The 2026-27 Budget proposes two company tax changes aimed at making the tax treatment of tax losses more commercially useful. 

The first is a permanent two-year loss carry back rule for companies with aggregated annual global turnover below $1bn, from tax years commencing on or after 1 July 2026. The second is a refundable tax offset for certain small start-up companies from tax years commencing on or after 1 July 2028.

For established companies, the loss carry back allows a revenue loss to be offset against tax paid in the previous two years. This can improve cash flow for businesses that have previously been profitable but experience a downturn in a future year. The loss carry back is limited by the company’s franking account balance, so the value of the measure will vary between businesses.

For early-stage companies, the start-up refundable tax offset is designed to provide help sooner and potentially provide much needed cash to businesses during their early stages. The measure will be accessible to start-up companies with aggregated annual turnover below $10m that generate a tax loss in their first two years of operation. The tax loss will be used to generate a refundable tax offset to the company, capped at the value of FBT and withholding tax on wages paid to Australian employees in the loss year. 

The Budget papers estimate the loss carry back will reduce tax receipts by $2.3bn over five years from 2025-26, while the start-up refundable tax offset will increase administered payments by $410m over the same period. 

Together, the measures are intended to support resilience of Australian businesses and encourage business investment and growth. 

The Government has announced the introduction of a 30% minimum tax on the taxable income of discretionary trusts, applying from 1 July 2028. This reform represents a significant shift in the way discretionary trusts are taxed.

Under the new rules, the trustee will be required to pay tax at a minimum rate of 30% on the trust’s taxable income, unless a higher rate already applies. The reform is designed to ensure that trust income is not taxed at rates materially lower than those applying to wage and salary earners.

Beneficiaries will continue to be assessed on trust distributions in their own tax returns. However, beneficiaries who are individuals or other noncorporate entities will receive nonrefundable tax credits for their share of the tax paid by the trustee. These credits can be used to offset current year tax liabilities but cannot be refunded. The effect is that, regardless of how income is distributed, the overall tax paid on discretionary trust income will not fall below 30%.

A key integrity feature of the reform is its treatment of corporate beneficiaries. Corporate beneficiaries will not receive credits for the tax paid by the trustee, preventing the use of “bucket companies” to defer tax or convert tax into refundable franking credits. Trustees receiving franked dividends will be required to apply franking credits towards meeting the minimum tax liability.

The policy is aimed primarily at addressing the use of discretionary trusts for income splitting, where income is distributed to low or noincome family members to reduce the family group’s overall tax bill.  

A range of trusts and income types are expressly excluded, including fixed and widely held trusts, superannuation funds, deceased estates, charitable and special disability trusts, primary production income, certain income relating to vulnerable minors, and income from assets of existing testamentary trusts.

To support transition, expanded rollover relief will be available for three years from 1 July 2027, allowing eligible taxpayers to restructure out of discretionary trusts into companies or fixed trusts without triggering income tax or capital gains tax.  

While rolling a discretionary trust into a company may reduce exposure to the proposed 30% minimum tax, it is important to consider both short-term relief and long-term tax outcomes before considering a rollover.

Overall, the minimum tax materially reduces the tax advantages of discretionary trusts used for income splitting or tax deferral. 

From 1 July 2026, the Government will permanently extend the $20,000 IAWO for businesses with a turnover of up to $10m.

The threshold of $20,000 per asset has effectively been in place since 1 July 2023 and was set to expire on 30 June 2026, with the threshold then reverting back to the $1,000 threshold.

Assets valued at $20,000 or more can continue to be placed into the small business simplified depreciation pool. The provisions that prevent small businesses from reentering the simplified depreciation regime for five years after opting out will continue to be suspended until 30 June 2027. 

Foreign residents have been subject to Australian capital gains tax on their disposal of taxable Australian property since 2006.

Treasury released draft legislation in April 2026 that was announced as ‘clarifying’ the definition of taxable Australian real property. The draft legislation is considered in more detail in our Tax Alert from 15 April 2026. In summary, the draft legislation will introduce a definition of ‘real property’ that is not consistent with existing case law. It will also introduce a requirement that foreign owners with indirect interests in Australian assets must document the nature of those interests at all times over the 365 days preceding their sale.

If passed, the amended legislation will result in assets like long-term leases and licences over land, water rights, and infrastructure installed on land (eg pipelines, cell towers, solar and wind installations) potentially being subject to foreign resident CGT.

The  an announcement that the Government will provide a time‑limited, targeted “concession” in the foreign resident CGT regime for investment in the renewables sector from the first day of the quarter following Royal Assent until 2030. It is not clear what the nature of the “concession” is. Foreign owners of assets that are likely to be impacted by the proposed new definition of real property should closely monitor any clarification of what this “concession” will bestow. 

The Government will provide $86.3m over four years from 1 July 2026 and $9.7m per year ongoing from 2030-31 to deliver Phase 2 of the Counter Fraud Strategy to modernise prevention and detection of fraud in the tax and super systems. 

The measure is estimated to increase receipts by $217.8m and increase payments by $72.9m over the five years from 2025-26. Phase 2 builds on the $187m that was allocated in the 2024-5 Budget.

Continued funding is intended to enhance the ATO’s ability to detect and prevent fraud in real time, provide additional fraud protections for individuals, and expand live monitoring of fraudulent account access to tax agents, business and for high-risk superannuation changes.

The ATO will be given powers to pause recovery of tax debts of fraud victims, waive those debts in appropriate circumstances, and recover the debts from intermediaries.

Existing garnishee powers will also be expanded to include jointly-held assets in relevant cases. The ATO will undertake additional targeted compliance activities over the two years from 2026-27, including in relation to the R&D Tax Incentive. 

Given the heavy focus on CGT, trusts and negative gearing, it is no surprise that the Government has decided not to make any material changes to indirect taxes. 

This is despite recommendations from the OECD earlier this year that Australia consider increasing its rate of GST to 15%. Perhaps the most notable change was the abolition of an additional 497 ‘nuisance’ tariffs from 1 July 2026 – importations of certain categories of goods will be duty-free from this date. Examples included in the Budget papers were limited to wine glasses, tyres, air conditioners, margarine and bitumen.

No changes were announced in relation to the temporary reduction to fuel excise on petrol and diesel and the heavy vehicle road user charge. It remains to be seen whether relief will be extended once these measures end on 30 June.

The Government will provide $7.6m over four years from 2026–27 (and $0.2m per year ongoing) to expand the Australian Trusted Trader program. This will include implementation of the Approved Exporter Scheme, which will be available to accredited Australian Trusted Trader exporters as an optin scheme, removing the need to obtain Certificates of Origin to take advantage of tariff reductions under the ASEAN Australia New Zealand Free Trade Area and the Regional Comprehensive Economic Partnership Agreement. 

Following a recent statutory review of the electric car discount, the Government has re-announced in the Budget its proposed changes to section 8A of the Fringe Benefits Tax Assessment Act 1986.

The Government will transition the reforms by:

• providing a full exemption for electric cars valued up to $75,000 that are provided before 1 April 2029
• providing a 25% discount on FBT for electric cars valued above $75,000 and up to the fuel-efficient car LCT threshold.  

From 1 April 2029, a permanent 25% discount on FBT will be available for electric cars up to and including the fuel-efficient LCT threshold.  

The Government continues to focus its attention to vehicles considered ‘zero or low emissions’ vehicles, with the concessions continuing to be limited to fully electric vehicles only. Plug-in hybrids continue to be excluded from any FBT discounts or exemptions, with the exemption for such vehicles having been sunset from 1 April 2025.