This article is designed to be a brief update for business owners, accountants, finance and tax managers, as well as property owners who are seeking clarity on the major tax reform measures passed following the 2026-27 Federal Budget.

Parliament has passed the following Budget 2026-27 measures on 18 August 2026, which are now awaiting Royal Assent:

• Loss carry back.
  
• Instant asset write-off (IAWO).

As part of the package, the already announced amendments to the recently changed negative gearing rules have also been made.

Budget 2026-27 Key Reforms Passed

Loss Carry Back

• Reintroduced for those corporate tax entities with aggregated annual global turnover  below AUD$1 billion.
  
• Eligible companies can carry back revenue losses and offset them against tax paid in either or both of the two previous income tax years. This creates a refundable tax offset.
  
• The offset is limited by the tax amount paid by the entity in the earlier income years and its franking account balance.
  
• The carry back provisions apply to income years starting on or after 1 July 2026; first claims in 2026–27 tax returns.
  
• The provisions include integrity rules similar to those that applied under the previous loss carry back regimes in 2013 and the temporary loss carry back measures that applied in the 2020-21, 2021-22 and 2022-23 income years.
  
• The measure is designed to support businesses facing cyclical downturns, and the currently challenging business environment, by improving cash flow and resilience.

Instant Asset Write-Off (IAWO)

• Permanent $20,000 threshold for small businesses with turnover under $10 million.
  
• Applies for eligible depreciating assets that are first used or installed ready for use for a taxable purpose on or after 1 July 2026.
  
• Enables immediate deduction for eligible asset purchases, supporting investment and growth.
  
• The measure will become a permanent feature, simplifying planning for small business owners.
  
• The $20,000 threshold will continue to apply on a per asset basis, so businesses can instantly write‑off multiple assets.
  
• The low-pool value threshold is also increased to $20,000, and the five-year lock-out rule is suspended until 30 June 2027.

Amendments: Negative Gearing

• Negative gearing restricted to new builds from 1 July 2027.
  
• However, important amendments have been made following issues being raised in the broader electorate regarding unintended tax outcomes in certain circumstances, for example marital breakdown.  Following these amendments, individuals who acquire an ownership interest in a residential property from a spouse, former spouse, or co-owner would generally inherit the same tax treatment that applied to that interest before the transfer. This includes maintaining eligibility for negative gearing concessions where available and preserving access to relevant capital gains tax (CGT) treatment.
  
• In addition, the amendments ensure that where a person acquires an ownership interest in a new residential dwelling due to inheritance from a spouse (or former spouse) or co-owner or relationship breakdown, the person can choose between applying the CGT discount or cost base indexation and the minimum tax on capital gains.

• Furthermore, the amendments include maintaining exceptions from the general loss quarantining rule for main residences that were acquired before 2026-27 Budget Night or that are new residential dwellings where the main residence is later used to produce assessable income.

What This Means for You

The Governments recent tax reforms signal a shift toward broadening the tax base and reducing certain long-standing concessions. Early review and planning are essential to optimise tax outcomes and avoid potential pitfalls. These specific measures outlined above are welcome tax relief for many smaller businesses.

Business owners and finance managers: Improved cash flow and investment certainty through loss carry back and permanent IAWO. Planning for asset purchases may be more attractive.

Property owners: The transitional and grandfathering rules require careful consideration of property portfolios and acquisition timing. The new negative gearing and CGT rules may affect investment strategies and tax planning. These recent changes should also give some comfort that unintended tax consequences should no longer arise in certain circumstances, for example marital breakdown.

Next Steps

The 2027 Budget reforms are significant and may have far-reaching implications for businesses and investors alike. For tailored advice on how these changes affect your business or investment strategy, consult Andersen Australia’s tax specialists. We can help you navigate transitional rules, optimise upcoming asset purchases, consider the application of carry backs for your business, and plan for the new negative gearing and CGT landscape.

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