Federal Budget 2026: What it means for SMEs

The Albanese government's May Budget delivered a mix of long-awaited certainty and new complexity for Australia's small business community – and for the mortgage and finance brokers who support them.

Roberto Sanz (pictured), general manager of sales and partnerships at small business lender Prospa, called it “a mixed Budget for small business… There are practical measures that support investment, but the broader reform package introduces complexity that business owners will need time to work through."

The permanent write-off

The headline measure for small business is the permanent $20,000 instant asset write-off – a hard-won win for the sector after years of temporary extensions and last-minute renewals.

"After years of temporary extensions and last-minute renewals, business owners finally have certainty," said Sanz. "They can plan equipment purchases, invest in new tech, or upgrade tools – and they know the deduction is there for good."

According to the treasurer Jim Chalmers, the write-off is estimated to save small businesses 376,000 hours of compliance time annually. The removal of the end-of-financial-year scramble is also expected to spread investment decisions more evenly across the calendar.

But Sanz noted a persistent limitation. "At $20,000, the threshold still falls short of the average asset value a small business purchases," he said. "Industry research puts that figure closer to $90,000. The certainty is welcome, but the cap limits the impact for businesses looking to make larger investments in equipment, vehicles or technology."

The permanent two-year loss carry-back provision adds a complementary layer of support. Businesses that have had a tough year can offset losses against previous profits, freeing up cash and – critically – giving healthy businesses the confidence to take on greater risk.

"Knowing that if a new investment or expansion doesn't pay off immediately, they can recover some of that cost against prior profits, gives owners more confidence to move forward rather than sit on the sidelines," Sanz said.

David Gandolfo, advocacy chair of the Commercial and Asset Finance Brokers Association of Australia (CAFBA), also welcomed the instant asset write-off changes; but he wished they went further.

“It is a small step in the right direction,” said Gandolfo. “However, we are disappointed that eligibility remains limited to businesses with annual turnover below $10 million, and the $20,000 threshold falls well short of the $150,000 limit sought by CAFBA, COSBOA and a range of other peak industry bodies.”

CAFBA chief executive David Bushby said that in the current uncertain economic environment, businesses need certainty from the government and greater tax support to invest in vehicles, equipment and productive assets that drive expansion and employment.  “However, if the deductible threshold and turnover limits are not increased, the announced decision will fail to achieve its full economic benefit potential.”

Tax reform: Start your planning now

Regarding the Budget's tax-reform package, brokers and their SME clients are urged not to treat extended implementation timelines as a reason to delay.

From 1 July 2027, the capital gains tax (CGT) discount will transition from a flat 50% model to an inflation-indexed structure. Negative gearing will simultaneously be limited to new residential builds. From 1 July 2028, a 30% minimum tax will apply to discretionary trust distributions.

"Many small business owners hold assets, invest in property, and use trusts, so these changes affect multiple aspects of how they run and structure their businesses," Sanz said.

The shift from the flat CGT discount to an inflation-indexed model could benefit owners in high-inflation, low-growth environments by providing a larger offset than the current 50% discount – but the inverse also applies, making individual modelling essential.

For trust arrangements, the Budget includes a three-year rollover window for SMEs looking to restructure before the new rules take effect – a provision Sanz said brokers should be actively flagging with clients.

"The changes are prospective with clear timelines, and in our experience, clarity drives confidence. When business owners understand the rules, they make decisions," he said.

Bushby said CAFBA is “deeply concerned” that the new tax rules and valuation requirements “will adversely impact our members and their commercial clients, leading to unintended consequences and possibly encouraging avoidance behaviour in the market”.

For mortgage and finance brokers who service a client base that frequently overlaps with SME ownership, understanding the intersection of property investment, trust structures, and lending strategy has rarely been more important.

Productivity gains – and a payday super warning

The Budget's productivity package has drawn mixed praise. The government claims the broader reform agenda will reduce regulatory costs by $10.2 billion per year economy-wide, including $780 million in the financial sector.

Free access to mandatory Australian Standards, simplified skills recognition for tradespeople, and more flexible monthly tax instalment arrangements are among the changes most likely to benefit the small business operators that form the core client base of many broker businesses across Australia.

But Sanz sounded a clear warning on payday superannuation changes, which take effect from 1 July 2026. Under the new rules, employers must pay super on payday rather than quarterly.

"For many small businesses, that's a meaningful increase in admin and payroll complexity that needs to be planned for," he said. "It's important to note that not all the changes in this Budget reduce compliance burden."

Adding value as a broker

Sanz said the Budget creates an opportunity for brokers to differentiate through proactive, informed client engagement – and that those who act early will stand out.

"Many business owners have seen the headlines but may not understand how the changes affect them personally," he said. "Brokers can step in with relevant insight and practical guidance."

His practical advice centres on three areas. First, use the permanent asset write-off as a prompt to revisit equipment and vehicle purchases that clients may have put on hold. The removal of the June 30 deadline means planning can happen year-round – but many clients won't shift their thinking without a nudge.

Second, engage clients now on the CGT and trust changes, even though they don't take effect until 2027 and 2028. "For clients using discretionary trusts, the three-year rollover window is worth flagging," Sanz said. "And with negative gearing limited to new builds from July 2027, brokers who understand what this means for clients who are also property investors will stand out."

Third, help SME clients understand the cash flow implications of payday super before it becomes a crisis.

"Brokers who take the time to understand their clients' goals make the biggest impact," Sanz said. "The key takeaway is to be proactive. Get in touch with your SME clients, highlight the changes that matter to them, and position yourself as the trusted adviser who helps them navigate what's ahead."

What the Budget missed

For Sanz, one of the Budget's most significant gaps was meaningful tax relief for SMEs at a time when input costs, wages, and compliance demands continue to climb.

"Many business owners were hoping to see the government outline how it plans to ease the tax burden on SMEs," he said. "That remains a gap, and it's one the small business community will continue to push for."

He also pointed to the unmet potential in direct business lending support. While the $1 billion in interest-free loans and the permanent loss carry-back are positive steps, Sanz argued that expanded loan guarantees, lender incentives, and targeted support for high-growth businesses could go further in addressing persistent funding barriers.

"As an SME lender, we know how important access to capital is for businesses that are ready to grow," he said. "The right funding at the right time makes a real difference."

The cash rate remains the main constraint on SME lending, and the Budget contains no direct mechanism to address it. But Sanz said the combination of cost-reduction measures and cash flow improvements does help position small businesses for better access to funding when conditions shift.

For brokers looking to build deeper SME relationships, this Budget – with all its complexity – may be the best catalyst in years.