Tax Tips 2026–2027 for Small and Medium Businesses: What Employers Need to Know
Quick Summary
Tax Tips 2026–2027 for Australian Employers
- The $20,000 instant asset write-off is now permanently legislated from 1 July 2026 for businesses with turnover under $10 million.
- Loss carry-back returns from 2026–27: eligible companies can offset current-year losses against tax paid in the prior two years.
- Payday Super starts 1 July 2026 — super must be paid each pay cycle, not quarterly. Employers face significant penalties for late payment.
- PAYG instalment flexibility: businesses can opt in to monthly instalments from 1 July 2027 and use ATO dynamic calculation tools.
- FBT changes for electric vehicles take effect from 1 April 2027 — plan novated lease arrangements before then.
- This article covers employment-related tax obligations only. For full tax advice, speak to a registered tax agent.
The 2026–2027 financial year brings a raft of changes that directly affect how small and medium businesses manage their tax obligations as employers. From a permanently legislated instant asset write-off to the arrival of Payday Super and new loss carry-back rules, there is more for employers to manage — and more opportunity to reduce their tax burden — than in recent years.
This guide focuses on the employment and business tax changes most relevant to Australian employers with 1 to 250 staff. It is not a substitute for advice from a registered tax agent, but it gives you a clear picture of what’s changed, what’s at stake, and what to do before 30 June 2027.
1. Instant Asset Write-Off: Now Permanent at $20,000
From 1 July 2026, the $20,000 instant asset write-off is permanently legislated under the 2026–27 Federal Budget.
2. Payday Super: A Major Shift Starting 1 July 2026
📅 PAYDAY SUPER — EFFECTIVE 1 JULY 2026
Superannuation must now be paid at the same time as wages — every pay cycle. The former quarterly payment system has ended. Employers who pay super late face a non-deductible Superannuation Guarantee Charge (SGC) plus interest of 10% per annum and an administration levy. This is not a grace period — it is a hard legislative start date. Review your payroll system now.
Payday Super is arguably the biggest practical change for Australian employers in 2026. Under the previous system, businesses could pay superannuation quarterly. From 1 July 2026, super must be paid on or before each employee’s payday.
The 11.5% Superannuation Guarantee rate (rising to 12% from 1 July 2025 — check your current obligation) applies to ordinary time earnings. If your payroll system isn’t set up to calculate and remit super with every pay run, you need to fix that immediately.
Key employer obligations under Payday Super:
- Super must clear the employee’s fund account by the payday (not just be lodged)
- Late payments attract the Superannuation Guarantee Charge — which is not tax-deductible
- The ATO will receive real-time Single Touch Payroll data to identify non-compliance
- Salary sacrifice arrangements must be reviewed to ensure contributions are remitted with each pay cycle
If you’re using a payroll platform like Xero, MYOB, or Employment Hero, confirm with your provider that Payday Super remittance is active in your settings. If you manage payroll manually or via a bookkeeper, this process needs to change before the first pay run in July 2026.
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3. Loss Carry-Back Returns for Eligible Companies
From the 2026–27 income year, eligible companies can carry back tax losses against tax paid in the prior two income years.
4. PAYG Instalment Flexibility
From 1 July 2027 (note: one year away), businesses can opt in to monthly PAYG instalments rather than the current quarterly schedule.
5. FBT and Electric Vehicles: Plan Before 1 April 2027
The current full FBT exemption for eligible electric vehicles (EVs) under $75,000 will transition to a 25% FBT discount from 1 April 2027 for newly commenced arrangements.
- EV arrangements commenced before 1 April 2027 on vehicles under $75,000 retain the full FBT exemption until 1 April 2029
- New arrangements on EVs over $75,000 starting after Budget night face the 25% discount from 1 April 2027
- Salary packaging providers may update their offering — review agreements and communicate changes to employees now
6. Payroll Tax: State-Based Obligations Employers Often Miss
Payroll tax is a state and territory tax — not federal. Thresholds and rates vary significantly, and many small business employers either don’t know they’re liable or miscalculate their wages bill. As at 2026, key thresholds include:
| State/Territory | Annual Threshold | Rate |
|---|---|---|
| NSW | $1,200,000 | 5.45% |
| VIC | $900,000 | 4.85% |
| QLD | $1,300,000 | 4.75% |
| WA | $1,000,000 | 5.50% |
| SA | $1,500,000 | 4.95% |
| ACT | $2,000,000 | 6.85% |
Wages for payroll tax purposes include salaries, bonuses, allowances, and in some states, contractor payments where the contractor is deemed an employee. If you’re approaching the threshold in your state — or if you employ across multiple states — you need a formal payroll tax review with your accountant.
7. Single Touch Payroll and ATO Data Matching
Single Touch Payroll (STP) Phase 2 is now fully operational across all Australian employers. Every pay event is reported to the ATO in real time. This means the ATO already knows your wages bill, your super contributions, your PAYG withholding, and your Payday Super remittances — before you lodge your annual tax return.
The practical implication for employers: there is almost no room to correct errors without the ATO noticing. If your STP reports show super payments going out late, or gross wages that don’t reconcile with your BAS, you will be flagged. The ATO’s data matching now extends to share registry information, property transactions, and bank account data — making undeclared income or underpayment of super increasingly difficult to hide.
Employers should run a payroll reconciliation before 30 June each year, comparing STP-reported figures against payroll records, super fund remittances, and PAYG withholding lodgements. Any discrepancies should be resolved via STP amendments before the payment summary finalisation date (31 July).
Frequently Asked Questions: Tax for Small Business 2026–2027
The $20,000 instant asset write-off allows eligible small businesses with an aggregated annual turnover under $10 million to immediately deduct the full cost of business assets costing less than $20,000. From 1 July 2026, this measure is permanently legislated. Each asset must cost under $20,000 individually (excluding GST), but you can claim multiple assets in the same year. Assets must be first used or installed ready for use within the income year.
Payday Super started on 1 July 2026. Employers are now legally required to pay superannuation contributions to employees’ funds on or before each payday — not quarterly as was previously allowed. Failure to comply triggers the Superannuation Guarantee Charge, which is not tax-deductible and carries 10% per annum interest. Employers must ensure their payroll systems are configured to calculate and remit super with every pay run.
Loss carry-back allows eligible companies to offset a current-year tax loss against tax paid in the prior two income years, generating a cash refund. The measure applies from the 2026–27 income year. To be eligible, your business must be a company (not a sole trader or partnership), and the refund cannot exceed your franking account balance or the total of carried-forward losses. Speak to your accountant to determine eligibility.
In some states, payments to contractors may be subject to payroll tax if the contractor is deemed to be providing services that are substantially the same as those of an employee (the ‘relevant contract’ rules). This varies by state and is a common compliance trap for businesses that rely heavily on contractors. If more than 80% of a contractor’s work is for one business, and they work exclusively or predominantly for that business, payroll tax liability may apply. Get a payroll tax review if you engage contractors regularly.
If you vary your PAYG instalment to a lower amount and your actual tax liability is higher, the shortfall is subject to the ATO’s general interest charge (currently around 11% per annum). However, the ATO generally does not apply penalties if the variation was based on a genuine and reasonable estimate of your year-end income. If your business income drops significantly mid-year, you can and should vary your instalment down using the ATO’s online portal.
The full FBT exemption for eligible electric vehicles under $75,000 will transition to a 25% FBT discount for new arrangements commencing from 1 April 2027. EV arrangements commenced before 1 April 2027 on vehicles under $75,000 retain the full exemption until 1 April 2029. Vehicles over $75,000 will move to the 25% discount from 1 April 2027 for new arrangements. Employers offering novated leases should plan arrangements before April 2027 to lock in the full exemption.
Run a payroll reconciliation report from your payroll software comparing STP-reported year-to-date figures against your payroll records. Check that gross wages, PAYG withholding, and super contributions match across your BAS lodgements, super fund remittances, and STP reports. Any discrepancies should be corrected via STP amendment submissions before 31 July. Your payroll software provider should have a built-in reconciliation report — use it every quarter, not just at year end.
Yes — employer superannuation contributions that are paid on time and within the compulsory Superannuation Guarantee amount are generally tax-deductible. However, contributions paid late (triggering the Superannuation Guarantee Charge) are NOT deductible. Additional voluntary contributions above the minimum SG rate may also be deductible. Salary sacrifice contributions are not treated as employer contributions for deductibility purposes — they are a reduction of the employee’s gross salary.
Key tax dates: 1 July 2026 — Payday Super starts; SG rate at 11.5% (check if this changed to 12%); Modern Award pay rates increase 4.75%. 28 July 2026 — June quarter BAS lodgement and payment deadline. 31 July 2026 — STP finalisation for 2025–26 income year. 31 October 2026 — Tax return lodgement deadline if self-prepared. 28 February 2027 — December quarter BAS deadline. 1 April 2027 — FBT EV concession changes take effect for new arrangements over $75,000.
Fair Work Centre specialises in employment law — Fair Work Act compliance, unfair dismissal, enterprise bargaining, Modern Awards, and employment contracts. For payroll tax and income tax matters, you need a registered tax agent or accountant. Where the two intersect — such as whether a worker is an employee or contractor, whether a salary sacrifice arrangement is properly documented, or whether your employment contracts correctly define remuneration — our employment lawyers can help. Call 1300 161 828 or visit our advice page.
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