A Bill that many small business owners have been watching closely has now passed into law.
The Treasury Laws Amendment (Tax Reform No. 2) Bill 2026 received Royal Assent on 26 August 2026, confirming several tax measures that were announced in the 2026-27 Federal Budget. The most broadly applicable changes for small businesses are the permanent instant asset write-off and the permanent loss carry-back regime.
This article sets out what the legislation confirms and what it means in plain terms.
Instant Asset Write-Off: Permanently Set at $20,000 From 1 July 2026
Previously, the instant asset write-off threshold has been legislated on a year-by-year basis, which created ongoing uncertainty for businesses trying to plan asset purchases. That uncertainty is now resolved.
From 1 July 2026, the $20,000 instant asset write-off is a permanent feature of the tax rules.
Eligible small businesses with aggregated annual turnover of less than $10 million can immediately deduct the full cost of eligible depreciating assets costing less than $20,000, provided the assets are first used or installed ready for use for a taxable purpose on or after 1 July 2026.
- The $20,000 threshold applies per asset, meaning multiple qualifying assets can each attract an immediate deduction in the same income year
- Assets costing $20,000 or more will generally be added to the small business simplified depreciation pool, attracting a 15% deduction in the first year and 30% in subsequent years
- A pool balance can also be written off in full once the pool balance falls below the $20,000 threshold at year end, before current year depreciation deductions are applied
For small business owners who have been managing asset purchases around temporary thresholds, the permanence of this measure provides a more stable planning framework going forward.
The Loss Carry-Back Regime Is Also Now Permanent
The second significant measure in the Bill is the introduction of a permanent loss carry-back regime for eligible corporate tax entities.
For income years commencing on or after 1 July 2026, an eligible company with a tax loss can carry that loss back against tax paid in either or both of the two preceding income years.
Where the conditions are met, this can generate a refundable tax offset, meaning a company that paid tax in a prior year and then incurs a loss may be entitled to receive a cash refund from the ATO rather than simply carrying the loss forward.
The legislation includes limitations on how this operates, including in situations where losses have been transferred within a corporate group under tax consolidation provisions. The resulting refund is also subject to statutory limits under the relevant division rules.
This measure applies to corporate tax entities that are not significant global entities. The specific eligibility conditions and the interaction with other rules will depend on a company's particular circumstances.
For businesses that have experienced a difficult year following a period of profitability, the permanent carry-back regime is a meaningful tool. Understanding how it interacts with your broader tax position is worth discussing with your adviser.
Negative Gearing Amendments: Technical Clarifications
The Bill also includes amendments to the negative gearing reforms that address some technical issues identified after the initial legislation passed.
These amendments clarify how the rules interact with the main residence exemption provisions, specifically in connection with the "home first used to produce income" rule.
The effect is that a taxpayer can continue to claim negative gearing deductions for a residential rental property against other income sources for a property acquired before 12 May 2026, even if the "home first used to produce income" rule within the main residence exemption provisions would otherwise be taken to have re-set the acquisition date.
- Where a residential dwelling passes to someone following the death of the original owner
- Where there is a relationship breakdown
In some cases under these provisions, the property can continue to be grandfathered from the negative gearing reforms even though a change in ownership occurs after the relevant date. The legislation notes that these rules are complex and require careful consideration in each case.
These clarifications address issues that were identified during Senate debate on the earlier legislation. A second tranche of legislation had flagged these scenarios, and this Bill resolves them.
A Note on the PNG Rugby League Exemption
The Bill also implements an income tax exemption for amounts derived in respect of employment with PNG Chiefs Ltd from 1 July 2025 to 30 June 2035. This is a narrow, specific measure and is unlikely to affect the majority of Trekk clients, but it is part of the legislation as passed.
What This Means in Practice
The passage of this Bill provides certainty on a number of measures that businesses and their advisers have been monitoring since the May 2026 Budget.
- The instant asset write-off is now permanent at the $20,000 threshold, removing the need to plan around annual extensions
- The loss carry-back regime is now a permanent feature for eligible companies, available from the 2026-27 income year onwards
- The negative gearing technical amendments provide clarity on grandfathering in specific situations involving deceased estates and relationship breakdowns
Each of these measures has specific eligibility conditions and rules around how they operate in practice. The right outcome in any individual situation will depend on the particular facts and circumstances involved.
For reference, you can read the Treasury Laws Amendment (Tax Reform No. 2) Bill 2026 in full here on the Australian Parliament House website.
Questions About How This Applies to You?
The measures in this Bill each have their own eligibility conditions and interact differently depending on your business structure and circumstances. If any of the changes covered above are relevant to your situation, we are happy to have that conversation.
Talk to the Trekk Advisory team - no pressure, just clarity on where you stand.
Trekk Advisory provides accountant-led tax, bookkeeping, and advisory services for Australian business owners. This article is general in nature and does not constitute personal advice. Please speak with a qualified adviser regarding your specific circumstances.
