Company Loss Carry-Back and Refundable Losses for Start-Up Companies

Start Date

• Loss carry-back: from 1 July 2026
• Start-up refundable losses: from 1 July 2028

As part of the 2026–27 Federal Budget, the Government announced the return of the company loss carry-back regime together with new refundable loss measures for eligible start-up companies.

Under the new rules, companies with aggregated global turnover below $1 billion will be able to carry back revenue tax losses and offset them against tax paid in the previous two income years.

Refunds will continue to be limited by the company’s franking account balance and will apply only to revenue losses.

The Government stated that the measure is intended to improve cash flow and support businesses investing in growth and expansion.

Example – Loss Carry-Back

The Budget papers include an example involving Dining Co, a small restaurant business with annual turnover of $1 million.

After purchasing new business equipment eligible for the instant asset write-off, Dining Co recorded a $15,000 tax loss in the 2026–27 income year.

Under the proposed rules, the company would be able to carry back the loss against prior year taxable income and receive a tax refund of $3,750 based on the 25% company tax rate.

Refundable Losses for Start-Up Companies

From 1 July 2028, eligible start-up companies with turnover below $10 million will be able to convert tax losses incurred during their first two years of operation into refundable tax offsets.

Refunds will be capped based on fringe benefits tax and withholding tax paid on wages to Australian employees.

The Government stated that the measure is intended to improve early-stage cash flow and encourage innovation and employment growth.

2026–27 Federal Budget – Better Targeting the R&D Tax Incentive

Start Date

From 1 July 2028

The Government announced major reforms to the Research and Development Tax Incentive (R&DTI) aimed at encouraging more substantial and innovative research investment.

Key reforms include:

• increasing R&D offset rates by 4.5 percentage points;
• reducing the R&D intensity threshold from 2% to 1.5%;
• increasing the refundable offset turnover threshold from $20 million to $50 million;
• increasing the maximum eligible R&D expenditure cap from $150 million to $200 million; and
• increasing the minimum expenditure threshold from $20,000 to $50,000.

The reforms will also remove eligibility for expenditure relating solely to supporting R&D activities unless undertaken through a registered Research Service Provider or Cooperative Research Centre.

According to the Government, the changes are intended to improve the integrity and effectiveness of Australia’s R&D support system.

Fringe Benefits Tax

2026–27 Federal Budget – Electric Car Discount

Application Dates

• From 1 April 2027: full FBT exemption limited to eligible electric vehicles costing $75,000 or less.
• From 1 April 2029: eligible electric vehicles below the fuel-efficient luxury car tax threshold will receive a permanent 25% FBT discount through a reduced 15% statutory rate.

The Government announced changes to the current electric vehicle FBT exemption system, transitioning from a full exemption model to a permanent discounted FBT framework.

Under the transitional rules:

• electric vehicles under $75,000 provided before 1 April 2029 will continue to receive a full FBT exemption;
• electric vehicles above $75,000 but below the luxury car tax threshold provided between 1 April 2027 and 1 April 2029 will receive a 25% FBT discount; and
• the standard 20% FBT statutory rate will continue to apply to higher-value vehicles.

Plug-in hybrid electric vehicles remain excluded from the exemption from 1 April 2025.

The measure is estimated to increase Government receipts by $1.9 billion over five years.