The Government announced in the 2026–27 Federal Budget that the $20,000 instant asset write-off will be made a permanent feature of the tax system for eligible small businesses from 1 July 2026. At the time of writing, legislation implementing this measure is before Parliament.
For the year ending 30 June 2026, eligible small business entities with aggregated turnover of less than $10 million can generally claim an immediate deduction for the full cost of eligible depreciating assets costing less than $20,000 that are first used, or installed ready for use, by 30 June 2026.
The $20,000 threshold applies on a per-asset basis. Accordingly, multiple eligible assets may qualify for an immediate deduction provided each asset costs less than the threshold.
Assets costing $20,000 or more that do not qualify for an immediate deduction may generally be allocated to the small business depreciation pool and depreciated under the simplified depreciation rules.
Tax planning opportunity:
Where significant equipment purchases are contemplated, taxpayers should consider the timing of acquisitions and installation to ensure assets are first used, or installed ready for use, before year end.
Individuals - Deductions
Home office expenses: Claim deductions for additional expenses incurred while working from home, such as stationery, energy costs, internet, phone, and home office equipment (including depreciation where applicable). See the ATO website for eligibility and record-keeping requirements (https://www.ato.gov.au/individuals-and-families/income-deductions-offsets-and-records/deductions-you-can-claim/work-related-deductions/working-from-home-expenses)
Motor vehicle and car expenses: Deductions for work-related use of your car or another motor vehicle per ATO (https://www.ato.gov.au/individuals-and-families/income-deductions-offsets-and-records/deductions-you-can-claim/work-related-deductions/cars-transport-and-travel/motor-vehicle-and-car-expenses)
Rental Property Deductions: The ATO continues to devote significant compliance resources to rental property deductions. The ATO has identified the following as key risk areas:
Holiday homes
Lifestyle properties
Short-term rental accommodation
Below-market rental arrangements
Excessive interest deductions
Private use of rental properties
Incorrectly claiming capital expenditure as repairs and maintenance
For the 2026 income year, taxpayers should pay particular attention to the Commissioner's updated guidance in TR2026/1; PCG2026/2 and PCG 2026/3
Non-deductibility of GIC: From 1 July 2025, the General Interest Charge (GIC) and the Shortfall Interest Charge (SIC) are non-deductible. This change will apply to all interest incurred on or after this date, even if the relevant tax debt relates to a prior year or assessment.
SIC applies to additional tax liabilities arising from an amended assessment where a taxpayer has underestimated their original tax liability. GIC applies to tax that is due and payable but remains unpaid. Both SIC and GIC have been deductible for income tax purposes until this change was enacted.
Making SIC and GIC non-deductible from 1 July 2025 significantly increases the cost of tax debt. Taxpayers should therefore work with their advisors to ensure they self-assess correctly, lodge and pay on time and, if necessary, engage with the ATO to seek remission of the interest otherwise payable.
The 2026–27 Federal Budget included significant proposed changes to the taxation of capital gains to commence on 1 July 2027.
At the time of writing, legislation has been introduced into Parliament but has not yet been enacted. Accordingly, the existing capital gains tax rules continue to apply.
The proposed measures include:
Changes to the CGT Discount
The Government has proposed abolishing the existing 50% discount and replacing it with an inflation indexation model. The changes are proposed to apply only to gains accruing after 1 July 2027.
For assets already owned on 1 July 2027:
• Gains accrued up to 30 June 2027 will continue to receive the existing 50% discount.
• Gains accruing after 1 July 2027 will be subject to the new indexation-plus-minimum-tax regime.
• A valuation (or equivalent apportionment methodology) would be required to separate pre- and post-1 July 2027 gains.
Taxpayers can still choose to apply the CGT discount to capital gains arising on the disposal of CGT assets which comprise new residential dwellings or affordable housing on or after 1 July 2027. The choice will apply for the whole holding period of the asset (even if the asset is purchased before and sold after 1 July 2027). The draft legislation does not define assets which will comprise “new residential dwellings” and instead provides that the Minister will determine the necessary requirements for such dwellings by legislative instrument.
30% minimum tax on capital gains
The Government has also proposed the introduction of a minimum 30% tax rate on certain capital gains.
If enacted, taxpayers currently benefiting from lower effective tax rates through the operation of the CGT discount may face a higher overall tax burden on future capital gains.
Removal of pre-CGT asset grandfathering
The Government has also proposed abolishing the long-standing exemption for assets acquired before 20 September 1985.
Under current law, assets acquired before the introduction of capital gains tax are generally exempt from CGT. The proposal is to tax post-1 July 2027 gains or losses on such assets.
The proposal may have significant implications for succession planning, estate planning and intergenerational wealth transfers.
Increased access to small business 50 percent active asset reduction
The Government has announced an increase to the turnover threshold for the existing small business 50 per cent active asset CGT reduction from $2 million to $10 million. Note that the thresholds for the other small business CGT concessions (i.e. the 15 year exemption, retirement exemption and replacement asset roll-over) will remain unchanged – that is, they will be available only to businesses with turnover up to $2 million or asset value up to $6 million.
Introduction of ‘Innovative Business CGT Concession’
A new Innovative Business CGT Concession is to be introduced that would provide a 50 per cent CGT discount to early-stage investors including founders and employee share scheme participants of innovative start-up businesses. Individuals, partnerships and trusts holding eligible shares will be able to choose between a 50 per cent discount or indexation and the minimum tax for gains accrued from 1 July 2027. It is proposed that eligible shares must be new equity issued by a company that is under 10 years old (or under 15 years in certain circumstances), under $50 million in turnover, meet principles-based innovation criteria, and must be held for five years before being sold, with a lifetime cap on the concession.
Planning implications:
Although the proposed measures are not yet law, taxpayers contemplating significant asset disposals, business sales or succession planning transactions should carefully monitor legislative developments.
For some taxpayers, the timing of a transaction may become increasingly important if the proposed measures are enacted in their current form.
Tax planning opportunity:
Taxpayers considering the sale of investments, businesses, investment properties or other significant CGT assets should seek advice before entering into binding contracts, particularly where the transaction may occur close to any proposed commencement date.