Australian manufacturers are entering the end of financial year period against a backdrop of tax changes announced in the federal budget, with measures spanning research and development incentives, asset write-offs, trust structures and compliance obligations. 

While many of the changes are aimed at stimulating investment and innovation, they also introduce new considerations around governance, cash flow and long-term business structuring.

For manufacturers navigating rising input costs, supply chain volatility and continued pressure on margins, the tax environment has become increasingly strategic. According to RSM Australia partner, tax services, William Zhang, the latest budget delivered several measures that manufacturing businesses should be paying close attention to before 30 June.

“From the R&D space, the refundable R&D tax offset threshold will be lifted from $20 million to $50 million aggregated turnover,” Zhang said. “This will be capturing more mid-sized businesses to the instant refund offset.”

R&D and investment incentives

Among the budget measures for manufacturers were changes to the R&D tax incentive framework. Zhang said the government had increased the R&D expenditure cap from $150 million to $200 million, which would benefit larger claimants.

At the same time, the minimum R&D expenditure threshold will increase from $20,000 to $50,000. Zhang said the combined changes reflected the government’s ongoing focus on supporting advanced manufacturing capability and other initiatives.

“The government will continue their commitment to support Future Made in Australia initiatives, focusing on renewable green materials and low emissions manufacturing,” he said.

Beyond R&D, the budget also confirmed that the $20,000 instant asset write-off would be made permanent for businesses with turnover under $10 million. Zhang said the permanence of the measure removed uncertainty for smaller manufacturers making ongoing equipment investments. Importantly, he noted that the threshold applies on a per-asset basis rather than as a single annual limit.

“One thing I wanted to remind businesses of is that the $20,000 limit is on a per asset basis, so that you can write off multiple separate equipment purchases in the same year, which are less than $20,000,” he said.

The budget also made the tax loss carry-back measure permanent for companies with turnover below $1 billion, allowing businesses to offset current losses against profits from prior years. Zhang said this would be valuable for manufacturers experiencing softer trading conditions after stronger periods in previous years.

“This essentially gives some companies that were experiencing downturns the ability to claw back some of the losses and help cash flow,” he said.

The government also announced a startup loss refund from 2028 for small startups with turnover under $10 million in their first two years of operation, enabling them to claim refunds for tax losses.

Looking beyond new products

While R&D tax incentives are often associated with new products, Zhang said many manufacturers overlook opportunities tied to improvements in existing products, systems and processes. He said manufacturers should be assessing where expenditure and testing activities have produced measurable improvements, rather than limiting claims to greenfield innovation projects.

“Manufacturers need to show how the expenditure and testing has improved their products and processes rather than mere routine changes,” Zhang said.

Zhang pointed to examples including improvements to product materials or components, embedded software, production processes, component integration and operational performance. At the same time, he warned that manufacturers should expect continued scrutiny around R&D claims and broader tax compliance obligations.

The Australian Taxation Office has increased its focus on data matching, governance processes and internal system controls, making accurate documentation and oversight increasingly important.

“We would strongly recommend that businesses look into their governance side,” Zhang said.

He said manufacturers should consider regular governance health checks conducted by third-party accounting firms or external specialists to identify compliance risks before they become audit issues.

Common mistakes at year end

According to Zhang, manufacturers continue to make recurring mistakes during the end of financial year process, particularly around inventory accounting, deductions and cash flow management. One common issue involves stock and materials in transit not being accounted for correctly through cost of goods sold calculations.

“We found in the past a lot of businesses are not accounting for stock or material in transit properly,” Zhang said. “With trading stock, be mindful of the three different valuation methods – cost, reselling value and replacement value.”

He said manufacturers should also identify obsolete stock that could be claimed as a tax deduction, while ensuring that standard costing systems are properly readjusted on 30 June. Other missed opportunities include diesel fuel rebates, deductible prepayments and foreign exchange losses tied to importing and exporting activities. Zhang cautioned businesses to remain mindful of doubtful debt provisions as they are not deductible.

Manufacturers should also review pay-as-you-go instalments for the June quarter to ensure they are not unnecessarily overpaying tax.

“You may have prepaid too much tax this year,” Zhang said.

Managing cash flow pressures

With manufacturers continuing to face elevated energy prices, labour costs and supply chain disruptions, Zhang said tax planning remained an important lever for improving cash flow. One area where businesses often miss opportunities is through the deferred GST scheme for importers. He said many importers continue to create avoidable GST cash flow pressures by failing to implement the

He also encouraged manufacturers to review customs duty and GST arrangements on imported goods, noting that incorrect duty classifications by customs brokers can create substantial refund opportunities. RSM has seen businesses recover refunds after reviewing historical import classifications and customs arrangements.

“An expert in this area could reveal and may result in large refund opportunities,” said Zhang.

Structural changes ahead

One of the most consequential budget measures for privately owned manufacturing businesses involves changes to family trust taxation. From 1 July 2028, a 30 per cent minimum tax on trust income will apply, while family trusts will also lose access to the 50 per cent capital gains tax discount for gains after 1 July 2027.

Zhang said the changes would reduce many of the traditional advantages associated with family trust structures.

“It takes away a lot of the past benefits of people streaming trust income to lower earning individuals and to move income to bucket companies,” he said.

As a result, Zhang said many businesses should begin reviewing whether their current structures remain appropriate, particularly where significant assets such as land are held within trusts.

The government has also introduced a tax-free rollover period between 1 July 2027 and 30 June 2030 to allow businesses to move assets out of family trusts without triggering income tax consequences. However, Zhang warned that stamp duty implications still need to be carefully assessed where land assets are involved.

“Businesses may think about restructuring their existing assets or future acquisitions out of reliance on the family trust structure into perhaps a corporate or fixed trust setup,” he said.

He added that businesses undertaking restructuring should also consider how the changes interact with R&D eligibility rules. Manufacturers may also benefit from tax consolidation arrangements, which Zhang said can improve both liability protection and tax efficiency.

“Business can also consider tax consolidation, which will provide better legal liability protection, as well as tax efficiencies being a single entity taxpayer,” he said.

Preparing for the next phase

While the budget delivered few major changes relating directly to payroll tax or employment taxes, Zhang said manufacturers should already be preparing for the incoming payday super regime. From 1 July 2026, businesses will need systems capable of meeting new superannuation payment obligations in real time, with penalties applying for non-compliance.

Looking forward, Zhang said RSM Australia continues to offer advisory services to manufacturing businesses that may need guidance in this busy period.  

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