Treasurer Jim Chalmers has handed down the 2026 federal Budget. Here’s everything small businesses need to know.

An overhaul of the capital gains tax system, new minimum tax rates for discretionary trusts, and long-awaited negative gearing changes lead a federal budget with real relevance to the small business sector.

Treasurer Jim Chalmers billed it as the most ambitious slate of tax reforms in more than 25 years, and the 2026-27 federal budget, handed down Tuesday, outlines how federal Labor intends to tackle a growing intergenerational divide.

But those hoping for deeper, holistic tax reform may be left wanting, with questions about broadening the tax base left unanswered.

And the same capital gains tax reforms, intended to make the housing market fairer for young Australians buying their first home, could rattle the startup sector.

Here’s what small businesses need to know about the budget.

Capital gains tax reform

The current 50 per cent capital gains tax discount will be replaced by a model taxing the ‘real’ profits of sold assets above inflation.

The new method kicks in from July 1, 2026, with hybrid rules for assets bought before that date but sold further into the future.

Small business concessions remain in place, but a question mark lingers over the startup sector and fearful investors.

Negative gearing

Negative gearing, allowing investors to offset losses linked to their property against their income, faces a major shake-up.

Firstly, the Albanese government will limit negative gearing for residential property to new builds.

From July 1, 2027, losses on established homes will only be deductible against rental income, or capital gains from selling residential properties.

The changes kick in Tuesday night – but properties bought before 7.30pm on May 12, 2026 will be exempt from the changes until they are sold.

Trust tax reform

A new baseline tax on discretionary trusts will come into play from July 1, 2028.

It will not affect beneficiaries, as some had predicted. Instead, it will fall on trustees, who will face a minimum 30 per cent tax.

Small businesses transitioning out of trusts and into other structures will receive rollover relief for three years July 1, 2027.

It’s part of a suite of measures the Albanese government says will make the tax system fairer for those who cannot fully benefit from income-splitting trust arrangements.

Working Australians Tax Offset

budget’s theme of prioritising income from work over that of investments, a new, permanent $250 tax offset is coming.

Budget documents state some 13.3 million Australians will become automatically eligible for the Working Australians Tax Offset past July 1, 2027, including around 1.5 million sole traders.

Loss carry-backs

This COVID-era policy, allowing businesses to carry back tax losses into an earlier year when they recorded a profit, is coming back.

From July 1, 2026, companies with aggregated turnover under $1 billion will be able to carry those losses against tax paid up to two years earlier.

Up to 85,000 businesses are set to benefit from the measure, according to the budget papers.

Instant asset write-off

As confirmed ahead of the budget, the Albanese government intends to make the $20,000 instant asset write-off permanent.

It claims the measure will provide $890 million in cash flow support to eligible small businesses in the next five years – and save 366,000 hours spent calculating depreciation schedules the normal way.

Payroll tax harmonisation… to a point

To make it easier for businesses to manage payroll tax obligations across different jurisdictions, the budget pledges to “harmonise” arrangements across the states and territories.

That does not necessarily mean payroll tax rates will be unified, but the government says the effort “will further reduce time spent on record keeping, systems and procedures.”

Free access to industry standards

For years, small businesses have had to pay out-of-pocket to access mandatory standards covering areas like construction, health and safety, and product safety.

The budget makes access to those standards free, which the government says could save some businesses up to $1,600 per year.

Business registers and Director ID

The long-running quest to support Australia’s ageing business registration infrastructure continues, with $136.1 million in new funding.

This will “uplift” Australian Business Number authentication systems, and transition ABN and superannuation lookup functions to the tax office.

Notably, it will also help lonk Director IDs to the companies register, with the overall goal of making it harder for dodgy directors to illegally phoenix their business.

Consumer Data Right funding – and ATO links

The Consumer Data Right, which allows Australians to safely share financial information, will cop a $62 million funding boost over two years.

The government will explore whether taxpayers could share information to the ATO through the system.

That would be a very interesting turn for a technology now showing up in small business payroll software.

Small business support in Fair Work

The budget provides another $1.3 million to the Fair Work Commission to help it provide specialised support to small businesses navigating disputes and Commission processes.

Expanded monthly business tax payments

The government will provide $10.9 million to the ATO to broaden a pilot program offering “dynamic” Pay As You Go instalment calculations to small businesses.

SMEs can opt in to the pilot from July 1, 2027, where they will access “an ATO-approved calculation embedded in accounting software to calculate and vary their instalments.”

This effort “will support businesses by enabling tax instalments to better reflect real time business activity,” according to budget documents.

Productivity Commission looks into early-stage dynamism

With Treasurer Jim Chalmers making productivity a major focus of his tenure, the budget shows the Productivity Commission has been tasked with a new inquiry on business dynamism.

It will “look into the barriers firms face – particularly young firms that create 6 out of every 10 new jobs – and whether Australia’s corporate, anti-phoenixing and  personal insolvency frameworks are fit for purpose and working effectively,” according to the budget documents.

New legislation to cut away red tape

The government plans to fight excess regulation by introducing new bills cutting away at “unnecessary” reporting and disclosure requirements in the financial sector.

Additionally, planned legislation will reform regulatory requirements for small and medium-sized banks, and “simplify” financial system frameworks.

More nuisance tariffs cut

The government pledges to cut an extra 497 ‘nuisance’ tariffs, affecting the import of everything from air conditioners to margarine.

This will cost the government $70 million over the five years from 2025-26, but is projected to save businesses $157 million in compliance costs each year.

This post first appeared on SmartCompany. You can read it here.

Want more? Get our newsletter delivered straight to your inbox! Follow Business Builders on Facebook, Twitter, Instagram, and LinkedIn.