Permanent $20,000 instant asset write-off and new loss carry-back rules
Australian businesses have received a welcome boost, with Parliament passing two significant tax measures designed to encourage investment, improve cash flow and provide greater certainty for business planning.
The measures introduce a permanent $20,000 instant asset write-off for eligible small businesses and a new loss carry-back tax offset for eligible companies.
Permanent $20,000 Instant Asset Write-Off
After years of temporary extensions, the $20,000 instant asset write-off has now been made permanent from 1 July 2026.
Eligible small businesses with aggregated turnover of less than $10 million may immediately deduct the business-use portion of eligible depreciating assets costing less than $20,000 each, provided the asset is first used or installed ready for use from 1 July 2026.
WHY THIS MATTERS
The $20,000 threshold applies to each individual asset rather than the total amount spent during the year. A business may therefore be able to immediately deduct multiple qualifying purchases.
Example
A business purchases the following during the 2026-27 income year:
✓ Laptop computers costing $6,000
✓ Office furniture costing $9,500
✓ Workshop equipment costing $18,000
Subject to the eligibility and business-use requirements, each asset may qualify for an immediate deduction because each individual cost is below $20,000.
What should business owners consider?
If your business is planning to invest in any of the following, it may be worthwhile reviewing the timing and structure of the purchase:
- Technology and computer equipment
- Tools, machinery and plant
- Office furniture and fit-outs
- Other eligible business equipment
Assets costing $20,000 or more do not qualify for the immediate deduction, but may generally be added to the small business depreciation pool, subject to the applicable rules.
New Loss Carry-Back Tax Offset
The second major measure introduces a loss carry-back tax offset for eligible companies. Tax losses arising in an income year commencing on or after 1 July 2026 may be carried back against tax paid in either or both of the two previous income years.
Previously, a company would generally carry a tax loss forward and wait until it generated sufficient future taxable profits. The new rules may instead allow an eligible company to recover tax previously paid, providing earlier cash flow support.
Who could benefit?
The measure may be particularly relevant to companies that:
- Paid company tax in the previous two income years
- Experience a temporary downturn or one-off loss
- Undertake significant expansion or investment
- Incur substantial costs while growing the business
IMPORTANT
Eligibility and the amount available will depend on the company’s circumstances. The offset is limited by factors including tax previously paid and the company’s franking account balance. Relevant income tax return lodgement requirements must also be satisfied
Example
A company paid tax on profits in the 2024-25 and 2025-26 income years. It then incurs a tax loss in the 2026-27 income year following a major investment and expansion program.
Under the new rules, the company may be able to carry the loss back and claim a tax offset referable to tax paid in one or both of the previous two income years, subject to the eligibility requirements and applicable limits.
What Does This Mean for You?
These reforms create genuine planning opportunities for many Australian businesses. Now is a good time to review:
✓ Planned asset purchases
✓ Expected profitability for 2026-27
✓ Company tax paid in the previous two years
✓ Current and forecast cash flow
✓ The company’s franking account position
How Seed Accounting Can Help
Every business is different, and the benefit available under these measures will depend on your specific circumstances. Seed Accounting can help you assess eligibility, quantify the potential tax benefit and ensure your investment decisions align with your broader business and cash flow objectives.
WOULD YOU LIKE TO DISCUSS HOW THESE CHANGES APPLY TO YOUR BUSINESS?
TALK TO SEED ACCOUNTING:
03 9826 3933 | [email protected] | seedaccounting.com.au
