Reforming the treatment of tax losses for businesses and start-ups
The Government proposes to reintroduce the loss carry back offset and introduce a refundable tax offset for certain small business start-ups.
Currently, if a company incurs losses in an income year, it must wait until it returns to profitability before using the tax losses to reduce taxable income.
For tax years commencing on or after 1 July 2026, companies with an aggregated annual global turnover of less than $1 billion will be able to carry back revenue tax losses and offset them against tax paid up to two years earlier.
Expansion of dynamic PAYG instalment calculations and monthly payments
The Government has announced three measures to ‘simplify’ the tax system, helping businesses focus more on running their operations and less on tax compliance.
This includes the expansion of dynamic PAYG instalment calculations, monhtly payments as an option for SMEs and mandatory monthly reporting for non-compliant taxpayers.
R&D Tax Incentive reform
The Government has announced major reforms to the R&D Tax Incentive (RDTI), purportedly seeking to simplify the scheme and better target support for business research and development activities.
These changes will take effect from 1 July 2028 and will adjust offset rates as well as program delivery and eligibility criteria.
Expansion of venture capital tax incentives
The Government will expand venture capital tax incentives to better support early-stage and growth businesses.
From 1 July 2027, the asset size caps for investee businesses under the venture capital limited partnership (VCLP) and early-stage venture capital limited partnership (ESVCLP) programs will be increased.
Expanded ATO powers to address tax fraud
The Government will commit $86.3 million over four years from 1 July 2026, with ongoing funding of $9.7 million per annum from 2030–31, to implement Phase 2 of the Counter Fraud Strategy.
This will modernise fraud prevention and detection in the tax and superannuation systems, including strengthened real‑time ATO detection capabilities, enhanced individual protections, and expanded live monitoring of fraudulent account access involving tax agents, businesses, and high‑risk superannuation activities.
Federal Budget 2026
Read our expert commentary on this year’s Federal Budget, including sector‑specific perspectives and analysis of the business decisions it informs.
