Most of the budget coverage this month has focused on negative gearing, CGT, and discretionary trusts. Those changes are consequential, and we have written about them separately. But sitting alongside that tax reform package is a quieter set of measures that has received a fraction of the commentary. The Backing Small Business package is worth understanding on its own terms, particularly if you are buying a business, running one, or thinking about whether an acquisition makes sense right now.
The headline figure is over $3.5 billion in business tax relief, with a wider package of competition reforms, regulatory burden reduction, and a temporary fuel excise response sitting alongside it. Some measures are permanent. Some are one-off or fuel-crisis-specific. This piece covers the ones that will actually affect deal economics and day-to-day operations.
What is in the Backing Small Business package
The package covers four broad areas: tax relief, competition and market fairness, regulatory burden reduction, and digital adoption. The tax measures carry the most direct financial impact for business owners and acquirers.
On the tax side, two previously temporary measures become permanent from 1 July 2026:
- $20,000 instant asset write-off
- Two-year loss carry-back for companies
Three further measures sit alongside:
- Loss refundability for start-ups (from 1 July 2028)
- Expanded venture capital incentives (from 1 July 2027)
- R&D Tax Incentive reform (from 1 July 2028)
On the non-tax side:
- Payment times reforms via an overhauled Payment Times Reporting Scheme
- Stronger ACCC enforcement powers (maximum penalties doubled to $100 million)
- Regulatory burden reduction targeting $10.2 billion per year in compliance savings
- Ten-year extension of the Small Business Responsible Lending Obligation exemption
Fuel excise relief ($2.9 billion) is framed as a temporary crisis response to Middle East-related supply disruptions rather than a structural SME measure.
The permanent $20,000 instant asset write-off
The instant asset write-off has been extended, reset, repriced, and debated at every budget cycle for over a decade. Practitioners have been telling clients to plan around it as if permanent while quietly noting it could disappear. That uncertainty is now resolved.
From 1 July 2026, businesses with annual turnover under $10 million can immediately deduct eligible assets costing less than $20,000, per asset. Treasury quantifies the compliance saving at around $32 million per year across the sector. The cash flow benefit is the bigger story: instead of a deduction spread over three to five years, you get the full deduction in year one.
For a business acquisition, this changes the investment calculus around asset refresh. When you buy a business you are often inheriting ageing equipment, vehicles, or technology. A buyer who spends $170,000 refreshing nine eligible assets, each under the $20,000 threshold, gets the full $170,000 deduction in year one. That is meaningful at the $500,000 to $3 million deal sizes we work with regularly, and it makes the lender serviceability conversation cleaner: year-one deductions from a capex plan become a permanent feature, not a conditional one.
One eligibility note: the $10 million turnover threshold applies to the entity claiming the deduction. If you are consolidating an acquired business into a larger entity that exceeds the threshold, confirm the combined entity’s eligibility with your accountant.
Loss carry-back made permanent
Loss carry-back has a similar history to the IAWO: introduced, lapsed, reintroduced during COVID, extended. From 1 July 2026 it is permanent for companies with annual turnover up to $1 billion. Around 85,000 companies are expected to benefit.
The mechanics:
- If your company incurs a revenue loss in the current income year, you can apply that loss against tax paid in the prior two years and receive a refund
- The refund is capped at the tax previously paid and limited by the company’s franking account balance
- Capital losses don’t qualify
- Companies only. Sole traders, partnerships, and trusts can’t access it, even where the underlying business is small
The two measures interact directly. Treasury’s worked example in the factsheet: a cafe running through a company pays $10,000 in tax in 2025-26 on $40,000 of profit. In 2026-27 it invests $55,000 in three asset purchases under the $20,000 threshold. The IAWO deductions create a $15,000 net loss. The company pays no tax that year and carries the loss back against prior-year tax, generating a $3,750 refund.
For a business acquisition, the first post-acquisition year often looks soft. You are absorbing transaction costs, integrating systems, and running below-normalised revenue during stabilisation. Under the old regime, a year-one loss was a deferred benefit. Under the permanent carry-back, it can be a cash refund if the entity has prior-year tax paid and the franking credits to support the refund. Acquiring a company with an existing payment record (and the franking balance that comes with it) is an underappreciated advantage here.
For buyers using a purpose-built acquisition vehicle with no prior tax history, the direct benefit is more limited. The start-up refundability measure (from 2028-29) addresses part of that gap: companies with turnover under $10 million, in their first two years of operation, can receive a refund capped to FBT and PAYG withholding remitted on wages paid to Australian employees.
R&D and venture capital incentives
Both measures are targeted at a specific subset of the small business universe, so I will cover them briefly.
The R&D Tax Incentive reform (effective 1 July 2028):
- Raises the turnover threshold for the higher, refundable R&D offset to $50 million
- Increases the core experimental R&D offset by around 25 to 50 per cent
- Refundability applies to businesses operating for less than 10 years
- Treasury estimates around $400 million per year in additional R&D unlocked by young businesses
If you are acquiring a business with active R&D programs, these changes affect post-acquisition entity structuring and forward cash flow modelling. For most trade, retail, and services acquisitions, they are background.
The venture capital incentive expansion (from 1 July 2027):
- VCLP investee asset cap raised from $250 million to $480 million
- ESVCLP fund size cap raised from $200 million to $270 million
The lift is intended to reflect modern company valuations and support larger VC rounds. For ETA buyers acquiring established, cash-flowing businesses, VC mechanisms are not the financing path. They are relevant for founders and growth-stage companies on a different trajectory.
Payment times reforms
The Payment Times Reporting Scheme is being overhauled: increased transparency, new reputational incentives, and enhanced regulatory powers to push large businesses to pay small suppliers faster.
Anyone running a B2B business understands the working capital problem here. A 60-day invoice from a large customer is effectively a short-term loan you are providing at zero interest. The reforms do not mandate payment terms, but they increase public reporting obligations and give regulators more tools to create consequences for slow payment. A $62 million Consumer Data Right extension runs alongside this, aimed at giving small businesses better real-time visibility of their financial position.
For a buyer evaluating a target, the debtor book’s payment cycle profile remains a due diligence item regardless of policy. What these reforms signal is a direction of travel: tighter regulatory accountability for large buyers, which reduces the systemic risk of concentrated large-customer exposure in an acquired business.
What this means for business buyers and existing operators
The permanent IAWO and loss carry-back together improve year-one economics for buyers of established small businesses in two concrete ways.
First, year-one capex becomes a year-one deduction. Post-acquisition capex planning shifts from a multi-year depreciation exercise to a year-one decision. If you are planning to spend $100,000 to $150,000 refreshing the asset base of a newly acquired business, and the spend is broken across items that each fall under the $20,000 threshold, that full deduction now falls in the acquisition year. Single items above the threshold (a vehicle, a major fit-out, an enterprise IT system) still depreciate over time. It changes what normalised earnings look like in year one and makes the serviceability case to a lender cleaner.
Second, year-one losses become recoverable rather than deferred, provided the acquisition entity has a prior tax history. Integration costs, asset write-offs, and revenue softness during stabilisation can generate a loss that flows back against the entity’s tax paid in the prior two years, producing a cash refund rather than a future offset. For an existing operator acquiring a competitor or adjacent business through a trading entity with established tax history, both benefits are calculable before signing heads of agreement.
Other directional positives sit in the background:
- Extended Responsible Lending Obligation exemption (ten years) keeps credit access smooth for small businesses
- Tariff reductions lower input costs
- Regulatory Reform Agenda reduces administrative burden
None of these are deal-defining, but they compound.
What is not in this package is also worth noting:
- No relief on commercial rent
- No change to the serviceability buffer on acquisition finance
- No rate relief inside the four-year window. Treasury’s own forecast assumes one further RBA cash rate hike in the September 2026 quarter, with no cuts in the forecast period
The Backing Small Business package improves the operating environment at the margin. The rate environment remains the central constraint.
If you are evaluating an acquisition or planning a business purchase, the right conversation is still about cash flow coverage, lender appetite for the sector, and deal structure. The budget changes are useful inputs to that analysis. We work through this with clients regularly.