Federal Budget 2026-27 - Business and employers

Instant asset write-off 

Start date: 1 July 2026 

The Government has announced that the cost threshold for the purpose of applying the instant asset write-off for small business entities will be permanently increased to $20,000 from 1 July 2026. 

In order to qualify for the immediate deduction, the cost of the asset must be less than $20,000, after subtracting any GST credits that can be claimed. 

The cost threshold applies on an asset-by-asset basis, so an immediate deduction could potentially apply to multiple assets that are purchased for less than $20,000 in a particular income year, even if the aggregated cost of those assets is $20,000 or more. 

Assets that cost $20,000 or more can continue to be added to a small business pool. 

Just a quick reminder, the threshold for the current income year that ends on 30 June 2026 had already been increased to $20,000. 

FBT on electric cars 

Start date: 1 April 2027 

On 5 May 2026 the Government announced that the FBT exemption for electric cars would be gradually scaled back over the next few years. 

The FBT exemption for electric cars was introduced in the 2022-23 income year as part of a broader initiative to reduce the cost of electric vehicles and increase uptake. 

While the exemption has been phased out for plug-in hybrid electric vehicles from 1 April 2025 (with pre-existing arrangements still qualifying for the exemption in some cases), a full FBT exemption still applies to battery electric vehicles and hydrogen fuel cell electric vehicles that are provided as fringe benefits to employees if certain conditions can be satisfied. 

However, the Government is planning to progressively reduce the scope of the FBT exemption on the following basis: 

• The FBT exemption will continue to operate in its current form until 31 March 2027. 

• From 1 April 2027 to 31 March 2029 the full FBT exemption will only be available if the car costs $75,000 or less. Electric cars above this threshold but costing less than the luxury car tax (LCT) threshold for fuel-efficient cars will receive a 25% FBT discount. 

• From 1 April 2029 all electric cars costing less than the LCT threshold will receive a 25% FBT discount. 

• The Government indicates that existing lease arrangements won’t be impacted by these changes.

Looking ahead 

The outlook remains uncertain. Treasury acknowledges the risk of further inflation spikes if global energy markets deteriorate, with worst-case scenarios still modelling inflation above 7 per cent and higher unemployment. But the central forecast avoids recession and assumes gradual improvement from late 2027 onward. 

If you have any questions about how the 2026 Federal Budget may affect your personal finances, please contact us to discuss.