Author
Marcus PetrovicDirector & Head of Client Strategy
For business owners already under financial pressure, and for the accountants, lawyers and advisers who work with them, understanding what has changed (and what has not) is essential. This article covers the overarching changes affecting all businesses, the impact on five key industries, and the ATO enforcement environment that underpins them.
Changes that affect most businesses
Payday super from 1 July 2026
From 1 July 2026, superannuation guarantee contributions must be paid on the same day as wages rather than quarterly. This affects every business with employees and is the most operationally urgent change in the entire budget.
The ATO will monitor compliance in real time through Single Touch Payroll from day one. Where super is not paid and not reported within required timeframes, directors can become personally liable through a lockdown Director Penalty Notice, with no ability to avoid that liability by placing the company into administration or restructuring.
ATO interest charges are no longer tax-deductible
From the 2025-26 income year, the General Interest Charge (GIC) applied to outstanding ATO debts is no longer tax deductible. At a current rate of approximately 11% per annum, this change increases the real after-tax cost of carrying ATO debt by around 33%.
To put that in practical terms: a business carrying $100,000 in ATO debt is now paying approximately $11,000 per year in non-deductible interest. A $250,000 debt costs approximately $27,500 per year. These are not small numbers, and they materially change the calculus for any business considering whether to maintain a payment plan or address the underlying debt more decisively.
This change makes a Small Business Restructuring a more attractive alternative to an ongoing payment arrangement. Rather than carrying an increasingly expensive debt, an SBR may allow eligible businesses to resolve the underlying obligation on more favourable terms.
$20,000 instant asset write-off is now permanent
The $20,000 instant asset write-off for small businesses with aggregated turnover under $10 million is now permanent from 1 July 2026, providing greater certainty for capital expenditure decisions.
Assets costing $20,000 or more continue to be depreciated through the simplified depreciation pool. Note that the threshold is not indexed, so its real value will erode over time.
Loss carry-back is reinstated
The loss carry-back measure has been permanently reintroduced from 1 July 2026 for companies with aggregated turnover under $1 billion. A company that makes a tax loss can carry it back against taxable income from either of the two preceding income years and claim a refundable tax offset.
There is an important limitation that is not always highlighted. The carry-back is capped by the company's franking account balance at the end of the loss year. If prior profits have been fully distributed or tax payments have not been maintained, the benefit may be reduced or eliminated entirely. Review your franking account position before assuming a refund is available.
Small business restructure rollover
The existing small business restructure rollover (SBRR) remains available and unchanged. It allows eligible businesses with turnover under $10 million to transfer active assets between entities without triggering immediate tax consequences. The small business CGT concessions were also confirmed as remaining available.
This budget introduced a separate, time-limited rollover for businesses exiting discretionary trust structures. Available for three years from 1 July 2027, it allows eligible businesses to restructure from a discretionary trust into a company or fixed trust without income tax or CGT consequences. Together, they form the core restructuring toolkit for businesses responding to the 30% minimum trust tax.
Note that neither of these should be confused with the Small Business Restructuring (SBR) process, which is a formal insolvency pathway for eligible companies with liabilities under $1 million. They are entirely separate mechanisms.
Dynamic PAYG instalments from 2027
From 1 July 2027, eligible businesses that currently pay PAYG instalments quarterly will be able to opt into monthly reporting and payment cycles using ATO-approved formulas embedded in accounting software. Businesses using the approved calculations will be protected from penalty interest where variations are unintentionally incorrect.
Importantly, participation will be mandatory for certain taxpayers with a history of non-compliance. For advisers with clients in this category, it is worth factoring into forward planning now.
Junior wage rates phased out for 18 to 20 year olds
The Fair Work Commission will phase out junior award rates for workers aged 18 to 20 in retail, fast food and pharmacy. This directly raises the labour cost floor for businesses in those sectors that rely on younger staff. This is bound to place additional stress on retail and hospitality businesses already struggling with cash flow problems.
The discretionary trust minimum tax: what every business owner needs to understand
From 1 July 2028, a 30% minimum tax will apply to the taxable income of discretionary trusts at the trustee level. Currently, discretionary trusts allow business income to be distributed to family members at their individual marginal tax rates, significantly reducing the overall tax paid. That will no longer be the case.
Around 350,000 small businesses are affected. Of those, approximately 60% will either pay additional tax under the new regime or need to restructure their arrangements.
The government has announced a three-year rollover window from 1 July 2027 to 30 June 2030, allowing eligible businesses to restructure from a discretionary trust into a company or fixed trust without triggering income tax or CGT consequences. Three years sounds sufficient, but given the volume of businesses affected and the complexity of unwinding a trust, advisers should be starting these conversations with clients now.
Some income types are excluded, including primary production income and income from testamentary trusts existing at the date of announcement.
For businesses carrying ATO debt as well as operating through a discretionary trust, the interaction between restructuring and existing tax obligations adds another layer of complexity that requires professional guidance.
What these changes mean for your industry
Construction and trades
The construction sector enters this budget period as the ATO's highest-priority enforcement target, carrying $4.3 billion in disengaged collectable debt nationally. In 2025, 2,735 construction businesses in Australia entered Liquidation, the vast majority of which did so because of tax debt. That position has not changed as a result of this budget.
The government's $2 billion housing infrastructure fund, targeting 65,000 new homes over ten years, creates a pipeline of work for builders and trades. New builds retain full negative gearing, sustaining investor demand for new construction. Mandatory Australian standards are now free to access, saving small electrical, plumbing and construction firms up to $1,600 per year.
Despite the investment, business owners face far greater headwinds than in previous years.
- Payday super creates cash flow pressure for project-based businesses with variable-wage weeks
- While fuel costs remain elevated and are likely to increase due to the war in Iran.
- Material costs are expected to fluctuate significantly due to the war in Iran.
Hospitality
Hospitality carries forward relief from the 2025-26 budget rather than receiving new measures in this one.
The draught beer excise indexation freeze applies until August 2027, providing cost relief for venues with taps. The excise remission cap for eligible brewers and distillers has increased from $350,000 to $400,000 per financial year from 1 July 2026, with the Wine Equalisation Tax producer rebate lifted to the same level. These are welcome adjustments given the cap had not moved since 2021 despite steady excise rate increases.
The headwinds are real:
- Junior wage rates for 18 to 20 year olds are being phased out, directly raising floor staff costs.
- Bottled and canned product is not covered by the excise freeze
- Payday super disrupts the weekly wage cycles common across the sector.
Retail
The personal tax cuts and $1,000 instant deduction provide a modest consumer spending uplift. The permanent $20,000 instant asset write-off benefits retailers investing in fit-out and equipment. The abolition of 497 nuisance tariffs offers minor import cost relief.
The headwinds are more direct:
- Retail is specifically named in the junior wage rate phase-out for 18 to 20 year olds.
- Payday super changes weekly payroll processes
- Many family retail businesses structured through trusts face the 30% minimum tax from 2028
The tax relief amounts to $268 per worker in 2026-27, rising to $536 from 2027-28. Welcome, but unlikely to significantly counteract the major cash flow stresses currently being experienced.
Manufacturing
Manufacturing receives genuine support through supply chain investment and R&D reform, though the reach is more limited than the sector had hoped.
The $1 billion in interest-free National Reconstruction Fund loans is practical for capital-intensive operations. The Critical Minerals Strategic Reserve and domestic smelting investments benefit manufacturers in those supply chains. The 20% gas export reservation reduces energy costs for gas-dependent manufacturers.
The R&D Tax Incentive reforms from 1 July 2028 include a higher offset rate for core experimental R&D and an increase in the turnover threshold for the higher refundable offset from $20 million to $50 million. However, supporting R&D expenditure will no longer qualify, and the minimum spend required to access the incentive rises from $20,000 to $50,000, tightening access for smaller programs.
The broader limitation is reach. Major grants and investments remain skewed toward defence and the government's seven priority sectors, leaving broader manufacturing without the same level of direct support.
Professional and financial services
Professional services is the sector most directly affected by the discretionary trust minimum tax. Law firms, accounting practices, consulting businesses and financial advisory firms are among the most common users of these structures, and many will need to review income-splitting arrangements before 2028. The rollover relief window provides a pathway, but unwinding a trust takes time, especially when property, goodwill, or other assets are involved.
The budget also creates significant advisory demand. The trust minimum tax alone affects an estimated 350,000 businesses, the majority of which will need professional guidance on whether to absorb the additional tax or restructure.
For financial services specifically, the MIT regime has been clarified for single, widely held institutional investors, and the corporate tax residency test has been reformed to a "significant economic connection to Australia" standard. The OECD Pillar Two package, which applies from 1 January 2026, creates additional compliance demands for firms advising multinational clients.
One notable absence: there wasn’t any mention of tax debt taskforces receiving any new funding reference in this budget. That does not mean enforcement is easing. The machine is already funded and running.
The ATO enforcement picture
Although the 2026-27 budget did not introduce major new enforcement funding, the 2025-26 budget had already allocated $999 million to the ATO, the vast majority of which was for tax compliance and avoidance programs. That investment is already deployed and operational.
The numbers speak for themselves. In 2024-25, the ATO issued 84,529 Director Penalty Notices covering $5.5 billion in company tax liabilities, a 136% increase from the prior year. Total collectable debt stands at approximately $46.4 billion, with small businesses accounting for around 65%. One in three businesses with ATO debt defaults exceeding $100,000 and more than 90 days overdue becomes insolvent or closes within a year.
Payday Super creates a new DPN tripwire from 1 July that is entirely separate from any existing debt. A business with no legacy ATO issues that fails to pay and report super on time can find its directors personally liable through the lockdown DPN provisions.
If your business is carrying ATO debt or facing financial pressure, a Small Business Restructuring may be an option worth exploring. Contact the Mackay Goodwin team to understand what is available for your situation.
What business should look into now
Get payroll systems ready for Payday Super before 1 July 2026. A processing error that causes late super can trigger a Superannuation Guarantee Charge and, if not reported in time, a lockdown Director Penalty Notice.
If your business is structured as a discretionary trust, engage an adviser before the end of 2026. The rollover window does not open until 2027, but the planning takes time. Waiting until 2027 will mean competing for adviser capacity with tens of thousands of other affected businesses.
If you are carrying ATO debt, review the real cost now that GIC is non-deductible. A payment arrangement that made sense last year may be significantly more expensive in real terms today.
If your company posted a loss in 2026-27, check your franking account balance before assuming the loss carry-back will generate a cash refund. The franking account cap is a real and often overlooked limitation.
If you are in construction with outstanding ATO obligations, engage before enforcement escalates. The ATO has demonstrated it will use all tools available, including DPNs, garnishee notices and departure prohibition orders, against businesses that do not engage.
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