Small business tax relief measures enter lower house

Under the measure, the business gets a refundable tax offset as a proxy for the tax the entity would save if it deducted the loss in the income year or years to which the loss is carried back.

Schedule 2 of the bill amends the income tax law to make the $20,000 instant asset-off measure permanent.

This allows small businesses with an aggregated annual turnover of less than $10 million to immediately deduct the taxable purpose proportion of eligible depreciating assets. The assets must be cost less than $20,000. The measure will apply to any assets that first used or installed for a taxable purpose on or after 1 July 2026.

The two measures, which were announced in the budget, have been welcomed by accounting bodies that have long advocated for both measures to be made permanent.

The Tax Institute previously said that making the instant asset write-off a permanent feature of the tax system was "a practical and long-overdue step to support business investment and productivity".

The Tax Institute’s head of tax and legal, Julie Abdalla, said that for many years, small and medium-sized businesses, and their advisers, have endured uncertainty about whether the measure will be extended for another year.

"Often enabling legislation has been enacted too late in the year to do anything more than confirm anticipated tax treatment of decisions already made by taxpayers rather than encourage investment," said Abdalla.

“We are pleased that the government has committed to moving away from ad-hoc extensions of the IAWO. Doing so will provide certainty to small and medium-sized businesses by removing the ongoing cycle of temporary extensions that has created uncertainty and compliance complexity in recent years.”