As the end of the financial year approaches, it's the ideal time for business owners to review their tax position and plan ahead. Taking proactive steps now can help minimise your tax liability, strengthen cash flow, and keep your business compliant. With the right planning, you can also identify opportunities to reinvest in your business and position yourself for the year ahead.
Whether 2026 has delivered steady growth or presented its fair share of challenges, now is not the time to leave your tax planning to the final weeks. Taking action early and engaging with your adviser can help you stay in control, manage outcomes, and avoid any tax surprises at end-of-year.
WHAT'S NEW FOR BUSINESSES?
Instant asset write-off for small businesses – Ends on 30 June 2026, to be made permanent in 2027 The Federal Government has announced it will enact legislation to make the small business instant asset write-off permanent at $20,000 in the most recent 2026 Federal Budget. Currently, the existing measure will end on 30 June 2026 and revert to the default $1,000 until new legislation is enacted. Reminder that to make use of the tax incentive, you must ensure your business is under $10 million annual turnover, and the asset is purchased, delivered and ready for use by 30 June 2026 to benefit from the immediate deduction.
Payday Super – From 1 July 2026 The Payday Super regime commences from 1 July 2026, which will require all employers to pay super within one week of the payment date of salaries and wages. This will have significant administrative and cashflow impact, particularly for businesses that pay employees weekly and especially those that are not prepared for the change.
Despite the increased compliance, the good news is that late-paid super will become deductible, and shortfall interest charges will be calculated from the payment date rather than from the first day of the quarter of the late-paid super.
If you have not yet made plans for this change, we recommend plans be put into place as soon as possible so you are not caught out unprepared.
Loss Carry-Back Reintroduced – The Government announced in the 2026 Federal Budget that it will re-introduce the loss carry-back rule, last available in the 2023 financial year, for a period of two years.
From 1 July 2026, eligible companies that make a loss in the current income year will be able to use that loss to get a refund against tax paid in the prior two income years. This will be introduced as a permanent measure and will apply to all companies with up to $1 billion in turnover.
This proposal has not been enacted at the date of publication.
Loss Refundability for new start-up businesses – The Government is introducing loss refundability to support new startup businesses with an aggregated turnover of under $10 million. From 1 July 2028, small startups in their first two years of operation will be able to get a refund for tax losses, up to the value of fringe benefits tax and withholding tax paid on Australian employee wages in the loss year.
This proposal has not been enacted at the date of publication.
POST FEDERAL BUDGET OUTLOOK
The 2026 Federal Budget proposed a number of significant tax reforms that, if legislated, will materially affect business owners, particularly those using trust structures, holding investment property, or planning a future sale of their business. These are proposals only; none have passed parliament yet, and we expect the detail to evolve through consultation. We're watching closely and will keep you informed as legislation progresses. Below is a summary of what's been announced and the areas we recommend you start thinking about now.
Changes to: Capital Gains Tax – The Government has announced in the 2026 Federal Budget that it will scrap the long-standing 50% CGT discount for individuals, trusts, and partnerships and replace it with an inflation-indexation model from 1 July 2027, as well as a 30% minimum tax on net capital gains, which will apply to all CGT assets, including pre-1985 assets.
While there will be grandfathering provisions to keep all gains made up to 30 June 2027 under the 50% discount model, this will have significant impact for existing business owners, as you will require a formal business valuation at 30 June 2027 to "lock in" your discountable capital gain up to that point. It will also significantly impact taxpayers who start a business on or after 1 July 2027 without a cost base.
This proposal is currently under consultation and has not been enacted at the date of publication.
Changes to: Negative Gearing Deduction – As part of the 2026 Federal Budget, the Government also announced that it will move to limit negative gearing from 1 July 2027 for existing residential investment properties, while retaining it for new builds. Losses from established residential properties will only be deductible against rental income or the capital gains from residential properties. Normal loss carry-forward rules apply to offset future residential property income.
These changes will apply to established residential properties acquired from 7:30PM on 12 May 2026. Properties acquired prior to this time will be exempt from the changes until disposed of.
There will be exclusions for properties in widely held trusts and superannuation funds, alongside targeted exemptions for build-to-rent developments and private investors supporting government housing programs.
It is expected that this proposal will not have any direct impact for most property developers; however, it may have significant impact on the housing market as it may push more individual property investors to purchase new builds. Under the proposed rules, a new build is classified as one where the construction creates more dwellings than the number it replaced, for example, the knock-down of a single dwelling and building a duplex, or the knock-down of a row of 3 houses to build a 20-unit apartment block.
This proposal is currently under consultation and has not been enacted at the date of publication.
Changes to: Family Trusts – The 2026 Federal Budget also includes an announcement to introduce a minimum tax rate of 30% on discretionary trust distributions from 1 July 2028, potentially affecting hundreds of thousands of family and business trusts. However, there will also be exclusions, including other types of trusts such as fixed trusts, widely held trusts, complying superannuation funds, special disability trusts, deceased estates and charitable trusts. Farmers are expected to be exempt, as some types of income such as primary production income will be excluded from the minimum trust tax.
If you operate your family business, other than a primary production business, through a discretionary family trust, you will face significantly higher income tax from 1 July 2028 under the existing business structure.
Rollover relief will be offered for three years from 1 July 2027 to support affected small businesses that wish to restructure out of a discretionary trust into another entity type, such as a company or a fixed trust. However, no details have been made public as of the date of this publication. There are also concerns expressed by business owners in Queensland and Western Australia because those two states still charge stamp duty on the transfer of business assets should they choose to restructure ahead of the changes.
All taxpayers that operate a trust structure should review their business arrangements well before any commencement date and speak with our tax experts to understand your restructure options should this change come into law.
This proposal is currently under consultation and has not been enacted at the date of publication.
WHAT IS STAYING THE SAME?
Company Tax Rate – The company tax rate remains at 25% for companies with aggregated turnover below $50 million and less than 80% of their income in the form of "base rate entity passive income".
ATO interest charges no longer deductible – Since 1 July 2025 ATO interest charges are no longer tax deductible since 1 July 2025, and there are no plans to revise this legislation. Together with a significantly tougher stance on the imposition of interest and penalties by the ATO, staying on top of your tax compliance obligations is now more important than ever. The General Interest Charge (GIC) rate is currently 10.96% at the time of publication.
We recommend all taxpayers review their financing arrangements if there is ATO debt owed, and consider their options. It is much easier to proactively manage a debt before it causes a problem for your business.
OTHER KEY TAX PLANNING CONSIDERATIONS
Here are a few classic tax planning strategies that are just as relevant for 2026 as they have been in years gone by:
- Prepaying expenses - If your business has an aggregated turnover under $10 million, you can claim a tax deduction this year for eligible expenses paid up to 12 months in advance, such as rent, interest, insurance and subscriptions. This is an easy way to bring forward deductions and reduce taxable income this year.
- Valuing trading stock - How you value your trading stock at year-end can significantly affect your taxable income. The ATO allows you to choose between cost, market value or replacement value. The right choice can reduce your profit, and therefore your tax, especially if you're holding slow-moving or obsolete stock.
- Asset write-offs - Review your asset register before 30 June. Writing off damaged or obsolete assets that no longer have any resale value, and have come to the end of their effective life, can deliver an immediate deduction and clean up your balance sheet.
- Staff bonuses - Bonuses are only deductible when they are both committed to and documented before 30 June. If your business intends to reward staff this year, make sure the decision is formally recorded in time, or the deduction may be pushed into next year.
- Income deferral - If you haven't completed a job or aren't yet required to issue an invoice, consider deferring that income until after 30 June. This is a legitimate way to manage your business's taxable income across years.
- Work-related purchases - If you need new tech, tools or subscriptions, purchasing these before 30 June means you can deduct the expense in this financial year. Even minor outlays can add up.
For more information about our personalised Tax Planning Service, please consult with your Prosperity Adviser, who can provide guidance tailored to your specific circumstances and objectives.
Every business is different — speak with your Prosperity adviser now to ensure your planning is tailored, timely and tax-effective. Contact us today on 1300 795 515 or email mail@prosperity.com.