Two tax measures just became permanent. Here is what the instant asset write off and loss carry back offset are worth to your business, and what to check before making any big moves.
Most tax changes arrive with a deadline attached. You hear about them in May, you think about acting on them in June, and by July the rule has expired or shifted again. The two measures that passed this year are different. Both are permanent. That changes how you should think about them.
The Treasury Laws Amendment (Tax Reform No. 2) Act 2026 received Royal Assent in August. It makes the $20,000 instant asset write off permanent for small businesses and reintroduces a loss carry back tax offset for companies.
Here is what each measure does, who it applies to, and the conversations worth having before making any big moves.
Part one: the instant asset write off is now permanent
What it does
If your business buys a piece of equipment, you normally claim the cost gradually. A $15,000 machine might give you a deduction spread across several years, matched to how long the asset is expected to last. The instant asset write off collapses that. You claim the whole cost in the year you start using the asset.
From 1 July 2026, small businesses with an aggregated turnover of less than $10 million can deduct the full cost of eligible depreciating assets costing less than $20,000 that are first used or installed ready for use in an income year, under Australian Taxation Office guidance.
The threshold applies per asset. Three separate items at $18,000 each are three separate claims, provided each one meets the rules.
What changed
The threshold itself is familiar. What changed is that it stopped being temporary. For more than a decade the threshold was set on a year by year basis, often legislated only weeks before the previous extension expired, and the standing legislated fallback was $1,000.
That fallback is where it gets interesting. Every year the extension was renewed, businesses were making purchase decisions against a rule that could drop from $20,000 to $1,000 if Parliament ran out of sitting days. Buying a $16,000 trailer in June instead of July was a genuinely different tax outcome, and nobody could say with certainty which side of the line a business sat on until the legislation passed.
That guessing game is over. The changes permanently set the instant asset write off threshold at $20,000, and permanently set the general small business pool threshold at $20,000 as well, from 1 July 2026.
What happens above $20,000
Assets costing $20,000 or more still get claimed, simply over a longer period. For a small business using the simplified depreciation rules, those assets go into the small business pool and are written off at 15 per cent in the first year and 30 per cent each year after that.
So a $25,000 asset is still fully deductible eventually. The difference is cash flow timing, and that timing matters more to some businesses than others.
The catch worth knowing about
The asset has to be first used, or installed ready for use, within the income year. Ordering it is not enough. Paying for it is not enough. If a piece of equipment is sitting on a loading dock in Melbourne on 30 June and arrives at the workshop on 3 July, the deduction belongs to the following year.
There is a second point that catches people out later. If an asset is written off in full and then sold in a later year, the written down value is nil, so the sale proceeds are treated as income in the year it is sold. The deduction is brought forward, not created from nothing. That is worth factoring in for any business that runs a fleet or replaces plant on a regular cycle.
What it is actually worth
The deduction reduces taxable income. The cash benefit is the deduction multiplied by the tax rate, so a $20,000 asset in a company paying 25 per cent is worth $5,000 in tax, not $20,000 in the bank. The asset still costs $20,000.
That distinction matters, because the write off is not a reason to buy something the business does not need. It is a reason to stop bending the purchase decision around the calendar. If the ute needs replacing, replace it when the business needs it replaced. The tax treatment is settled either way now.
Part two: loss carry back returns for companies
What it does
Companies pay tax when they make a profit. When they make a loss, the loss usually sits there as a carry forward, waiting for a profitable year to absorb it. If that profitable year is three years away, the cash benefit is three years away too.
Loss carry back changes the direction. Corporate tax entities with aggregated annual global turnover of less than $1 billion will be able to carry back a tax loss and offset it against tax paid in either or both of the two previous income years, according to the Australian Taxation Office.
The mechanism is a refundable tax offset. Rather than waiting until future years to use the loss, the company claims a refundable tax offset and receives a cash benefit sooner.
In practice: a company paid tax in 2024 to 25 and 2025 to 26. Trading conditions turn and 2026 to 27 produces a loss. Instead of parking that loss until profits return, it can be converted into a refund of tax already paid.
Who it applies to
This measure is narrower than the write off, and the boundary is structural rather than about size. The offset is available to corporate tax entities that are not Significant Global Entities, being entities that are part of a global group with annual global income of $1 billion or more.
The word to focus on is corporate. Businesses trading through a company are potentially covered. Sole traders, partnerships, and trusts that distribute their income sit outside this measure. Losses in those structures follow different rules altogether, worth a separate conversation.
When it can be claimed
The changes apply to income years starting on or after 1 July 2026, and eligible corporate tax entities will first be able to claim the refundable tax offset in their 2026 to 27 income tax returns.
So the first claims land at 2026 to 27 lodgement. Preparation starts now, because three things determine the outcome, and all three move while the year runs.
The three limits
First, revenue losses only. Loss carry back applies to revenue losses only and is limited by the entity’s franking account balance. A capital loss on a property or a share parcel sits outside this.
Second, the tax actually paid. The offset cannot exceed the relevant tax paid for the earlier year. If a company paid $40,000 across the two prior years, $40,000 is the ceiling, whatever the loss looks like.
Third, the franking account. This is the one that surprises people. The franking account tracks the tax a company has paid and has yet to pass to shareholders as franking credits on dividends. Carrying a loss back effectively claws some of that tax back, so the offset is capped by what sits in the franking account at year end. A large fully franked dividend paid in a year when a loss is also being carried back means the two decisions compete with each other.
That last point is the clearest example of why this measure rewards planning. A dividend decision made in isolation in March can quietly shrink a refund expected the following October.
Why permanence is the real story
Taking a step back from the numbers, the valuable change here is not the $20,000, which has been the number for years. It is that both measures are now part of the standing landscape rather than something renewed annually.
Permanent rules do something temporary rules cannot. They allow a decision to be made on its merits.
The old pattern went like this. A business owner needs a second vehicle in about eighteen months. The write off is due to expire in June. So the purchase gets pulled forward into a year when cash is tight, financed at a rate that outweighs the deduction, because the rule might vanish. The tax tail wagged the business dog, every single year.
Now the question returns to where it belongs. Does the business need the asset? Can it afford the asset? Will the asset earn its keep? Answer those first. The tax treatment is already settled and will be settled next year too.
The same logic applies to loss carry back. A company heading into a heavy investment year, or a year of deliberately slower trading while it retools, can now model that decision knowing a loss converts to cash rather than sitting on the shelf. That changes what is possible. Loss carry back is expected to benefit up to 85,000 companies each year, mostly small businesses, with the largest impacts in construction, manufacturing, professional and scientific services, finance and insurance, and wholesale trade, according to Treasury.
This is The 1% Way in practice. No single decision here transforms a business. A purchase timed properly, a dividend sequenced properly, a loss converted to cash in the year it happens rather than three years later. Each one is a small improvement. Repeated across a few years, they compound into a materially different position.
What to look at before the end of this financial year
For the instant asset write off
- List the assets the business will realistically need in the next twelve to eighteen months, with an honest price against each.
- Split the list at $20,000. Below the line is an immediate deduction, at or above the line goes into the pool.
- Check delivery and installation timing for anything close to a year end, because first used or installed ready for use is the test.
- Confirm the aggregated turnover position, remembering that aggregated includes connected entities and affiliates rather than one company in isolation.
- Sense check the finance. A deduction is worth the tax rate, so interest on an unnecessary purchase can easily exceed the benefit.
For loss carry back
- Confirm whether the structure is a company. If it is anything else, the measure sits outside the position.
- Pull the tax paid in the previous two income years, because that is the ceiling.
- Check the franking account balance, because that is the second ceiling.
- Model the projected 2026 to 27 taxable income now rather than at lodgement.
- Sequence any dividend decisions against the franking account position before declaring.
The conversation worth having
The honest answer to what these measures are worth depends on structure, timing and position. A company with tax paid across two solid years and a healthy franking account is in a very different place to a trust that distributed everything. A business needing $60,000 of equipment gets a different answer to one needing three items at $15,000.
Both of those are five minute conversations that produce very different numbers.
The useful step is to have the conversation before the purchase rather than after it. Once an asset is installed and once a dividend is declared, the options narrow considerably. Before that, there is room to move.
How 360 ONE Supports You Through These Changes
Both measures sit at the centre of our accounting and tax service. Our team reviews the purchase and structure decisions behind the instant asset write off, and works through the franking account and prior year tax position behind any loss carry back claim. Where a purchase or dividend decision touches broader business strategy, our advisory team is part of the same conversation.
For 360 ONE clients, this is a conversation we have well before 30 June, not after it. We look at the whole picture, the structure, the prior year tax position and the plans ahead, and give a straight answer on what these measures are worth in your situation.
If you would like to talk through what these changes mean for your business, get in touch today.