Federal Budget 2026-27: What First Nations and Small Businesses Need to Know

10-12 minute read

Please note: The government has not yet legislated these measures. This article contains general information only and is intended to support conversations with your accountant or adviser.

If you’ve seen the Federal Budget headlines and felt a bit overwhelmed, that’s understandable. The 2026–27 Federal Budget includes a range of changes that may affect small businesses, individuals, investors, and First Nations communities.

With approximately $1.31 billion in First Nations investment and some of the most significant proposed tax changes in years, this article breaks down the key measures in plain language, with practical context around what they may mean for you, your business and day-to-day operations.

Key Takeaways

The instant asset write-off is proposed to become permanent from 1 July 2026 for eligible small businesses.
Proposed changes to the Indigenous Procurement Policy, introducing stricter ownership and control requirements for businesses accessing IPP opportunities.
Approximately $1.31 billion to be allocated toward First Nations investment initiatives across employment, health, safety, and community infrastructure.
Proposed changes to capital gains tax, negative gearing, and discretionary trusts may affect long-term business and investment structures from 2027 onwards.
Several measures remain years away from implementation, but early awareness may help businesses prepare.
None of the measures discussed have been legislated at this stage.
Stage 3 tax cut reductions continue, with the next rate change taking effect from 1 July 2026.

Small Business Tax Measures

If your business has annual turnover under $10 million, it’s generally classified as a small business entity for tax purposes. Several Budget measures may also affect businesses within this threshold.

Permanent instant asset write-off

After several years of temporary extensions, the instant asset write-off is proposed to be made permanent from 1 July 2026.

Here’s what it means in practice: if you buy an eligible piece of equipment, a tool, a computer, or any other asset for your business under $20,000, you may be able to deduct the full cost in that same tax year, instead of spreading the deduction across multiple years. Assets above the threshold can generally go into the simplified depreciation pool.

Loss carry-back for companies

This one’s for businesses operating as a company.

If your company had a profitable year or two followed by a tough period where you made a loss, you may be able to apply that loss against profits from earlier years where tax has already been paid, potentially resulting in a refund from the ATO.

For example, your company made a $100,000 profit in Year 1 and paid tax on it, then made a $60,000 loss in Year 2. Under this proposal, you could carry that loss back and offset it against Year 1’s profit, potentially getting a refund on some of the tax you already paid.

This is proposed from 1 July 2026 for companies with global turnover under $1 billion. The amount you can carry back is generally limited by the tax credits your company has already built up. These are tracked in what’s called a franking account. Your accountant can help work this out for you.

Dynamic PAYG Instalments

PAYG instalments are the regular tax payments businesses make throughout the year.

Currently, instalments are generally based on what you earned last year, which can mean overpaying during a slow period or underpaying during a good one.

From 1 July 2027, eligible small and medium businesses may be able to opt into a system where PAYG instalments are calculated through accounting software using current business performance data.

For many businesses, this could mean fewer surprises at tax time and payments that better reflect how the year is actually going.

Electric Vehicle: Proposed FBT Changes

If your business provides EVs to employees through salary packaging, a novated lease, or a company fleet, there are proposed changes to FBT concessions

Currently, many eligible EVs under $75,000 receive a full FBT exemption. That exemption is proposed to reduce from 1 April 2029, moving to a 25% discount on FBT for eligible EVs up to a certain value.

Existing arrangements entered into before the changes commence are generally expected to retain their current treatment. That said, this may depend on the final legislation.

Given the variables around timing and vehicle value, it’s a good idea to go over your specific arrangement with your accountant.

Mental health and debt support

Running a small business is hard, and the last few years have been harder than most. If financial pressure has been affecting you or your team, two free services may be available: NewAccess for Small Business Owners and the Small Business Debt Helpline.

Both services are expected to remain available to business owners experiencing financial or operational pressure.

Start-Up Businesses

If your business is in its early stages, there are several proposals to keep on your radar. Most don’t kick in until 2028, so there’s time, but it helps to know they’re coming.

Refundable loss offset for early-stage companies

Starting a business almost always means running at a loss before things take off. From 1 July 2028, eligible start-up companies with annual turnover under $10 million could potentially convert losses made in their first two years into a cash refund from the ATO, rather than carrying those losses forward indefinitely.

Businesses employing Australian staff may see greater benefit from this measure. For founder-only operations, however, the benefit may grow as your team does.

R&D Tax Incentive reforms

The R&D Tax Incentive is a government program that gives eligible businesses money back for approved research and development spending.

From 1 July 2028, the proposed changes include:

Increasing offset rates by 4.5 percentage points
Expanding access to the higher refundable rate
Increasing the refundable turnover threshold from $20 million to $50 million.

The minimum spending threshold may also increase from $20,000 to $50,000. If your business currently claims R&D, it’s a good idea to review your eligibility and spending levels with your accountant.

Venture Capital Tax Incentives

From 1 July 2027, the government is proposing to expand tax incentives designed to support start-ups and high-growth businesses in accessing investment and industry expertise.

For businesses exploring venture capital funding, this is an area to watch as more detail becomes available.

First Nations Business: Key Investments

The Budget includes First Nations investment across employment, health, family safety, education, and community-controlled services.

Many of these measures respond to priorities that First Nations peak bodies and community-controlled organisations have advocated for over the years.

Indigenous Procurement Policy reforms

The Indigenous Procurement Policy (IPP) is one of the primary ways the federal government directs procurement opportunities toward First Nations businesses.

The reforms focus on:

Increasing procurement targets
Strengthening integrity requirements
Addressing concerns around “black cladding”, where businesses access contracts without genuine First Nations ownership or control.

From 1 July 2026, a business is expected to be at least 51% owned and controlled by First Nations people or registered under the Office of the Registrar of Indigenous Corporations, to qualify for IPP contracts.

The National Indigenous Australians Agency (NIAA) is developing clearer pathways for community members to identify and report businesses using dishonest structures to access contracts they are not eligible for.

Furthermore, the government has proposed to increase spending with First Nations businesses each year, with targets set to grow steadily through to 2030. For businesses that qualify, this could represent a growing pipeline of opportunity.

The proposed key changes at a glance:

	Current Settings	Proposed Reforms
Government spending target	2.5% baseline	3%, increasing to 4% by 2030
Ownership requirements	Less prescriptive	Strict 51% ownership and control
Integrity enforcement	Limited	Expanded reporting pathways

If you are a Queensland-based First Nations business navigating these changes, the Queensland Indigenous Business Network (QIBN) is a useful starting point. As the state-wide representative body for Aboriginal and Torres Strait Islander businesses in Queensland, QIBN provides connections, support services, and a collective voice to government and industry. Karlaya is a proud member of the network.

Our Ways – Strong Ways – Our Voices

The government has proposed $218.3 million to support Australia’s first standalone national plan addressing family, domestic, and sexual violence in First Nations communities.

The initiative is intended to support community-controlled organisations delivering culturally safe services, crisis accommodation, and prevention initiatives for women, children, and families.

Remote Jobs and Economic Development

The government has proposed additional funding for the Remote Jobs and Economic Development (RJED) program, with the program expected to support up to 6,000 remote jobs by 2030.

Importantly, RJED is not limited to government-delivered roles. Local organisations and businesses operating within eligible regions can potentially apply to become employers under the program.

For organisations operating in Remote Australia Employment Service regions, this may become an area to discuss with an adviser as more information becomes available.

Community-Controlled Organisations

The government has proposed additional funding for Aboriginal and Torres Strait Islander Community Controlled Organisations delivering family violence support services, health infrastructure, and Birthing on Country programs.

Community-controlled organisations operating in these areas may want to monitor funding pathways and eligibility requirements as further detail is released.

Individual Tax Measures

Several measures may also affect individuals, employees, and sole traders, depending on your circumstances.

Stage 3 tax cuts

The government has already legislated Stage 3 tax cuts. From 1 July 2026, the tax rate applying to income between $18,201 and $45,000 is scheduled to reduce from 16% to 15%, with a further reduction to 14% from 1 July 2027.

$250 Working Australians Tax Offset

From 1 July 2027, the government is proposing a $250 annual tax offset for individuals earning income from work, including sole trader business income. In practice, this could reduce the tax you owe each year by a modest amount. That’s roughly equivalent to raising the tax-free threshold by around $1,800.

$1,000 Instant Work-Related Deduction

This measure is expected to apply to salary and wage earners. Eligible employees may be able to claim an automatic $1,000 deduction for work-related expenses without keeping receipts for claims below that amount.

Employees with work-related expenses above $1,000 may still be able to claim the higher amount under the usual record-keeping requirements.

Donations, tax agent fees, union fees, professional association memberships, personal super contributions, and other non-work-related deductions are expected to remain claimable separately under this proposal.

Tax Changes to Watch Closely

Several proposed tax reforms are likely to generate ongoing discussion over the coming years.

CGT reform from 1 July 2027

Capital gains tax (CGT) is the tax you pay when an asset is sold for more than its original purchase price.

Currently, individuals and trusts can get a 50% CGT discount on eligible assets held longer than 12 months. The Budget proposes changes to how capital gains are calculated on assets sold after 1 July 2027.

Two things to note. First, existing small business CGT concessions are expected to remain unchanged. Second, gains made before 1 July 2027 may retain access to the current 50% discount. The proposed change would only apply to gains from that date forward, so there’s time to plan. It’s always advisable to speak to your accountant before making any decision.

Negative gearing

Negative gearing is when the costs of owning an investment property, including mortgage interest, council rates, and maintenance, are higher than the rent you receive. Currently, you can use that shortfall to reduce your overall taxable income.

From 1 July 2027, that’s proposed to change for established residential properties purchased after 7:30pm AEST on 12 May 2026. Under the proposal, losses on those properties would only offset income or gains from other residential properties. Properties owned before that time would generally be unaffected until you sell. Additionally, new builds are expected to be exempt from this change.

Ultimately, how this affects your situation will depend on your individual circumstances. Once the government releases the legislation, it’s a good time to go through it with your accountant.

Discretionary Trust Minimum Tax

Discretionary family trusts are commonly used by family businesses to manage how income is distributed.

From 1 July 2028, a minimum 30% tax rate may apply to income held within discretionary trusts. The government has also flagged a potential restructuring window between 1 July 2027 and 30 June 2030, which may allow eligible businesses to restructure without triggering capital gains tax liability.

If your business operates through a family trust, this is one to keep an eye on as more detail becomes available. Revisit it with your accountant once more information is released.

Cost of Living Relief

The Budget also includes several broader cost-of-living measures, including temporary fuel excise relief, additional Pharmaceutical Benefits Scheme listings, energy bill support, and Medicare threshold changes.

While not business-specific, these measures may still affect households, employees, and day-to-day living costs across the broader community.

Practical Steps to Consider

Although these measures have not yet been legislated, there are several areas to keep an eye on.

If your business works under the Indigenous Procurement Policy, you may want to check that ownership and decision-making arrangements meet the proposed requirements.
If you operate through a family trust, put a conversation with your accountant on the calendar once more details are released.
Property investors may want to monitor the proposed negative gearing changes and how they could affect their situation when the legislation is released.
If you’re considering selling assets, it’s a good idea to have a conversation with your accountant as legislation develops.

If you would like support understanding how these changes may affect you, the team at Karlaya is here to help you work through it. You can book a meeting with us here.

This article contains general information only and does not constitute financial, tax, or legal advice. The measures discussed are based on Budget announcements available at the time of writing and may change as legislation develops. Professional advice should be obtained before making decisions based on this information

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