2 recent tax changes that could help improve cash flow in FY2027

Two tax reforms passed the Senate on 19 August (Treasury Laws Amendment (Tax Reform No. 2) Bill 2026) making the $20,000 instant asset write-off permanent and bringing back the two-year loss carry-back for eligible businesses. Both measures are applicable from 1 July 2026

Individually, each measure provides a tax benefit, but together, they could bring eligible businesses some much needed cashflow relief.

From investment to deduction: Instant Asset Write Off becomes permanent

The $20,000 instant asset write-off, which allows eligible small businesses (aggregated annual turnover of less than $10 million) to immediately deduct the business-use portion of eligible depreciating assets costing less than $20,000, is now permanent & will apply per asset as opposed to being a total annual spend limit.

For a business purchasing equipment, technology, or other eligible assets, being able to bring the tax deduction forward rather than spreading it over several years, can make a significant difference to cash flow in the year the investment is made.

Related: Tax Planning Is No Longer Optional: It Is Now A MUST DO For All Businesses

From loss to cash: Loss carry-back reintroduced

Before the recently passed bill, companies making a tax loss carried it forward to offset against future taxable profits. The reintroduced loss carry-back rules change the timing of that benefit.

From this year (the 2026–27 income year) eligible companies (turnover of up to $1 billion) will be able to carry current-year tax losses back against tax paid in either of the previous 2 income years generating a refundable tax offset, subject to the rules and applicable limits.

This is particularly helpful for businesses experiencing a temporary downturn as it could provide additional cash flow at precisely the point it is most needed.

So, say your business has been profitable in recent years and you've paid your taxes, you may be able to recover some of that tax if you went on to make a loss.

Related: Are You Paying Too Much FBT? Top 5 Strategies To Minimise Your FBT Liability

How the two measures work in tandem: Treasury’s practical example

Let's consider a hospitality business that makes a $40,000 taxable profit in 2025–26 and pays $10,000 in tax.
In 2026–27, the owners invest in a $19,000 coffee machine, $19,000 of tables and chairs and $17,000 of outdoor heaters.
Because each asset costs less than $20,000, they are all eligible for the instant asset write-off.
The deductions turn what would have been a $40,000 taxable profit into a $15,000 tax loss.
Under the new loss carry-back rules, that $15,000 loss can be carried back against the previous year's taxable income, generating a $3,750 tax refund at the 25% company tax rate.

The main takeaway here isn’t the tax refund; it’s the opportunity before businesses to accelerate the cash-flow benefit of investments.

What this means for business owners

The biggest practical change with the loss carry-back is that a tax loss no longer necessarily represents a benefit that has to sit on the balance sheet waiting for future profits.

For an established business that has recently paid tax but is facing a downturn in FY27, there is potentially an opportunity to recover some of previously paid tax.

This is particularly relevant for businesses facing temporary losses, undertaking significant investment, or deliberately taking on short-term costs in pursuit of longer-term growth.

However, getting to this outcome will depend on things like previous taxable income, tax paid, franking account position, and eligibility for the new rules.

In other words, the new loss carry-back rules can create a meaningful cash-flow benefit — but you need to plan for it, including how the now permanent instant asset write off fits into the picture.

Consider the interaction between investment decisions, taxable income and cash flow early when planning FY2027 expenditure — rather than waiting until the end of the financial year to discover what it all means for you.

A word of warning: It is advised against buying assets simply to obtain a tax deduction. Investments should always make commercial sense.

Have questions around these latest changes?

Our experienced team is here to help you make sense of these new rules including:

from when these rules are effective and what’s eligible
whether it just applies to capital losses or revenue losses too
what impacts the amount that can be claimed
what this means for profitable business versus startups yet to make a profit

Please send us an email with your questions or call us on 02 9238 11 88.

This article is intended to provide general information only, and is not to be regarded as legal or financial advice. The content is based on current facts, circumstances, and assumptions, and its accuracy may be affected by changes in laws, regulations, or market conditions. Accordingly, neither Azure Group Pty Ltd nor any member or employee of Azure Group or associated entities, undertakes responsibility arising in any way whatsoever to any persons in respect of this alert or any error or omissions herein, arising through negligence or otherwise howsoever caused. Readers are advised to consult with qualified professionals for advice specific to their situation before taking any action.