Strategies for a FY26 of stability and growth

The global business landscape continues to navigate a turbulent path, with uncertainty looming well into the 2026 financial year.

For Australian manufacturers, the challenges are mounting. The erratic foreign policy of US President Donald Trump has sparked volatility across international markets. Manufacturers still grappling with the aftermath of the COVID-19 pandemic now face the challenge of reevaluating their supply chains in response to new tariffs imposed by the United States.

Those engaging in trade with the US must navigate a more complex and expensive tariff system. Currency fluctuations add to the worry as global tensions undermine stability. In addition, tariffs and trade tensions are disrupting global shipping operations, which has serious implications for Australian manufacturers. There is a risk that Australia could become a dumping ground for goods that would otherwise be sold in the US, which could lower the prices of Australian-made products.

We cannot tell you when this period of global uncertainty will end. What we can provide is strategic insights into the key areas Australian manufacturers should focus on as they enter the 2026 financial year. Our goal is to provide clarity in this time of change and to help manufacturers reduce the impact of global factors while placing themselves in a position to benefit from new opportunities. 

Get back to basics: Understanding your business 

In times of uncertainty, knowledge empowers. For a manufacturer, you must know your business inside and out. 

Use these questions as a starting point:

• What was your original conception and design process for your business?
• Where are all your inputs sourced?
• What are your staffing requirements?
• What do your customers need from you?
• Who is your target market, how big is it and where are they located?
• Logistics – how do your inputs get to you, and how do your outputs get to your customers?
• How well do you understand your tax and accounting landscape? 

You cannot control global markets, but you can control your own awareness of these factors.  Having a thorough understanding of your business allows you to respond faster to unexpected changes or to be first to take advantage of new opportunities. Nailing your tax obligations.

Heading into the 2025 tax season, there are important enacted and unenacted tax changes manufacturers should be aware of.

The Instant Asset Write-Off threshold

Businesses with under $10m in aggregated turnover can choose to opt into the small business depreciation rules under 328-D, which will allow access to the Instant Asset Write-Off. This measure allows businesses to immediately deduct the cost of depreciating assets costing less than $20k(excluding GST) against their assessable income in that financial year. The $20k threshold is legislated for the 2025 financial year but reverts to the standard amount of $1,000 from 1 July 2025. 

The Instant Asset Write-Off allows you to claim an immediate tax deduction for the cost of a depreciating asset, which reduces your taxable income for the financial year in which the asset was purchased. However, this means the asset does not retain a cost base for future tax calculations. If the business eventually sells the asset, the proceeds from the sale are treated as taxable income since no cost base exists due to the prior deduction. This approach can help in short-term tax relief but requires careful consideration of the tax implications upon the asset’s sale.

•  Available to businesses with under $10m in turnover
• Can deduct the cost of assets purchased in 2025FY up to $20,000
• Reverts to $1,000 from July 2025.

Pros: Immediate tax deduction in the financial year that you purchase an asset. 
Cons: When you sell the asset, the proceeds are treated as taxable income. 

Non-deductibility of General Interest Charges

From 1 July 2025, General Interest Charges (GIC) and Shortfall Interest Charges (SIC) charged on ATO debts will no longer be tax-deductible. By removing the ability for businesses to deduct interest charged on their outstanding ATO debts, the cost of falling behind on ATO obligations increases. This measure applies to any outstanding ATO debts that are overdue and will apply regardless of whether there is a payment plan over the debt or not. The current ATO GIC is 11.17% per annum. 

In addition to the removal of interest deductibility, the ATO has tightened its stance on the remission of overdue interest charges. It is crucial manufacturers treat ATO debt as seriously as any other form of finance to make sure they have robust cash flow planning measures in place to ensure ATO obligations are met on time. Businesses with inconsistent or seasonal cash flows should consider alternate financing options to pay ATO obligations as interest on normal business financing remains tax deductible. 

• Starting July 2025, businesses can no longer deduct interest on overdue ATO debts.
• ATO debt should be treated seriously.
• Robust cash flow management and timely payment plans are important

Payday Super

From 1 July 2026, the Government has announced that, among other changes, the Employer Superannuation Guarantee must be paid within seven days of paying the employee’s wages. This is a significant shift from the current timing, which only requires employers to make payments of super four times a year, being 28 days after the end of each respective quarter. Also, the Superannuation Guarantee rate is increased from 11.5% to 12% from 1 July 2025. 

Employers should review their payroll processes and systems to ensure they are ready for the superannuation changes. Consideration should be given to the system’s employers use for their payroll, internal finance function improvement, changing pay run frequency and the cashflow impact the more regular superannuation payments will have on the business. 

• From July 2026, employers must pay Superannuation Guarantee contributions within seven days of paying wages.
• Rates increase to 12% from 1 July 2025.
• Wise to ensure payroll systems are set up to comply with these changes. 

Taking advantage of Government initiatives

The Australian Government encourages businesses domestically to invest in research and development (R&D) through the R&D tax incentives scheme (RDTI). The RDTI helps subsidise the cost of investment into the development of new processes, products and technologies. 

Given the result of the 2025 Federal election, Labor’s Future Made in Australia economic plan will continue to be at the forefront of the government’s economic agenda. The Future Made in Australia plan provides funding for investment into green energy manufacturing, critical minerals processing and renewables through funding various regimes.   

• Invest in R&D to access tax incentives.
• Key areas include:
  • Green manufacturing
  • Critical minerals processing
  • Renewables

Need a hand? RSM is here to help

RSM Australia offers tailored audit, tax, and consulting services to the manufacturing sector.

We can help with:

• Transaction advisory - guiding manufacturers from the growth and funding stages to business sale.
  • M&A lead advisory
  • Debt advisory
  • Due diligence
  • Valuations
  • Tax advisory
  • Financial modelling
• Data analytics – giving insights into manufacturing chains.
  • Business process improvement
  • Customer growth
  • Data management
• Transfer pricing – assisting manufacturers with international related party sales and supply chains.
• R&D – helping clients access potential R&D tax offsets for implementing new technology in manufacturing processes or developing new/improved products, processes, and equipment.
• Software – providing advice on the appropriate digital ecosystem for manufacturers, including NetSuite and ERP solutions for those requiring more advanced platforms for cost accounting, inventory, and other manufacturing accounting needs.
• Management reporting – offering customised management reporting and dashboarding to provide better business oversight and insights for manufacturing business owners and managers. 

FOR MORE INFORMATION

If you would like to learn more about the topics discussed in this article, please contact your local RSM office.

This article was first published on Manufacturer's Monthly.