On 12 May 2026, Treasurer Jim Chalmers handed down a federal budget that includes the most significant changes to Australia's tax system in more than two decades. Much of the public attention has focused on housing and negative gearing, but several of the measures will directly affect small business owners, particularly those thinking about a sale or transition in the coming years.
We've pulled together the key changes most relevant to owners of businesses turning over $2 million to $10 million.
1. The 50% CGT discount is being replaced, but the Small Business CGT Concessions are not
The headline announcement was the replacement of the general 50% CGT discount with an indexation-based system and a 30% minimum tax rate on capital gains. This kicks in from 1 July 2027 and applies broadly to shares, managed funds, investment properties, and other assets.
For small business owners, the more important news is what wasn't changed. The Small Business CGT Concessions, including the 15-year exemption, the 50% active asset reduction, the retirement exemption, and rollover relief, have been retained. The Budget papers and accompanying commentary indicate the Small Business CGT Concessions will remain available.
In practice, this means owners who meet the relevant eligibility conditions — including the small business entity or maximum net asset value tests, along with the active asset and significant individual requirements — can still access the existing concessions when they sell. The 15-year exemption, in particular, remains the most powerful tool available for owners aged 55 or over who have held their business for at least 15 years and are selling in connection with retirement. The capital gain is disregarded entirely.
If your succession plan was built around these concessions, the budget hasn't taken them away.
2. New rules for discretionary trusts
From 1 July 2028, a new minimum tax of 30% will apply at the trustee level on income retained in discretionary trusts. The change is aimed at trustees rather than beneficiaries. The proposal does not currently appear to prohibit distributions to beneficiaries, but instead imposes a minimum tax outcome at trustee level.
For small business owners who operate through a discretionary trust — a very common structure — this is worth raising with your accountant well before the start date. Three years of rollover relief will be available from 1 July 2027 for businesses transitioning out of a trust into another structure, which gives some time to plan if a restructure makes sense.
The practical question for most owners isn't whether trusts still work….they do. It’s whether the existing structure is still the most efficient one given the change, and whether any restructure should be timed to use the rollover window.
3. The $20,000 instant asset write-off is now permanent
After years of temporary extensions and last-minute legislative changes, the $20,000 instant asset write-off has been made permanent for businesses with turnover under $10 million. Eligible assets purchased and first used or installed ready for use under the threshold can be deducted in full immediately, rather than depreciated.
For owners in the $2-10 million revenue range, the threshold itself isn't large, but the certainty is valuable. Capital expenditure decisions no longer have to be timed around whether the measure will be extended.
4. Two-year loss carry-back is now permanent
From 1 July 2026, eligible companies can carry tax losses back against tax paid in the two prior income years and receive a refund of the earlier tax. This was a temporary COVID-era measure and has now been made permanent.
For small businesses dealing with a difficult trading year, such as those affected by the current cost pressures around fuel, energy, insurance and wages, this provides a meaningful cash flow buffer that wasn't reliably available before.
5. Negative gearing changes are largely a personal investment issue
The proposed changes to negative gearing on established residential investment properties apply prospectively from 7:30pm on 12 May 2026. Properties bought before that time are grandfathered. The announced changes are focused on established residential investment property rather than commercial property.
For most small business owners, the direct business impact here is limited, but if you hold investment property personally or through related entities, the changes may shift the overall picture of your wealth planning.
6. Other measures worth noting
A few other changes will matter to small businesses in the $2-10 million range, even if they're less headline-grabbing:
- PAYG instalments are becoming more flexible. From 1 July 2027, businesses will be able to opt in to monthly PAYG instalments. The ATO is also expanding its dynamic instalments pilot, which uses data from business accounting software to calculate PAYG more accurately based on current trading conditions rather than the standard formula based on prior-year figures. For businesses with uneven or seasonal cash flow, both changes are practically useful.
- Payroll tax administration reforms are flagged as an intent rather than a confirmed change. The federal government has said it will work with states and territories on reforms to payroll tax administration — payroll tax is a state tax, so any actual change depends on what's negotiated with each jurisdiction. Worth watching, but not something to plan around yet.
- Apprenticeship incentives are being redirected to small and medium businesses. From 1 January 2027, the Australian Apprenticeships Incentive System will be reformed to channel employer incentives toward SMEs, with changes also to how priority occupations are chosen. For trade-heavy businesses — plumbing, electrical, landscaping, and similar — this is worth raising with whoever manages apprenticeship arrangements in your business.
- R&D Tax Incentive reforms take effect from 1 July 2028. The headline change for smaller businesses is that the turnover threshold for the higher, refundable offset is being lifted to $50 million, which brings more growing businesses into scope. R&D projects under $50,000 will need to be done with a recognised research organisation to qualify. If R&D claims are part of your tax position, this one warrants a conversation with your accountant.
- Loss refundability for new start-ups in their first two years of operation, from 2028-29. A refund is available up to the amount of FBT and withholding tax paid on employee wages, relevant if you or someone in your network is launching something new.
- Productivity Commission inquiry into business dynamism, with a particular focus on barriers facing young firms and whether Australia's insolvency framework is fit for purpose.
* This isn't tax advice. Every business sits in its own structure, and the right decisions depend on professional guidance from accountants and lawyers. All measures remain subject to legislation and may change during consultation and parliamentary process.
