For startups and small businesses, growth and innovation often involve taking calculated risks. But when an investment or expansion results in a financial loss, it can put pressure on cash flow and make business owners think twice about pursuing new opportunities.

The Federal Budget 2026 introduces new loss carry back arrangements designed to reduce some of the financial impact of business losses and support investment, innovation and growth.

What is loss carry back?

Loss carry back arrangements allow eligible companies to use current-year tax losses against profits from previous years, potentially resulting in a tax refund.

This can provide valuable cash flow during periods of investment, such as research and development, launching new products or expanding your business.

How will it work?

From 2026–27, eligible companies that make a current-year loss will be able to claim a refund against tax paid in the previous two income years.

The key requirements include:

  • The measure applies to revenue losses.
  • The refund will be limited by the company’s franking account balance.
  • Companies must have aggregated annual global turnover of less than $1 billion.

 

The aim is to reduce some of the financial downside of taking calculated business risks and encourage greater investment and innovation.

Support for new startups

From 2028–29, eligible startups in their first two years of operation will also be able to receive refunds for tax losses, up to the value of fringe benefits tax and withholding tax paid on employee wages.

This will be available to startups with aggregated annual turnover of less than $10 million.

The $20,000 instant asset write-off

The Government is also permanently extending the $20,000 instant asset write-off from 1 July 2026.

Eligible small businesses with turnover of up to $10 million will be able to immediately deduct eligible assets costing less than $20,000, helping improve cash flow and support investment in the business.

Planning for growth

These measures could provide valuable support for businesses looking to invest, innovate and grow. However, eligibility and the tax implications will depend on your individual circumstances.

If you’re planning an expansion, investing in new assets or exploring an innovative opportunity, talk to our team. We can help you understand how these measures may apply to your business and plan your tax position accordingly.