The 2026–27 Budget and Your Business
What small business owners and hospitality operators need to know — and act on
Modern Australian Office Building at Dusk
This article is general information only. Always speak with a qualified accountant or financial adviser before making financial decisions.
Most of the budget headlines have focused on property investors and workers — but buried inside this budget are measures that materially affect how small businesses are taxed, structured and funded. And for hospitality operators specifically, the economic settings in this budget create a genuinely challenging 12 to 18 months ahead.
Here's what you actually need to know, in plain English.
1. The tax measures that work in your favour
Loss carry-back: a real cash flow tool
If your company has annual turnover under $1 billion — which covers essentially every small business in Australia — you can now carry back losses for up to two years. That means if your business recorded a loss in the most recent financial year, you can offset it against taxable income from the previous two years and receive a tax refund from the ATO. The federal budget confirms this will benefit up to 85,000 companies, mostly small businesses.
This is a meaningful cash flow tool. Rather than sitting on a carried-forward tax loss that only helps you in future profitable years, you can access real cash now. For businesses that have had a tough trading period, this is worth modelling with your accountant before the end of this financial year.
Australian Business Owner Reviewing Financial Documents
Pitcher Partners' budget analysis notes that the rules apply to income years commencing on or after 1 July 2026 and operate on a permanent basis — unlike the temporary COVID-era version.
Startup loss refundability
If your business is in its first two years of operation and recording losses — which is normal for early-stage companies — you can now receive those losses as a cash refund from the ATO rather than carrying them forward as a deferred tax asset. SmartCompany reports this will benefit up to 25,000 young companies each year, providing valuable cash flow support. This could meaningfully extend runway for founders burning through capital before reaching profitability.
Red tape reduction: $10.2 billion per year
The government's productivity package promises to remove $10.2 billion per year in regulatory compliance costs across the economy. The specific measures are still being detailed as legislation is drafted, but this covers licence requirements, reporting obligations, permit processes and other administrative burden. For small business owners, any genuine simplification of compliance is a material win — both in direct cost and in time.
Watch for the detail on the productivity package over coming weeks. If you're in a heavily regulated industry — food, hospitality, construction, financial services — there may be specific relief measures relevant to your sector.
2. Trusts: the 30% minimum tax is the biggest structural change
How trusts work today
Discretionary family trusts have been a cornerstone of small business tax planning in Australia for decades. The core strategy: a trustee distributes business income to multiple family members — spouse, adult children, a holding company — who each pay tax at their own (lower) marginal rate. The result is that the family collectively pays significantly less tax than if one person had earned the full income.
What's changing from July 2028
A minimum 30% tax rate will apply to all discretionary trust distributions. The trustee pays the tax; beneficiaries still declare the income in their returns. But income splitting to reduce the effective rate below 30% will no longer be possible. SBS News reports the government expects this to generate $4.47 billion over the decade — a figure that tells you just how widespread the current arrangements are.
Australian Businesswoman Meeting with Accountant
What's exempt
Agricultural income is exempt. Fixed trusts are exempt. Testamentary trusts (set up under a will) are exempt. Special disability trusts, deceased estates, complying superannuation funds, and charitable trusts are all also exempt. If you hold your business in a standard discretionary family trust to split income with your spouse or children, you are in scope.
Important — act earlyYou have two years before this takes effect. That sounds like a long time, but restructuring a trust has its own tax consequences — stamp duty, capital gains tax implications, and potential changes to asset protection. Act early, not in a rush.
What you should doBook a review with your accountant or tax adviser now. Understand your current trust distributions and model what a 30% minimum rate means for your tax position from July 2028 onwards. Explore your options early — including whether a restructure makes sense and what the cost of that would be. KPMG's budget analysis provides further technical detail on the rules.
3. EV novated leases: understand the transition before it's too late
The current deal
Electric vehicles on novated leases have been entirely exempt from Fringe Benefits Tax — making them one of the most tax-effective ways to finance a vehicle in Australia. For employees, payments come from pre-tax salary. For employers, there's no FBT liability. The effective cost of a novated lease EV has been dramatically lower than a conventional purchase.
What's changing
The budget flags that the scheme is being made 'more sustainable long term.' The full detail hasn't been released yet, but this language clearly signals the FBT exemption is being wound back — likely through a cap on eligible vehicle value, an income threshold, or a phase-out over time.
What you should doContact your salary packaging provider this week to understand the current arrangements and what transition rules are being proposed. Make sure any staff communications about novated leases are updated once the legislation is released — timing matters for employees making vehicle decisions right now.
4. Defence spending: a $53 billion pipeline for the right businesses
The opportunity
$53 billion in extra defence spending over the next decade, with $6.8 billion arriving in the next four years. This isn't just about weapons systems — it encompasses construction, civil infrastructure, logistics, cybersecurity, IT, communications, engineering, maintenance, training, catering, and facilities management.
Warehouse Professionals Reviewing Operational Documents
Who should pay attention
Defence procurement has historically been dominated by large multinational primes. But Australian government policy has been shifting toward greater SME participation in the defence supply chain, particularly in technology and sovereign manufacturing capability. Businesses in the following sectors should investigate seriously:
Construction & civil infrastructure
Information technology & cybersecurity
Logistics, transport & supply chain
Engineering — mechanical, electrical, systems
Niche manufacturing & component supply
Professional services & consulting
How to get started
The Office of Defence Industry Support (ODIS) is the trusted gateway for Australian SMEs looking to enter or expand their footprint in the defence sector. They offer advisory, guidance and mentoring services at no cost. The Defence Industry Development Grants Program also offers up to $1 million in matched funding across four streams — Sovereign Industrial Priorities, Skilling, Exports, and Security — with batches currently open.
This is a long game: relationships and panel positions built now translate into contracts in two to three years.
5. What it means for hospitality businesses
The honest assessment
There's no point softening this. The 2026–27 budget is landing at a difficult time for hospitality, and the economic settings in it create real pressure on the industry for the next 12 to 18 months.
Chef Reviewing Business Documents Before Service
Inflation and cost pressures
With inflation forecast to peak at 5% this year — driven by oil price increases flowing from the Middle East conflict — every cost line in a hospitality business is under pressure. Your food and beverage suppliers are paying more to transport goods. Your energy costs are rising. Your linen, cleaning and consumables are all going up. And your staff, whose cost of living is also rising, will reasonably expect wage increases at their next review. Business Victoria's 2026 outlook notes that sectors exposed to discretionary spending — including hospitality — face particular margin pressure.
Consumer spending will soften
At the same time, your customers are being squeezed by the same inflation. Eating out and drinking out are discretionary expenses — among the first things households cut when budgets tighten. Research from Restaurant & Catering Australia shows Australians are dining out around 12% less frequently than pre-2020, and when they do go out, expectations around value are higher than ever. Expect more price sensitivity at the counter, lower average spend per table, and more 'trading down' behaviour.
Labour: a double-edged sword
Unemployment is forecast to rise from 4.25% to 4.5% over the next two years. For an industry that has faced chronic staff shortages since the pandemic, marginally looser labour market conditions could make it easier to find and retain team members. But the same conditions mean your customers have slightly less job security — which feeds back into their spending caution.
Trust structures: act now
A large proportion of independent hospitality businesses are held through discretionary family trusts. The 30% minimum trust tax from July 2028 applies to those structures. If your venue or group is held this way, speak to your accountant before the end of this year. Two years sounds generous until restructuring timelines are factored in.
Red tape relief: watch this space
Hospitality is one of Australia's most compliance-heavy industries — licensing, food safety, council requirements, liquor laws, employment obligations. The productivity package's promised $10.2 billion in annual regulatory savings could include real relief in some of these areas. Watch for the legislative detail and engage with your industry association to ensure hospitality-specific compliance costs are on the agenda.
The hospitality playbook for the next 12–18 months
Given everything in this budget, here is what smart operators will be doing:
Review your menu and pricing now — before your suppliers update their own. Get ahead of cost increases rather than reacting to them mid-season.
Audit energy usage and lock in supply contracts where possible. Energy is one of your most volatile cost lines and it's moving upward.
Review your trust structure with your accountant this financial year. July 2028 has real lead time requirements if restructuring is needed.
Invest in your loyal regulars. In a softer consumer environment, repeat customers are worth more than ever. Loyalty programs, personalised service and genuine community matter.
Manage your roster with precision. A slightly easier labour market doesn't mean overstaffing — it means you can be more selective and build a more stable team.
Watch the red tape detail. As the productivity package legislation comes out, there may be genuine compliance savings on licensing or reporting that are worth actioning.
Get professional advice
Not sure how these changes affect your business?
Our team works with small business owners and hospitality operators to translate budget changes into clear, actionable strategy — from trust restructuring to cash flow planning.
The bottom line for business
This budget contains some genuine wins for small business — loss carry-back is a real cash flow tool, the red tape reduction package could deliver meaningful savings, and the defence spending pipeline creates a decade of opportunity for the right businesses.
But the trust tax change is significant and affects a large number of Australian businesses. If you've relied on a discretionary trust structure for tax planning, this is the most important thing to address in the next two years.
For hospitality specifically, the near-term outlook is challenging. The operators who come through the next 12 to 18 months in good shape will be the ones who manage their costs proactively, protect their loyal customer base, and use the current period to build a leaner, more resilient operation.