Federal Budget Update: Quick Budget Wins Wont Calm Confidence Storm

Set against a backdrop of war in the Middle East and rising inflation, the 2026 Federal Budget offers mixed news for local businesses.

While the budget contains a few quick wins, sluggish economic growth projections and the impact of tax reform will only fuel the current environment of business uncertainty.

Although the budget responds to some of the immediate pressures businesses are facing, it will not shift momentum at a time when confidence is at historic lows.

We have just closed our most recent Survey of Business Expectations, and early results indicate sentiment is back to levels not seen since the height of the COVID pandemic. Cost pressures, margin squeeze, red tape, and the impact of the fuel crisis are all contributing to a very tough trading landscape.

While the budget provides for productivity and regulatory reform, understanding the details and practical application of these measures will be critical in the months ahead.

Compliance and regulatory costs for business have never been higher, so while initiatives to cut red tape are welcome, several announcements speak more to ambition than specifics.

Unfortunately, the Capital Gains Tax changes will impact beyond the housing sector, with potential flow-on effects for investment appetite, succession planning, and access to risk capital for start-ups and high-growth businesses.

The move to lock in the $20,000 instant asset write-off for small businesses is something we have long advocated for, so that is a positive step — although it is a missed opportunity not to increase this to a more realistic $50,000.

Key announcements for business include:

• Permanent extension of the instant asset write-off for small businesses with turnover under $10 million, with the threshold set at $20,000.
• Smaller businesses will benefit from broader access to the R&D tax incentive, with the offset threshold increasing from $20 million to $50 million. Larger businesses will benefit from an increase in the expenditure threshold from $150 million to $200 million.
• Permanent introduction of a two-year loss carry-back for all companies with turnover up to $1 billion from 2026 – 27.
• Expanded tax incentives for venture capital through increased asset caps.
• Mandatory standards in Commonwealth, state and territory legislation will now be free, delivering an estimated $1,600 saving for small businesses.
• Introduction of loss refundability for start-ups from 1 July 2028, applicable to businesses in their first two years.
• A $250 Working Australians Tax Offset from 2027 – 28 and a $1,000 instant deduction for work-related expenses from 2026 – 27.
• $2 billion in funding for the sewage and water infrastructure needed to support the delivery of 65,000 new homes.
• Introduction of concessional and government-backed loan programs to support businesses facing high fuel, freight, and energy costs.
• $85.2 million over four years to improve recognition of migrant skills, including faster and more flexible skills assessments and collaboration with states and territories on assessment-to-licensing pathways for priority trades.