimum Tax
- A 30% minimum tax on discretionary trust income starts 1 July 2028.
- A three-year rollover relief window opens 1 July 2027 for restructuring.
- Affects business owners and investors holding assets through family trusts.
Negative Gearing — New Builds Only
- From 1 July 2027, negative gearing on residential property limited to new builds.
- Existing property holdings as of 12 May 2026 are grandfathered.
VC Tax Incentives Expanded
From 1 July 2027:
- VCLP asset value cap on investee companies increases from $250M to $480M.
- ESVCLP investee asset cap rises from $50M to $80M.
Superannuation funds are targeted beneficiaries, encouraging super capital flow into innovation.
Eligible Venture Capital Investor (EVCI) program closed to new applications from 12 May 2026.
Key Dates to Remember
Conclusion
The 2026–27 Budget has some useful measures like loss carry-backs, permanent instant asset write-off, and expanded VC caps. However, changes to the R&D Tax Incentive threshold, CGT reforms, and discretionary trust tax rules represent drastic shifts that require careful planning.
These changes are not yet fully legislated; details will evolve. If these measures impact your business structure, exit plans, or R&D strategy, consult your Fullstack advisor promptly.
Need Help?
Our team partners with startups, SMEs, and investors across Australia. Contact your Fullstack advisor to understand how these budget changes affect your specific situation.
This article is general in nature and does not constitute tax or financial advice. Please consult your Fullstack advisor before making decisions based on these budget measures.
